Key Takeaways

  • Smartphone shipments in India dropped 10% year-over-year.
  • Higher memory costs are impacting budget smartphone segments significantly.
  • Samsung is the only major brand to see growth in Q2.
  • Consumers are delaying upgrades and turning to secondhand markets.

Memory Chip Demand Disrupts Market

India’s smartphone market is feeling the effects of a memory chip shortage, primarily driven by the rising demand for RAM and storage components in AI data centers. Major manufacturers like Samsung, SK Hynix, and Micron are reallocating production to high-bandwidth memory, which is more profitable than standard memory used in consumer devices. This shift has resulted in increased costs for smartphones.

Declining Shipments and Rising Prices

According to Counterpoint Research, smartphone shipments in India fell by 10% in the April-June quarter, marking the steepest decline for this period in six years. The increase in memory costs has particularly affected the sub-₹20,000 segment, which constitutes about 60% of the market. In contrast, China experienced only a 2% decline in smartphone shipments during the same timeframe.

Shifts in Consumer Behavior

Despite the challenges, experts believe consumers are unlikely to abandon smartphones entirely. However, many are expected to delay upgrades, extending replacement cycles from 3.5 years to around four years. Premium brands like Apple and Samsung are better positioned to weather the storm, as their customers are less sensitive to price increases.

Impact on Competition

The competitive landscape is shifting, with Samsung being the only major brand to report shipment growth in Q2, up 2% year-over-year. Apple, on the other hand, saw a 3% decline in shipments, largely due to supply constraints. The lower end of the market has been hit hardest, with shipments in the sub-₹15,000 segment plummeting by 45% compared to last year.

Strategic Changes Among Brands

In response to these economic pressures, some brands are reevaluating their strategies. OnePlus has announced it will halt new product launches in Europe and North America while focusing on its Indian market. This decision reflects a broader trend among budget-focused brands as they adapt to tighter margins.

Consumer Impact and Future Outlook

The rising costs of components are being passed down to consumers, with smartphone prices increasing between 4% and 68% depending on the model. As a result, many consumers are either opting for higher-priced devices, postponing upgrades, or exploring secondhand options. Financing options have become crucial for affordability, and brands are stocking up on inventory ahead of the festive season to mitigate further price increases.

Looking ahead, IDC predicts that smartphone shipments in India will continue to decline in double digits for Q2. The memory shortages and high prices are expected to persist until at least the end of 2027, although the rate of price increases may stabilize as consumers adjust to the new pricing landscape.