India has pipped China to drive the volume growth of smartphones in the world on the back of falling prices of high-end devices and growing adoption of 3G services, according to an HSBC report.
"China was the volume growth engine since 2013. However, given China's smartphone penetration having reached 95 per cent in 2014, further growth will be derived from other emerging countries with relatively low smartphone penetration.
"We forecast that smartphone shipments will grow at a 2014-19 CAGR of 26 per cent in India, followed by 19 per cent in Middle East (West Asia), 8 per cent in Latin America and 5 per cent in China," HSBC Global Research report said today.
It noted that India was the global No. 2 mobile phone market in 2014 with 275 million units of shipment, or 14 per cent of world market.
However, it was global No. 3 smartphone market last year with 81 million units of shipment, or 6 per cent of global market. India's smartphone penetration was merely 30 per cent in 2014.
This is far below 95 per cent for China and 72 per cent at the global level, the report observed. It attributed the meagre penetration to lower disposable income and lack of carrier subsidy but said the falling smartphone prices and growing adoption of 3G should help increase the penetration of high-end phones in India.
India will account for 12 per cent of global smartphone market with a penetration rate of 65 per cent in 2019, it said.
"While we believe demand for 3G smartphones will continue to dominate for the next 12-18 months, post that, will it be still 3G-led demand or 4G-led demand will depend on how successful 4G entrants are with their offerings."
The report noted that the online channel currently accounts for less than 10 per cent of smartphone sales in India compared to 20 per cent in China. "We note there are currently 70 million 3G users and total Internet users are estimated at 243 million (including 2G data users).
Increasing Internet adoption and ability of e-commerce portals to get into exclusive deals with handset makers suggest that online handsets sales may double to 20 per cent over the next 18 months," the report said.