At a time when South Korean electronics giant Samsung is fighting tooth and nail against Chinese device maker Xiaomi in the budget devices category to dominate the Indian smartphone market, it is getting tougher for the company to maintain its market share in the premium segment, where it is up against Chinese rival OnePlus and American heavy-weight Apple.
According to the recent numbers published by Hong-Kong headquartered research firm Counterpoint, OnePlus became the top smartphone brand in the mid-to-high end category (devices priced over USD 400 or INR 30,000) with a 29% share in the quarter ended June 2020, leaving Samsung behind by a slight margin. Apple, meanwhile, fell to the third spot in the premium shipment share due to intensifying competition.
The Seoul-headquartered firm had taken the number one spot in the first quarter of 2020 with a 34% market share, as per Counterpoint, while Apple and OnePlus followed it closely at second and third positions, respectively.
However, in Q2 2020, the launch of OnePlus 8 series along with a price cut on the OnePlus 7T series helped OnePlus recapture the top position in the overall premium category (above INR 30,00 or USD 400), the research firm noted.
It is to be noted that although the Indian smartphone market can be broadly categorized as low-cost, mid-range, and high-end, most research firms tracking the market have different benchmarks. Roughly, below INR 25,000 (USD 340) is the affordable or budget range, between INR 25,000 to INR 50,000 (USD 340 to USD 680), devices are classified as affordable premium or just premium, and beyond INR 50,000 fall into the ultra-premium or luxury segment. The overall premium category drives 90% of the revenues.
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Over the past few years, Samsung has been strengthening the premium segment with its renewed Galaxy Series A and a scaled-down version of high-end devices in Galaxy Series S and Galaxy Note Series. For instance, it was the launch of Galaxy S10 Lite and Galaxy Note 10 Lite that partially drove Samsung’s shipments in the first quarter of this year.
Overall, for the first half of 2020, Samsung led the premium smartphone segment with a 37% market share, followed by Apple with a 26% share, while OnePlus was left at a distant third with a 15% share, a recent report by CyberMedia Research (CMR) said. The research firm classifies devices beyond INR 25,000 as the premium category, as opposed to Counterpoint, which considers handsets above INR 30,000 as premium devices.
Samsung saw a 56% growth in the premium segment in the H1 of 2020, over the year-ago period, driven by its shipments of Series A devices–Galaxy A71 and Galaxy A51, the CMR report said. Furthermore, it added that Samsung’s domination of the overall premium smartphone segment was made possible through good supply-side dynamics, attractive discounts, and smart channel strategies.
The South Korean major traditionally has had better control over its supply chain as it makes many of the components in-house. Apple, on its part, depends on third-party component manufacturers but is said to have an efficient supply chain. In comparison, OnePlus, Oppo, and Vivo, the sister companies backed by Guangzhou-based BBK Electronics suffered more disruption in the supply chain due to the pandemic that broke out earlier this year.
Despite facing severe supply chain issues due to the nationwide lockdown, India’s smartphone shipments in the overall premium segment grew 18% in H1 2020, compared to H1 2019, the CMR report noted. Brands including Xiaomi, Vivo, Realme, Oppo, and Motorola also made some strategic moves into the premium segment.
In fact, the premium smartphone segment fueled the market growth in the first half of 2020, said Amit Sharma, Analyst – Industry Intelligence Group, CMR. Sharma believes this bodes well for the second half of 2020, and, especially, in the run-up to the festive season in the country, which kicks off in October and lasts till the new year.
According to CMR, India’s premium smartphone segment is potentially slated to grow 20% year-on-year in H2 2020. It expects Samsung and Apple to be in a dead heat in the second half of the year, while new device offerings are anticipated from various other brands.
The emerging sweet spot
Faisal Kawoosa, founder at TechARC, a Gurugram-based research firm, believes the INR 25,000 to 50,000-category is the emerging sweet spot for smartphone brands in India.
About 93% of the smartphone market is below INR 25,000 (USD 340), of which INR 10,000 to 25,000 (USD 135 to USD 340) category constitutes 43% market share, he explained. A lot of people from this 43% market segment are likely to upgrade their phones to the premium category (USD 340 to USD 680), which constitutes about 5.5% of the entire smartphone market.
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“A huge chunk of people (primarily those who started jobs) who bought ultra-premium phones on EMIs over the last few years are likely to scale down to the premium category when they buy their next phone, as high-end devices with similar experience are available at better prices,” Kawoosa said.
“Moreover, according to our internal survey, there are many users who are now going from INR 10,000 device segment to premium devices directly,” he added.
OnePlus and Samsung have already realized the next hot and profitable segment is going to be the premium category, and thus have been sharpening their focus on it, intensifying the competition in the market.
According to Kawoosa, after reaching its peak in the INR 30,000 to INR 50,000 category (USD 400 to USD 680), OnePlus is looking for a new growth segment.
“It tried going beyond INR 50,000 (USD 680), but it is really hard to make it in that category. The luxury segment is primarily split between Apple and Samsung and has been stagnated at about 1.5% of the overall smartphone market,” he said. “Now OnePlus is stepping down in the premium segment to look for a bigger opportunity. If you look at INR 25,000-30,000 segment, it still remains under served as not many brands have devices at that price point.”
For instance, OnePlus brought its flagship series Nord to India this month, which falls in this category. And OnePlus is not the only one targeting it. Google is also reportedly bringing Pixel 4a in October, which would cost around INR 26,000 (USD 350).
On the other hand, Samsung is now the challenger in this particular segment, said Kawoosa.
“Although, as a brand, Samsung has been there for many years, with the recent changes (renewed focus on Series A and Galaxy Lite devices), it is now full of new energy,” he said. “Moreover, it is going aggressive online, as it is trying to build a connection with millennials, who are usually the decision-makers in a family.”