4G Smartphone shipments in 3Q are tracking around 32-34mn units (up 14% yoy at the midpoint), helped by channel build-up demand in preparation for the peak buying season during Sep-Nov. The rollout of online mega-sales by leading e-commerce players also contributed to the growth in sell-in demand during 3Q, in our view. We now see 2H16 smartphone shipments at roughly 62-64mn units, taking total 2016 shipments to 113-115mn units (or up 9-11% yoy),
Upside drivers for smartphone shipments could be aggressive pricing and a quicker-than expected feature-phone-to-smartphone transition as 4G network coverage broadens. Further, with stagnating smartphone purchases across tier-1 cities and better price parity between online and offline channels, smartphone vendors are increasingly focusing on brick-and-mortar stores in tier-2/3 cities and rural areas to boost shipment growth.
Chinese vendors such as Xiaomi, Oppo, vivo and Gionee look set to continue their strong performance in 3Q, while global vendors such as Samsung are likely to defend their market share. On the other hand, barring Lyf (Reliance Retail?s brand), Indian smartphone brands are likely to lose some share amid increased competition from Chinese players.
Key Factors Aiding SmartPhone Growth in India
smartphone market growth should pick up in 2017, driven by (1) better rural demand than in 2016 (a good 2016 monsoon should help drive smartphone purchases in rural areas impacted by droughtlike conditions); (2) declining smartphone ASPs (esp. 4G handsets); (3) growing digital literacy driving migration from 2G to 4G subs; and (4) greater smartphone content localization, which will help drive
penetration among the non-English-speaking Indian populace
