The days of the ordinary feature phone are numbered with consumers rapidly upgrading to 4G feature phones, led by the JioPhone, that offer a much richer data and video experience, forcing plain vanilla handset makers to review their production plans.
CyberMedia Research (CMR) data shows market share of 2G phones has plunged 17 percentage points in just six months to 30% in the quarter ended June, while Reliance Retail’s 4G variant, called JioPhone, increased its market share by 9 percentage points during the same period to 27%.
“This signals the beginning of ordinary feature phones as a category becoming unviable,” said Sanjay Kapoor, former chief executive at Bharti Airtel. This scenario would be accelerated with GPRS and Edge also becoming defunct technologies, he told ET.
Counterpoint Research estimates market share of 2G feature phones will drop to 25% by the first quarter of 2019 and crash below 10% by 2021.
Analysts expect handset makers to phase out 2G feature phones sooner than later and focus on 4G feature phones as telcos turn their attention to data and content delivery to boost their revenues. Or, they risk losing their user base to JioPhone, analysts said.
HMD Global, the Finnish maker of Nokia devices, has already entered the 4G feature phone market. Indian handset maker Lava too plans to make 4G feature phones.
Micromax and Karbonn, domestic handset makers that have been major players in the 2G basic phone segment, are reviewing their 2G feature phone production plans and brand portfolios at a time when Jio’s 4G feature phone has emerged the largest-selling phone in the sub-Rs 1,500 price range.
Micromax cofounder Vikas Jain said sales volumes of ordinary feature phones “have definitely been impacted, and the company would review its 2G devices portfolio and focus on both 4G feature phones and smartphones” if 2G device users want a stronger data experience.
He expects “almost the entire ordinary handset market to go 4G in the next 12-to-18 months if the cost gap between an ordinary and an LTE feature phone can be bridged with support from carriers”.
Shashin Devsare, executive director of Karbonn Mobiles, said the handset vendor “would strengthen its entry-level smartphones portfolio as the 2G feature phones pie will keep falling”.
But handset sector barons said an issue holding up mass 4G feature phone production is the manufacturing cost of such a device, which is 3-to-4 times more than an ordinary 2G phone. Matching the JioPhone price point, they said, would be next to impossible as that device is heavily subsidised, and would accordingly, require handset makers to partner with telcos to produce a 4G LTE feature phone that is competitive against Jio’s feature phone offer.
“Since the operator is heavily subsidising the cost of the 4G LTE feature phone in the India market, we are left with no option but to partner with a telco in this segment,” Sunil Raina, president at Lava International, told ET without directly naming Jio.
Lava, he said, is looking “to deliver 4G-enabled feature phones through strategic tie-ups with operators”.
CLSA expects Reliance Jio Infocomm to have some 462 million customers by March 2021, of which 40% are likely to be JioPhone users. Jio’s latest offer of exchanging any old feature phone for the basic JioPhone model for around Rs1,000, including recharge, has been an absolute killer for the 2G device segment, analysts said.
Jain of Micromax said mass production of a JioPhone-like device “would require a carrier partner to make the value proposition suitable to the end consumer both from the device and 4G tariff points of view”, adding Micromax is in talks “to partner with either incumbents or Jio” to manufacture a 4G LTE feature phone.
Prabhu Ram, head of industry intelligence group (IIG) at media services group CyberMedia Research (CMR), said handset makers would require “economies of scale with adequate telco support to match JioPhone’s pricing”.