India sticks to cheap feature phones as brands struggle to attract new smartphone buyers

India, the world’s second largest smartphone market after China, with approx. 750 million usersis struggling to attract new smartphone buyers because the typical citizen of the country cannot afford to buy a new smartphone.

Instead of switching to a new smartphone, hundreds of thousands of Indian consumers prefer to keep on with their current feature phones or simply upgrade to a new feature phone. The latter has led to a surge in feature phone shipments within the country, though these phones are quite old-fashioned and have only a number of features compared to smartphones, which helps solve many of the mobile computing requirements for the standard buyer.

According to data shared by market intelligence firm Counterpoint, shipments of entry-level feature phones in India registered a ten per cent year-on-year growth last yr, compared to -31 per cent in 2022. This growth is due to the reluctance of existing feature phone buyers to buy a new smartphone.

Compared to the general entry-level phone market, entry-level 4G phone sales in India rose to 25% in 2023 from 9% in 2022. However, entry-level 2G phones proceed to dominate the Indian market with a 75% share, according to data from Counterpoint.

Indian telecom giant Reliance Jio leads the 4G feature phone market with a 27% share, followed by Transsion Holdings-owned Itel and Indian phone maker Lava with 24% and 18%, respectively, according to Counterpoint. The telco offers a spread of models on this segment with dedicated tariff plans and access to digital services, including the country’s real-time payments system Unified Payments Interface and apps like JioCinema, JioTV and WhatsApp, to appeal to the masses.

However, Tarun Pathak, director of device and ecosystem research at Counterpoint, told TechCrunch that Jio’s 4G-enabled handsets have somewhat hindered smartphone adoption within the country “as consumers are now able to download basic apps on their own on their 4G-enabled handsets.”

Jio is considering launching a 5G-enabled phone to capitalize on this trend.

Jio, India’s largest telecom player by subscribers and revenue, is quietly planning to launch a 5G-enabled phone as brands face the challenge of attracting new smartphone buyers to the South Asian market, TechCrunch has exclusively learned.

The telecom operator, owned by Indian conglomerate Reliance Industries, has been selling feature phones for years and progressively moved into Google-powered smartphones in 2021. However, its first smartphone was too expensive for its average specs and didn’t help it achieve success. Jio now sees feature phones as essentially the most potent weapon it has to bring phones to as many individuals in India as possible.

Jio’s 5G phone will run on Linux-based KaiOS software, which already powers the telecom company’s existing range of feature phones. Contract manufacturers Dixon Technologies and Neolync are currently constructing prototypes of the phone, the sources said.

The phone might be announced at Reliance’s upcoming AGM, which is predicted in August, although sources say it’s unlikely to be ready for the mass market anytime soon. The phone’s price can also be one in all the problems that Jio is yet to determine.

Sources conversant in the matter told TechCrunch that the Mumbai-based telecom company is in preliminary talks with Qualcomm for an early version of its 5G-capable phone. However, the ultimate device could involve other chipmakers as discussions on its development are still ongoing.

Qualcomm denied its involvement in talks with Jio when contacted by TechCrunch this week. A Reliance Industries spokesman declined to comment.

In addition to the new 5G phone, Jio plans to launch a 5G Android tablet and a 5G smartphone this yr, two people conversant in the carrier’s plans told TechCrunch.

Dixon Technologies and Neolync didn’t respond to requests for comment.

Till now, Jio has been offering a line of 4G devices that included JioPhone Next as its first Android smartphone. However, the telco is looking to expand its portfolio with 5G devices as it looks to increase revenue from telecom services and is working on monetizing 5G connectivity. Jio, together with competitors Airtel and Vi, recently raised tariffs within the country to boost subscription revenue. The operator can also be expected to spin off from Reliance and list as a public company on Indian stock exchanges at a valuation of $112 billion as early as next yr.

Jio Mobile Phones History So Far

In August 2017, Jio unveiled its first 4G-enabled phone, JioPhonebased on KaiOS. Soon after the launch of JioPhone became the best-selling cell phone within the countryThe candybar phone later also received support for popular apps like Facebook, WhatsApp, and YouTube, allowing for its wider use.

In 2018, Jio launched a phone with a new generation QWERTY keyboard. However, JioPhone 2 failed to replicate the success of JioPhone due to its limited availability and appeal.

Last yr, the telecom company launched Jio Bharat as a $12 series of feature phones to revive its presence within the feature phone market. It also updated the unique JioPhone with a facelift called JioPhone PrimeThe launch of new models helped grow the 4G phone market in India.

Why are hundreds of thousands of Indians not buying new smartphones?

Smartphone Market in India a year-on-year increase of over 11% was recorded in the primary quarter, the third consecutive quarter of shipment growth, with 34 million smartphones shipped throughout the quarter, according to IDC. However, unlike the budget price segments (between under $100 and $200), the super-premium segment (above $800) saw the best growth of 44%, seeing its share increase to 7%. It was dominated by the most recent and last-generation iPhone models, followed by the Galaxy S24 and Galaxy S23 families.

However, the entry-level segment (sub-$100) share of the Indian smartphone market fell 14% year-on-year to 15%, from 20% a yr ago, according to IDC. In 2020, it accounted for 26% of the overall smartphone market and 20% in 2021.

Market experts consider that the major reason for the sharp decline in sales of entry-level smartphones is the reluctance of users of phones with basic features to switch to cheaper smartphones.

Navkendar Singh, associate vice chairman of device research at IDC, told TechCrunch that about 350 million people in India still use feature phones, and 50% of them have a model that costs lower than $18. “Since they can’t buy a smartphone, they are replacing their feature phones,” he said.

Singh also noted that smartphone penetration in India is lower than 50% and has remained unchanged for the past few years, though the market has seen some growth in smartphone shipments post-COVID.

“The switch from feature phones to smartphones is not easy for some consumers,” said Counterpoint’s Pathak, adding that within the country, older people, low-income earners and people doing manual labour will not be choosing smartphones.

“The price gap between smartphones and feature phones is still large enough to limit users’ ability to easily switch to smartphones,” he said.

According to IDC, the typical selling price (ASP) of a smartphone in India is $255. It has increased by over 54% from $165 in 2020. The average selling price of a smartphone in India is barely about 31% compared to $826 within the U.S.

Yet, hundreds of thousands of individuals in India find it difficult to buy a smartphone due to low disposable income.

“Although India has one of the cheapest smartphones in the world, as a percentage of user income, it is less affordable than in the US and the UK,” said the report, titled State of India’s Digital Economy by the Indian Council of Research on International Economic Relations and Prosus.

Smartphone brands are offering financing options to attract customers. However, Singh told TechCrunch that the move has to this point only helped existing smartphone consumers upgrade their models.