5G connectivity may not cater to budget smartphone buyers | Mint – Mint

NEW DELHI : Budget smartphone users will have limited choice of 5G handsets, and 4G devices will continue to dominate the budget segment even after 5G services are rolled out, industry analysts said.

Most 5G-ready handsets in the sub- 12,000 category will primarily be subsidized offerings by companies, they said.

“5G is more of a marketing thing right now, showcasing presence across the channels,” said Navkendar Singh, associate vice-president for devices research at IDC India, South Asia, and Australia and New Zealand. “In fact, 4G models will do well below the 12000 price point as it is challenging for firms to bring a 5G device at this price,” he added.

According to IDC, the average selling price (ASP) of smartphones is rising every quarter since Q4 2020. In the June quarter, it was at $213 (around 16,957). Smartphones are getting costlier as companies are shifting focus to the high-value middle and premium segments amid waning demand from the budget category due to “inflationary pressures” and brands are also struggling to offer phones at competitive prices, he added.

Many leading brands have not launched smartphones in the budget segment in the past year, and are not planning to do so at least for the next year. Faisal Kawoosa, founder and chief analyst at researcher TechARC, said it is not possible to offer 5G smartphones in the budget segment. “You will need bare minimum hardware to run games that can take advantage of 5G and its benefits. When we moved from 3G to 4G, the hardware improved. With 5G, hardware will be upgraded further and it will be difficult for brands to offset that cost,” he said.

“5G will not penetrate into lower price points at the same pace as it has penetrated other segments. The bill of materials will not allow that,” said Tarun Pathak, research director, Counterpoint Research. Bill of materials cost of a phone is the combined cost of all the components, including chipset, and display.

Kawoosa said every generational upgrade kills a threshold in the market. “Prior to 4G we had a segment of 4,000-6,000. After 4G came, no brand was able to sustain that segment. Similarly, 5G smartphones will create a new threshold of 8,000 to 9,000, leading the budget segment to shrink further.”

That said, brands will consider strategic partnerships with telcos to offset the cost. “Brands can bring ecosystem players who can subsidize and share the cost. Jio can use it for monetization, acquiring users for platforms such as Jio Mart,” said Kawoosa.

“While we have already introduced 5G smartphones in the sub- 15,000 segment, we are now working towards bringing the prices further down. There are challenges however given high component costs and fluctuating dollar prices. We don’t want to bring a smartphone that does not meet all the needs of our users and hence will take some time to bring a 5G smartphone in the sub- 10,000 segment,” said Madhav Sheth, CEO, Realme India.

At its annual general meeting this week, Reliance Jio said it is working with Google to create a low-cost 5G device, and the lack of interest from other brands may benefit Jio in the long run, if it succeeds in making such a device. 5G handsets comprised 33% of the overall market in the June quarter, according to Cybermedia Research.

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