Affordable smartphones are disappearing from the market: Here’s what it means for buyers

Here are possible reasons why affordable smartphones, despite serving a wider demographic in a mass market like India, are losing out.

What is an affordable smartphone?

An affordable smartphone is typically defined as any device priced between Rs 7,000 and Rs 8,000 in India. Generally, any smartphone priced below Rs 10,000 can also be considered an affordable one. However, over the years, the definition of an affordable smartphone has changed. As the market moves toward premiumisation and the cost of phones gradually increases, even a device priced at Rs 15,000 can qualify as an affordable smartphone. That said, phones priced under Rs 10,000 are still universally regarded as affordable smartphones, providing a clear way to categorise them based on various metrics.

1. Falling numbers of affordable smartphones

A CyberMedia Research (CMR) report for Q2 2024 revealed that smartphones priced below Rs 7,000 have experienced a 26 per cent decline year-over-year in India. Shipments of 5G smartphones as a whole have increased, with devices priced between Rs 10,000 and Rs 13,000 growing by over 200 per cent. In the past couple of years, the numbers for affordable smartphones (priced at Rs 7,000 and below) have continued to fall.

2. Macro factors pushing up prices

The main factors behind the disappearance of affordable smartphones from the market are external. There have been long-term structural changes, as well as sudden shifts caused by dramatic news events, which have contributed to this decline. During the pandemic, production stoppages due to lockdowns and a chip shortage severely impacted supply, pushing up smartphone prices.

The perception of being cheap and affordable often implies that smartphones are substandard. (Express Photo)

Additionally, the Russia-Ukraine war further restricted supply chains, and inflation increased manufacturing costs. Tighter regulations, stricter laws, and a shift toward sustainability also led to higher production expenses. This combination of factors has left manufacturers with little choice but to raise prices. As a result, there has been a defocus on ultra-low-cost smartphones, contributing to the disappearance of the affordable phone segment in a market like India.

3. Cheap smartphones are cheap

Another obvious factor regarding affordable smartphones (similar to the case with Tata’s Nano car) is that the perception of being cheap and affordable often implies they are substandard. This wasn’t the case when many smartphone brands entered India in the early 2010s. Back then, smartphones were new, the mobile ecosystem wasn’t as fully developed as it is today, and brands offered a wide range of affordable smartphones alongside expensive smartphones.

Selling a few expensive smartphones may not provide the same volume. (Express Photo)

However, today, smartphones are often seen as a means of social validation, leading to the narrative that affordable smartphones look cheap. However, this is misleading. Brands intentionally choose not to focus on affordable smartphones for a few reasons: a) they don’t make much money on them, and recouping their massive overhead costs by selling cheap phones with such low-profit margins makes little sense; b) affordable smartphones are often designed to become unstable within the first six months (e.g., frequent slowdowns, app crashes, poor camera quality), leaving consumers with no choice but to upgrade to a new smartphone at a higher cost.

4. Industry pivots to more expensive smartphones

Perhaps, the biggest reason why bargain smartphones are slowly disappearing from the market is the shift toward more expensive devices. While there are several expensive and premium mid-range smartphones available, there are fewer truly affordable smartphones to choose from. It’s all about economics. Even though an affordable smartphone can generate volume, selling a few expensive smartphones may not provide the same volume but offers significantly higher profit margins. Hence, it is not the preferred strategy for smartphone companies to sell cheap phones.

Average consumers have become less aware of how pricey smartphones have become. (Express Photo)

It’s much better for them to focus on selling expensive smartphones instead. This works both ways — better margins from selling expensive smartphones, and creating the image of a premium brand. That’s why you see more and more smartphone brands, especially value players who were once known for selling affordable smartphones, shifting toward the upper end of the market. Ever since Apple changed its approach toward India and made an aggressive push to sell high-end iPhones, other brands followed suit and started mimicking the Apple model.

Apple has always been a premium player — it is other brands that have jumped ship and pivoted toward expensive smartphones. This gave them an excuse to quietly eliminate their most affordable offering with no replacements in sight, or in some cases reduce the lineup of affordable smartphones, limiting the options further. Clearly, things have changed, and the push toward premiumisation across different product categories (not just smartphones) has led to the creation of lucrative segments.

5. The rise of affordable options

Even if you can afford a smartphone priced over Rs 50,000 or even a lakh: brands have a deal for you. You can get a premium smartphone for as little as Rs 2,000 a month through easy EMI options. Indian consumers are becoming hooked on finance deals and cash-back offers, which make it easier for them to own more expensive smartphones. As a result, average consumers have become less aware of how pricey smartphones have become, thanks to easy access to personal loans and cleverly marketed EMI plans.

Not everyone is convinced about getting a premium smartphone on finance. (Express Photo)

Consumers feel like they are getting more value for their money. Smartphone makers capitalise on this impression of greater value and sell premium smartphones to consumers. For the industry, premium smartphones are profitable and indeed lucrative. Now, because consumers are willing to pay more for smartphones without realising they are committing to a monthly payment, those who could only afford a low-cost smartphone may end up buying a premium smartphone well beyond their income. All this has led smartphone makers to shift away from inexpensive smartphones because they weren’t as popular and, more importantly, had smaller profit margins. At the same time, consumers began buying more expensive phones because they could finance them for seven years.

6. Used smartphone market continues to grow

However, not everyone is convinced about getting a premium smartphone on finance, leading some to look at used smartphones for better deals. The International Data Corporation (IDC) estimates that the used smartphone market is expected to grow by 9.6 per cent in 2024, with an estimated 20 million used devices traded. This suggests that consumers might choose a used smartphone — perhaps from an older generation packed with better features — though it’s not clear how many users end up buying a used smartphone priced under Rs 10,000 in India.

Is this the death of cheap, affordable smartphones?

In a price-sensitive market like India, there is ample room for smartphone makers to capture the sub-Rs 10,000 price range. However, with the focus shifting to high-end smartphones, there’s little incentive for companies to offer low-cost phones in the market. This is why brands no longer market affordable smartphones as aggressively as they used to.

There has been a constant effort to facilitate a mass exodus from the affordable segment, prioritising higher-priced models within their lineups and emphasising more features to push up transaction prices. All this makes affordable smartphones a less viable option going forward. Maybe it’s time to rethink affordable smartphones rather than abandon them completely and let them die a slow death.