India's smartphone market is experiencing a significant shift due to the global memory chip shortage, which is impacting the production and pricing of smartphones. This shortage, driven by the high demand for memory chips in AI data centers, has led to a 10% year-over-year decline in smartphone shipments in India's April-June quarter, according to Counterpoint Research. This is the steepest decline in six years, with prices rising by 4% to 68% depending on the model. The impact is particularly pronounced in the sub-₹20,000 segment, where higher memory costs have significantly affected prices. This has led to a shift in consumer behavior, with many delaying upgrades and stretching replacement cycles to around four years from about 3.5 years previously. Premium brands like Apple and Samsung remain better insulated from the slowdown, while Chinese brands are heavily exposed to entry- and mid-tier smartphones, leading to a decline in their market share.
The memory chip shortage is also prompting strategic shifts among smartphone manufacturers. Chinese brand OnePlus has decided to stop launching new products in Europe and North America, while maintaining its India business, as the market share in China has grown to 74% in Q1, while India's share has fallen to 19%. This retreat to more profitable markets is a pattern likely to repeat across other budget-focused brands as margins tighten. The pressure on brands is trickling down to consumers, with smartphone prices rising and consumers either moving to higher-priced devices, delaying upgrades, or turning to the secondhand market. The higher component costs are already filtering through to consumers, with smartphone prices in India rising by between 4% and 68%, depending on the model. As a result, the Indian smartphone market is shifting from volume-led growth to value growth, with fewer phones being sold overall, but each one generating more revenue.
The memory shortage and elevated smartphone prices are likely to persist until at least the end of 2027, according to IDC's associate research director for mobile phones research, Kiranjeet Kaur. However, the pace of price increases should moderate as consumers gradually adjust to higher prices becoming the new normal. The weaker currency is making imports costlier, which has added to margin pressures for the market players, and they are passing on the cost to the consumer. This double whammy is impacting Indian consumers, who are feeling the squeeze as the higher costs of imports are being passed on to them.
