Mint Primer | 5G smartphones at ₹8000: The push for digital India

Qualcomm’s new Snapdragon chip has brought 5G connectivity to budget smartphones. Mediatek has a similar product. But, in the past two years, the average price of smartphones in India has jumped from ₹10,000 to ₹23,000. Is there a future for cheap smartphones?

What’s new about cheap smartphones?

Over the past couple of years, most brands have abandoned sub- ₹8,000 smartphones, largely due to the existing 4G smartphone user base moving up to more premium 5G devices, and smartphone prices increasing by 30% due to rising input costs. This mix of factors created a gap in the sub-$100 segment. The chipset makes up nearly half the cost of making phones, and the absence of a cheap 5G chipset prevented brands from offering 5G smartphones below ₹15,000-17,000. With Qualcomm and Mediatek having cracked that problem, the entry-level 5G smartphone segment is getting the limelight.

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Who are the likely consumers?

India has about 250-300 million users who still rely on feature phones or 2G devices, which provides a huge untapped potential for smartphone adoption. Offering 2G users affordable or entry-level 5G smartphones in these new price ranges can be the catalyst needed for the transition from 2G phones to smartphones. In terms of the addressable market, there’s another large chunk of existing 4G smartphone users who will eventually upgrade to 5G. Some of these users may well prefer to opt for an entry-level 5G smartphone instead of one that is higher priced.

Can chipset makers alone create the push?

No, but they’re already working with leading brands to create smartphones that will cost less than those currently offered in the market. No. 2 player Xiaomi has announced that it will bring out its first low-cost 5G smartphone by the end of this year using Qualcomm’s Snapdragon. The US chipset maker will use India as the test bed for global markets.

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Is there still a need for budget smartphones?

India, a mobile-first market, has more smartphone users than personal computer users, so millions access the internet for the first time on their mobile phones. Their access to welfare schemes, financial inclusion schemes and other digital public infrastructure (DPI)-based facilities happens on the phone. With a low-cost 5G device, their access to digital inclusion will be more reliable. Indian telcos have built 5G networks over the past year, which create the highways needed for users to access these services.

How can phone makers benefit?

The entry-level segment is the bulk of the $38-40 billion Indian smartphone market. Brands can offer attractive features and prices to capture a significant market share, and may even reshape the competitive landscape. For telcos Bharti Airtel and Reliance Jio, which have invested over ₹3 trillion in 5G networks, increased 5G adoption can help monetize their investments. For Vodafone Idea, capturing the entry-level 5G customer segment can be a good strategy to gain a foothold among the larger rivals.

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