India Holds Firm to Budget Feature Phones Amid Challenges for Brands in Attracting New Smartphone Users

With approximately 750 million users, India stands as the globe’s second-largest smartphone arena, following China. Yet, the populace grapples with the high cost of new smartphones, making new acquisitions a rarity.

Many in India opt to stick with their current basic phones or replace them with newer versions of the same, bypassing smartphones altogether. This preference for feature phones, despite their limited functionality compared to the vast capabilities of smartphones, has actually propelled the growth of feature phone shipments within the nation.

Market analysis by Counterpoint reveals a striking 10% rise in feature phone shipments over the past year, a considerable rebound from a -31% drop in 2022, as consumers hesitate to transition to smartphones.

Out of all feature phones shipped, Counterpoint notes a surge in 4G feature phone deliveries, capturing 25% of 2023’s market up from 9% in 2022. Yet, 2G devices continue to command the market with a 75% share.

Reliance Jio is at the forefront of the 4G feature phone segment in India, dominating with a 27% market share. Close behind are Itel and Lava, capturing 24% and 18% of the market, respectively. The telecom behemoth continues to lure consumers with various models, exclusive data plans, and digital services, including access to apps like JioCinema, JioTV, WhatsApp, and India’s real-time payment service Unified Payments Interface.

Counterpoint’s research director for devices and ecosystems, Tarun Pathak, shared with TechCrunch how Jio’s 4G feature phones are decelerating smartphone adoption, as feature phones now offer basic apps, negating some consumer motivation to upgrade to smartphones.

Jio Preparing to Launch a 5G Feature Phone

In an exclusive update, TechCrunch reveals that Jio, India’s telecom titan, is working on a 5G feature phone to appeal to the South Asian consumer base, attempting to overcome the hurdles in converting first-time users to smartphone ownership.

Built on the KaiOS platform, similar to its current line, Jio’s forthcoming 5G handset is in the prototype stage with Dixon Technologies and NeoLync. While the unveiling is anticipated during Reliance’s annual general meeting in August, market readiness and pricing strategies are still under discussion.

Discussions with Qualcomm for the 5G device’s early versions are underway, with the possibility of including other chipmakers in the project. Qualcomm has yet to confirm these talks, and Reliance Industries has declined to comment.

Additionally, Jio has ambitions to introduce a 5G Android tablet and smartphone this year, marking a significant upgrade in its tech offerings in efforts to amplify telecom revenues and capitalize on 5G services.

The Evolution of Jio’s Feature Phones

Since unveiling the revolutionary JioPhone in August 2017, Jio has significantly impacted India’s feature phone market. This device, running on KaiOS, swiftly became the top seller in the category, later incorporating major apps like Facebook, WhatsApp, and YouTube to enhance user experience.

Despite the JioPhone 2’s attempt to innovate with a QWERTY keyboard in 2018, its impact was muted due to limited distribution and appeal. Jio aimed to revitalize interest in the feature phone segment through the Jio Bharat and JioPhone Prima series, thereby stimulating 4G feature phone market growth.

Challenges in Smartphone Adoption Among Indians

While India’s smartphone market witnessed more than 11% growth in the initial quarter as per IDC, with 34 million units shipped, it’s the high-end segment that saw the most significant surge. However, the entry-level market witnessed a downturn, indicating a resistance amongst basic phone users to switch to smartphones.

This hesitation is attributed to the existing feature phone userbase, consisting of 350 million individuals, half of whom own phones costing less than $18. With smartphone penetration stalled at below 50%, the divide persists primarily due to the substantial cost difference between smartphones and feature phones.

Despite being among the world’s cheapest, smartphones in India remain unaffordable for a large segment when considered as a proportion of the user’s income. While finance options exist, they largely benefit those already owning smartphones, looking to upgrade.