India’s smartphone market has just experienced its most challenging quarter in ten years, according to the latest report from Counterpoint Research. The analytics firm revealed that smartphone shipments in the country declined by 20% year-on-year during the July-September period, marking the lowest quarterly volume since 2015. The findings echo a similar report from Omdia last week, which noted a 26% drop to the lowest level since 2016. While the two firms’ numbers differ slightly, the underlying narrative remains consistent: the Indian smartphone market is in the midst of a significant downturn, driven by a combination of rising device costs and subdued consumer demand.
The Perfect Storm: Rising Memory Prices and Weak Demand
At the heart of this decline is the unprecedented surge in memory prices. Over the past year, the cost of DRAM and NAND flash memory has skyrocketed due to increased demand from data centers and AI applications, as well as supply chain constraints. This has directly impacted smartphone manufacturers, who have been forced to pass on the higher costs to consumers. As a result, device prices have climbed across the board, but the effect has been most pronounced in the budget segment, where margins are razor-thin and consumers are highly price-sensitive.
Counterpoint noted that the record-high memory prices have significantly inflated the bill of materials for smartphone makers, especially for entry-level and mid-range devices. Brands have had little choice but to raise retail prices, which has dampened demand in a market where affordability is a key purchase driver. The situation is further exacerbated by a slowdown in consumer spending amid inflationary pressures and economic uncertainty. With disposable incomes under strain, many consumers have opted to hold onto their existing devices for longer, delaying upgrades and stretching replacement cycles.
Festive Season Fails to Lift Spirits
Typically, the third quarter marks the beginning of the festive season in India, a period when brands ramp up shipments and offer attractive discounts to capitalize on increased consumer spending. However, this year, the usual festive cheer was notably absent. Counterpoint observed that brands deliberately kept inventory levels low, even as the festive season approached, due to weak demand and the fear of piling up unsold stock. This cautious approach reflects a broader sense of uncertainty in the market and a strategic shift towards leaner inventory management.
The festive season, which includes events like Navratri, Durga Puja, and Diwali, is traditionally the biggest sales period for smartphones in India, accounting for a significant portion of annual shipments. But with demand remaining soft, brands were reluctant to flood the channels with new stock. Instead, they focused on clearing existing inventory through promotions and cashback offers, which further pressured average selling prices. The lack of robust festive demand is a worrying sign for the industry, as it suggests that the downturn may persist beyond the immediate quarter.
The Budget Segment Bears the Brunt
The impact of the market contraction has been uneven across price segments. The affordable end of the market, particularly smartphones priced under ₹15,000, has been the hardest hit. This segment, which has historically been the volume driver for the Indian smartphone market, saw a sharp decline in shipments as brands scaled back their offerings and consumers tightened their belts. The entry-level segment, once the launchpad for first-time smartphone buyers, has been particularly vulnerable to the price hikes caused by rising memory costs.
According to Counterpoint, shipments of smartphones in the sub-₹10,000 segment plummeted, as many popular models either became too expensive or were discontinued. Brands have been reallocating their resources towards higher-priced models, where margins are healthier and demand is relatively more resilient. This shift in focus has left a void in the budget segment, which has traditionally been the backbone of India’s smartphone market. The decline in the low-end segment is particularly concerning because it affects the pace of digital adoption in the country, as feature phone users looking to upgrade to their first smartphone may now find themselves priced out of the market.
Premium Segment Shows Resilience
While the budget segment struggles, the premium smartphone segment has shown remarkable resilience. Counterpoint’s data indicates that the high-end segment, particularly devices priced above ₹30,000, continued to grow, albeit at a slower pace than in previous quarters. This trend reflects a growing polarization in the Indian smartphone market, where affluent consumers continue to upgrade to premium devices, while budget-conscious buyers either delay purchases or opt for refurbished devices.
The premium segment’s relative strength can be attributed to several factors, including the availability of attractive financing options, trade-in programs, and the aspirational value of flagship devices. Brands like Apple, Samsung, and OnePlus have maintained a strong presence in this segment, leveraging brand loyalty and innovative features to drive sales. However, the premium segment alone cannot compensate for the overall market decline, as it represents a smaller share of total shipments. The widening gap between the premium and budget segments underscores the need for brands to adopt a more balanced approach to cater to diverse consumer needs.
