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There’s a boom in premium phones: What’s driving it?


Demand for smartphones fell in 2022, with the market shrinking by 10%. In the first six months of 2023, it fell another 10%. Premium phones, priced at $400 or more, are bucking the trend – shipments grew 75% in H1 this year. Are premium phones more affordable now?

Has the pattern of purchases changed?

Growth in first-time smartphone buyers has slowed over the past 10 years. Brands also don’t offer truly new features, so they don’t attract buyers who already own smartphones. The quality of smartphones has also improved, meaning that buyers can use their phones for a longer period of time. The smartphone upgrade cycle, which was six months in 2015, has increased to 30 months by the end of 2022. Finally, rising supply chain costs, exacerbated by the covid-19 pandemic, have meant that brands have no headroom for war prices that Chinese brands played in India until half a century ago.

Why are premium phones doing well?

Longer upgrade cycles mean people have some money to spare. Additionally, almost all smartphones have zero financing options, making even expensive phones affordable. Plus, premium phones have tighter margins, allowing brands to offer bigger discounts. As the bulk has fallen, brands have started to focus more on premium phones to retain revenue. This introduced more regular exchange offers, discounts and cashbacks. Apple, which sold iPhone 14 as low as 59,000 last month, there is benefit. Experts say the growing market in refurbished phones has also helped.

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Graphics: Mint

How has all this changed the market?

While 5% of smartphone users in 2021 had phones priced at $400 and above, this grew to 7% in June this year. This could grow to 20% in four years, according to market research firm Counterpart. Smartphone users increased from 600 million in 2021 to 750 million now. Premium smartphone users are set to rise from 30 million in 2021 to 52 million – a 70% increase.

How sustainable is this massive growth?

Rising disposable incomes, along with better financing schemes, will make splurges more affordable for most buyers. While first-time buyers are expected to increase the number of smartphone users to 1 billion, upgrades and repeat customers will continue to push up the average selling price of smartphones. However, there is a long-term glass ceiling for brands – India is inherently a value-conscious market, and premium phones will always have a limit to their growth trajectory.

How will brands tackle India now?

Samsung and OnePlus are increasing their growth potential with foldable phones, while Google is pushing next-generation AI. Apple has grown exponentially, introducing the latest iPhones according to global launch timelines. This change is causing more brands to refine their portfolios. Xiaomi is refining its portfolio to offer fewer devices across all price segments. And iPhones, in fact, are poised to capture the largest share of growth in premium phones – becoming more affordable and accessible to more buyers.

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