India is the world's second-largest smartphone market after China with around 750 million users, but it is struggling to attract new smartphone buyers as the average person cannot afford to buy a new smartphone.
Instead of upgrading to a new smartphone, millions of Indian consumers prefer to stick with their existing feature phones or upgrade to new feature phones only. The latter has led to an increase in feature phone shipments in India, despite the fact that these phones are quite old and have only a few features compared to smartphones. Smartphones help solve most of the on-the-go computing needs of the average buyer.
According to data shared by market research firm Counterpoint, feature phone shipments in India grew by 10% year-on-year last year and are expected to increase by -31% in 2022. This growth is due to existing feature phone buyers being reluctant to opt for new smartphones.
Of the overall feature phone market, 4G feature phone shipments in India are projected to grow from 9% in 2022 to 25% in 2023. However, 2G feature phones still dominate the Indian market with a 75% share, according to Counterpoint.
According to Counterpoint, Indian telecom giant Reliance Jio leads the 4G feature phone market with 27% share, followed by Transsion Holdings-owned Itel and Indian handset maker Lava with 24% and 18%, respectively. The telco offers a variety of models in the segment, attracting the masses by offering exclusive tariff plans and access to digital services including the national real-time payment system Unified Payments Interface and apps such as JioCinema, JioTV and WhatsApp.
However, Tarun Pathak, head of devices and ecosystem research at Counterpoint, told TechCrunch that Jio's 4G feature phones have to some extent hindered smartphone adoption in the country “as consumers can now get basic apps directly on their feature phones.”
Jio capitalizes on trend with 5G feature phones
TechCrunch exclusively reports that Jio, India's largest telecom operator by subscriber base and revenue, is quietly planning a 5G feature phone as the company struggles to attract new smartphone buyers in the South Asian market.
The telecom operator owned by Indian conglomerate Reliance Industries has been selling feature phones for years, and gradually shifted to smartphones in 2021 with Google. But the first smartphones were too expensive for their mediocre specs and didn’t help move the needle. Now, Jio sees feature phones as its most powerful weapon to get phones into the hands of as many Indians as possible.
Jio’s 5G feature phone will run KaiOS, the Linux-based software that already powers the carrier’s existing feature phone lineup. Contract manufacturers Dixon Technologies and Neolync are currently prototyping the handset, the people said.
According to sources, the phone will be announced at Reliance's upcoming annual general meeting in August, but it is unlikely to be available for the mass market anytime soon. One question Jio has yet to decide on is the price of the phone.
Sources familiar with the matter told TechCrunch that the Mumbai-based carrier is in early talks with Qualcomm for an early version of its 5G feature phone, but other chipmakers could be involved in the final device as development discussions are still ongoing.
Qualcomm denied being involved in discussions with Jio when contacted by TechCrunch this week. A Reliance Industries spokesperson declined to comment.
Jio plans to launch a 5G Android tablet and a 5G smartphone this year, along with a new 5G feature phone, two people familiar with the carrier's plans tell TechCrunch.
Dixon Technologies and Neolync did not respond to requests for comment.
So far, Jio has a 4G line of devices, including its first Android smartphone, the JioPhone Next. However, the telco is looking to upgrade its portfolio to 5G devices to boost its telecom revenues and monetize 5G connectivity. Jio, along with rivals Airtel and Vi, have recently raised tariffs in India to boost subscription revenues. The operator is also expected to be spun off from Reliance and listed on Indian stock exchanges early next year at a valuation of $112 billion.
Jio's feature phone journey so far
In August 2017, Jio unveiled its first 4G feature phone, JioPhone, based on KaiOS. Soon after its launch, JioPhone became the best-selling feature phone in the country. The candybar phone later expanded its usage by supporting popular apps including Facebook, WhatsApp, and YouTube.
In 2018, Jio launched its next-generation feature phone with a QWERTY keyboard. However, the JioPhone 2 failed to replicate the success of the JioPhone due to limited availability and appeal.
Last year, the carrier launched a $12 feature phone series called Jio Bharat to regain its position in the feature phone market. It also updated the original JioPhone with a facelift called JioPhone Prima. The launch of the new models helped to grow the 4G feature phone market in India.
Why aren't millions of Indians buying new smartphones?
According to IDC, the Indian smartphone market grew by over 11% year-over-year in Q1, marking the third consecutive quarter of growth in shipments, with 34 million smartphones shipped during the quarter. However, unlike the budget segment (between $100 and $200), the super premium segment (above $800) saw the highest growth at 44%, increasing its share to 7%. This was led by the latest and previous generation iPhone models, followed by the Galaxy S24 and Galaxy S23 family.
Nonetheless, according to IDC, the share of the entry-level segment (sub-$100) in the Indian smartphone market has declined 14% year-on-year to 15%, down from 20% a year ago. In 2020, it was 26% of the overall smartphone market, and in 2021, it was 20%.
Market experts believe that the main reason for the sharp decline in budget smartphone shipments is the reluctance of feature phone users to switch to cheaper smartphones.
Navkendar Singh, vice president of devices research at IDC, told TechCrunch that about 350 million people in India still use feature phones, and 50 percent of them have models that cost less than $18. “They’re replacing their feature phones because they can’t afford smartphones,” he said.
Singh also pointed out that smartphone penetration in India is below 50% and while smartphone shipments have picked up slightly since the COVID-19 pandemic, they have remained flat over the past few years.
“The transition from feature phones to smartphones is not easy for some consumers,” said Pathak of Counterpoint, adding that older people, low-income earners and those in blue-collar jobs are not upgrading to smartphones in India.
“The price gap between smartphones and feature phones is still so large that it is difficult for users to easily switch to smartphones,” he said.
According to IDC, the average selling price (ASP) for a smartphone in India is $255, up more than 54% from $165 in 2020. The smartphone ASP in India is only about 31% of that in the US, at $826.
But millions of people in India still struggle to afford smartphones due to low disposable income.
According to the report, “State of India’s Digital Economy,” published by the Council for Research in International Economic Relations and Prosus, “India has one of the cheapest smartphones in the world, but on a per-user basis, it is cheaper than those in the US and UK.”
Smartphone brands are offering financing options to attract buyers, but Singh told TechCrunch that these moves have so far only helped existing smartphone consumers upgrade their models.
