Coronavirus fallout: China strengthens grip on India's smartphone market, Xiaomi undisputed leader

Chinese smartphone makers strengthened their hold on the Indian market, with Vivo overtaking Samsung to become the second-largest brand behind Xiaomi, which remained the leader in the first quarter of 2020.

The overall market posted a modest 4 per cent growth during the quarter to a little over 31 million units as the impact of the lockdown in the wake of the coronavirus pandemic was felt in the fag end of the quarter. Research firm Counterpoint said the industry was poised to witness its first-ever annual decline in sales due to the prolonged impact of the pandemic. Also, volumes are expected to contract by at least 10 per cent during the year.

"January and February shipments grew annually due to new launches and aggressive promotions. However, a steep annual decline in March (-19%) due to the COVID-19 outbreak restricted overall quarter growth to just 4 per cent," Counterpoint said. "The nationwide lockdown was enforced by the Indian government from the last week of March and will remain in place until May 3rd. Any signs of recovery will likely only start from the third quarter onwards. As a result, we are estimating that overall smartphone shipments will decline by 10% for the full calendar year."

Xiaomi retained its hold at the top of the pie with a 30 per cent share, which was its highest market share since the first quarter of 2018. Its volumes grew 6 per cent over Q1 of 2019 on the back of strong performance of the Redmi Note 8 series, offline expansion and affordable pricing strategies also helped it to expand consumer base. With this, Xiaomi also became the leading brand in the overall handset market, including feature phones, surpassing Samsung.

Vivo was the big mover during the quarter with a 40 per cent growth in Q1 2020, which helped it garner a 17 per cent market share ahead of Samsung at 16 per cent. The Korean firm saw a steep decline in its market share, which stood at 24 per cent in Q1 2019. Its overall volumes declined due to an 84 per cent drop in shipments in the sub Rs 10,000 segment, which was captured by the Chinese players, including Realme, besides Xiaomi and Vivo.

Realme, which is the sub-brand of Oppo, continued to outsmart its parent brand, with a 119 per cent growth in volumes during the quarter, which gave it a 14 per cent market share ahead of Oppo's 12 per cent. In the first quarter of last year, both brands were in a dead heat at 7 per cent share. Realme's volumes grew on the back of the newly launched 5i and C3. It was the first brand to launch a 5G-enabled phone in the India market (realme X50 Pro 5G). OPPO's shipments also grew 83 per cent, underlining the overall strong showing by all Chinese brands.

"With the social distancing norms, factories will be running at lower capacities even after the lockdown is lifted. Consumer demand will have a larger impact on smartphone sales, as people will focus on saving and therefore limit discretionary purchases," said Prachir Singh, Senior Research Analyst, Counterpoint Research. "As entry-level smartphone consumers will be the worst-hit by the lockdown, the demand for the entry-level smartphones will decline in the near-term. We believe demand will shift to the second part of the year. Even if the situation stabilises by mid-year, people may hold-off purchasing until the festive season."

The impact of the lockdown was more severe on the feature phone market, which saw a decline of around 24 per cent during the quarter. Counterpoint said it also implies consumers transitioning to smartphones. In this segment too, Chinese brands are gaining momentum reaching a combined 33 per cent up from just 17 per cent in Q1 2019. Itel is the principal brand driving this change.

China's Transsion Group brands (Itel, Infinix, and Tecno) reached its highest ever market share in Q1 2020 registering 78 per cent year on year growth. It remained strong in tier 3, tier 4 cities, and rural India.

"Itel continued to be the number one smartphone brand in the entry-level sub-INR 4,000 price segment, while Tecno and Infinix showed good growth in the Rs 6000-Rs10,000 ($80-$130) segment. Itel also remained the #1 feature phone brand during the quarter," Counterpoint said.

"Smartphones should be considered as essential items during the lockdown as people are dependent on them as a primary mode of communication. We believe that sales should be allowed through online channels or at least adopting an Online to Offline (O2O) model. This is happening in Europe and the USA where online channels remain in service," said Shilpi Jain, Research Analyst at Counterpoint Research.

"For OEMs, a lot of work will be needed to restart operations once the lockdown is lifted. This will range from managing existing inventory across all distributor and retail touchpoints and supporting retailers sell-through older inventory. Also, if the lockdown is lifted in phases starting with the green zone areas, OEMs will have to align their channel and sales strategies to drive sales in these non-affected areas."

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