Brand Dynamics: Who Gained and Who Lost?
The market downturn has reshuffled the competitive landscape, with some brands weathering the storm better than others. According to Counterpoint, Samsung maintained its leadership position in the Indian smartphone market, although its shipments also declined year-on-year. The company’s diversified portfolio, spanning from budget to premium devices, helped cushion the blow, but it was not immune to the overall market weakness.
Xiaomi, which has long been a dominant player in the budget segment, saw a significant decline in shipments as its core customer base felt the pinch of rising prices. The brand’s reliance on the entry-level segment made it particularly vulnerable to the market contraction. However, Xiaomi managed to retain a strong presence in the online channel, thanks to its aggressive pricing and promotional strategies.
Vivo and Oppo, both of which have a strong offline presence, also experienced declines but managed to hold their ground in the mid-range segment. Their ability to offer attractive financing schemes and bundle offers helped mitigate the impact of rising device costs. Meanwhile, Apple continued to make inroads into the premium segment, with its older-generation models like the iPhone 14 and iPhone 15 finding favor among aspirational buyers. The company’s aggressive trade-in offers and financing options further bolstered its position.
Realme, which had been growing rapidly in the budget segment, faced a challenging quarter as its shipments declined sharply. The brand’s focus on online sales and aggressive pricing had driven its growth in recent years, but the current market conditions proved to be a formidable obstacle. Other players like Transsion (which includes brands like Tecno, Infinix, and Itel) also saw their shipments dwindle, particularly in the sub-₹10,000 segment.
Inventory Correction and Channel Dynamics
Another key factor contributing to the decline in shipments is the ongoing inventory correction in the channel. With demand remaining weak, retailers and distributors have been cautious about stocking new inventory, leading to a build-up of unsold stock in some cases. Brands have responded by reducing their shipment volumes to avoid further inventory pile-up, which has further dragged down the overall market numbers.
Counterpoint noted that the channel inventory levels have been gradually normalizing, but the process has been slower than expected due to the persistent weakness in demand. The festive season, which typically sees a surge in channel fill, did not witness the usual momentum this year. Retailers, wary of unsold stock, preferred to keep their shelves lean, focusing on fast-moving models and offering discounts to clear existing inventory. This cautious approach has had a cascading effect on shipments, as brands adjusted their production and distribution strategies accordingly.
Outlook: When Will the Tide Turn?
Looking ahead, the outlook for the Indian smartphone market remains uncertain. Counterpoint expects the market to remain subdued in the coming quarters, with any meaningful recovery unlikely before the second half of 2026. The memory price situation is expected to persist, keeping device costs elevated and further squeezing the budget segment. Additionally, the slowdown in consumer spending is likely to continue, especially if macroeconomic conditions do not improve.
However, there are some silver linings. The premium segment is expected to continue its growth trajectory, driven by replacement demand and the increasing adoption of 5G devices. The rollout of 5G networks across the country is also expected to stimulate demand for 5G-enabled smartphones, although the impact may be gradual. Brands are also likely to focus on value-added services, financing options, and trade-in programs to incentivize upgrades and offset the higher device costs.
Furthermore, the government’s push for domestic manufacturing and the production-linked incentive (PLI) scheme could help mitigate some of the cost pressures in the long run. As local production ramps up, brands may be able to reduce their dependence on imports and achieve cost efficiencies, which could eventually translate into more competitive pricing. However, these benefits will take time to materialize and may not provide immediate relief to the ailing market.
In the near term, brands will need to navigate the challenging environment by focusing on operational efficiency, inventory management, and customer engagement. The ability to adapt to the changing consumer preferences and offer compelling value propositions will be key to surviving the downturn. For consumers, the current market conditions may present opportunities to grab attractive deals and discounts, especially on mid-range and premium devices, as brands look to stimulate demand.
Ultimately, the Indian smartphone market’s worst quarter in a decade serves as a stark reminder of the cyclical nature of the industry and the importance of resilience. While the road to recovery may be long and winding, the underlying fundamentals of the market—a large young population, increasing digital penetration, and a growing appetite for connected devices—remain intact. As the market matures, stakeholders will need to collaborate to address the structural challenges and unlock the next phase of growth.
