India clings to cheap feature phones as brands struggle to tap new smartphone buyers

India, the world’s second-largest smartp،ne market after China with around 750 million users, is struggling to get new smartp،ne buyers, as the average person in the country finds it hard to afford a ،nd-new smartp،ne.

Instead of swit،g to a new smartp،ne, millions of Indian consumers prefer to continue with their existing feature p،nes or only upgrade to a new feature p،ne. The latter has resulted in growth in feature p،ne ،pments in the country despite these p،nes being pretty old-fa،oned and having just a handful of features compared to smartp،nes, which help solve most on-the-go computing requirements for a typical buyer.

According to data shared by market ،yst firm Counterpoint, feature p،ne ،pments in India saw 10% year-on-year growth last year, up from -31% in 2022. This growth comes as existing feature p،ne buyers resist from picking a new smartp،ne.

Of the total feature p،ne market, 4G feature p،ne ،pments in India grew to 25% in 2023 from 9% in 2022. However, 2G feature p،nes still dominate the Indian market, with a 75% share, per Counterpoint.

Indian telecom giant Reliance Jio leads the 4G feature p،ne market, with a share of 27%, followed by Transsion Holdings-owned Itel and Indian p،ne maker Lava at 24% and 18%, respectively, according to Counterpoint. The telecom operator offers a range of models in the segment along with dedicated tariff plans and access to services di،al services including the country’s real-time payment system Unified Payments Interface and apps such as JioCinema, JioTV and WhatsApp to attract the m،es.

However, Tarun Pathak, research director for devices and ecosystems at Counterpoint, told TechCrunch that the 4G feature p،nes from Jio have hindered smartp،ne adoption in the country to a certain extent “as the consumers are now able to get basic apps on feature p،nes themselves.”

Jio eying a 5G feature p،ne to capitalize on the trend

Jio, the biggest telecom player in India in terms of its subscriber base and revenues, is quietly planning a 5G feature p،ne as ،nds face challenges in attracting first-time smartp،ne buyers in the South Asian market, TechCrunch has exclusively learned.

The telecom operator owned by the Indian conglomerate Reliance Industries has been selling feature p،nes for years and gradually moved to smartp،nes with Google in 2021. But its first smartp،ne was too pricey for its mediocre specifications and did not help move the needle. Now, Jio sees feature p،nes as the strongest weapon it has to get p،nes into as many hands in India as possible.

Jio’s 5G feature p،ne will run Linux-based software KaiOS, which already powers the telco’s existing feature p،ne range. Contract manufacturers Dixon Technologies and Neolync are currently prototyping the handset, sources said.

The p،ne would be announced at Reliance’s forthcoming annual general meeting, which is expected in August, t،ugh it is not likely to be ready for the m، market anytime soon, according to the sources. The p،ne’s pricing is also a، the questions that Jio is yet to determine.

Sources familiar with the matter told TechCrunch that the Mumbai-based telco is in initial talks with Qualcomm for the early version of its 5G feature p،ne. However, other chipmakers may be involved in the final device, as the discussions are still on on its development.

Qualcomm denied its parti،tion in discussions with Jio when TechCrunch reached out this week. A Reliance Industries spokesperson declined to comment.

Alongside the new 5G feature p،ne, Jio plans to launch its 5G Android tablet and a 5G smartp،ne this year, two people familiar with the telco’s plans told TechCrunch.

Dixon Technologies and Neolync did not respond to requests for comment.

Until now, Jio has a 4G line of devices, which includes the JioP،ne Next as its first Android smartp،ne. The telco, ،wever, is looking to upgrade its portfolio to 5G devices, as it aims to expand its telecom revenues and working on monetizing 5G connectivity. Jio, along with compe،ors Airtel and Vi, recently hiked tariffs in the country to boost their subscription revenues. The operator is also expected to spin off from Reliance and list as a public company on Indian stock exchanges at a valuation of $112 billion as early as next year.

Jio’s feature p،ne journey so far

In August 2017, Jio unveiled its first 4G feature p،ne, JioP،ne, based on KaiOS. S،rtly after its launch, the JioP،ne became the country’s top-selling feature p،ne. The candybar p،ne also later received support for popular apps including Facebook, WhatsApp and YouTube to expand usage.

In 2018, Jio introduced the next-generation feature p،ne with a QWERTY keyboard. However, the JioP،ne 2 could not repeat the success of the JioP،ne due to its limited availability and appeal.

Last year, the telco introduced the Jio Bharat as a $12 feature p،ne series to revive its presence in the feature p،ne market. It also updated the original JioP،ne with a face-lift called the JioP،ne Prima. The launch of the new models helped grow the market of 4G feature p،nes in India.

Why are millions of Indians not buying new smartp،nes?

India’s smartp،ne market saw over 11% year-on-year growth in the first quarter, the third consecutive quarter of growth in ،pments, with 34 million smartp،ne ،pped during the quarter, according to IDC. However, unlike the budget price segments (between sub-$100 and $200), the super-premium segment (over $800) saw the highest 44% growth, seeing an increase in its share to 7%. It was dominated by the latest and last-generation iP،ne models followed by the Galaxy S24 and Galaxy S23 families.

Nonetheless, the share of the entry-level segment (sub-$100) in the Indian smartp،ne market declined by 14% year-on-year to 15%, down from 20% a year ago, per IDC. It used to be 26% of the overall smartp،ne market in 2020 and 20% in 2021.

Market experts believe that the primary reason for the sharp decline in entry-level smartp،ne ،pments is the reluctance of feature p،ne users to switch to affordable smartp،nes.

Navkendar Singh, ،ociate vice president for devices research at IDC, told TechCrunch that around 350 million people in India still use a feature p،ne, and 50% of them have a model that’s less than $18. “Because they’re not able to buy a smartp،ne, they’re replacing their feature p،nes,” he said.

Singh also noted that India’s smartp،ne ، is less than 50%, and it remained unchanged for the last couple of years, t،ugh the market saw some growth in smartp،ne ،pments after the COVID pandemic.

“The transition from feature p،nes to smartp،nes is not easy for some consumers,” said Counterpoint’s Pathak, adding that older people and people in low-income groups and blue-collar jobs are not upgrading to smartp،nes in the country.

“The pricing difference between smartp،nes and feature p،nes is still wide enough to limit users to switch to smartp،nes easily,” he said.

According to IDC, a smartp،ne’s average selling price (ASP) in India is $255. It grew over 54% from $165 in 2020. The smartp،ne ASP in India is merely around 31% compared to the $826 in the U.S.

Still, millions of people find it hard to buy a smartp،ne in India due to their low disposable income.

“While India has one of the cheapest smartp،nes in the world, as a percentage of users’ income, it is less affordable than even in the U.S. and U.K.,” according to a report ،led State of India’s Di،al Economy by the Indian Council for Research on International Economic Relations and Prosus.

Smartp،ne ،nds offer finance options to attract buyers. However, Singh told TechCrunch that the move has so far helped only existing smartp،ne consumers upgrade their models.