Phone business

Samsung plans to exit India phone business

Samsung plans to phase out the high-volume but low-value feature phone business in India, with the last batch of devices for the country to be manufactured by a contract manufacturing partner Dixon in December, people familiar with the matter said.

The Korean major is believed to be focusing its energies on higher price points, with one of the people claiming that Samsung will launch smartphones mostly above Rs 15,000 in the future.

The move comes with the Korean company among the top two multinational contributors to government production-related incentive (IPL), mandated to obtain sops only on the production of handsets worth more than Rs 15,000 in factory prices and as average retail prices in India rise, the price segment of 10,000-20,000 rupees registering the most traction in volume, according to market experts.

“Samsung has spoken to channel partners and said they will exit the feature phone market in India within the next few months or by the end of this year,” one of the people told ET.

Samsung did not respond to ET’s email query while Dixon declined to comment.

Mobile phone shipments in India were down 39% year-on-year in the first quarter of 2022, due to a shortage of supply, high inventory levels and a slowdown in demand due to a high retail inflation, according to market-watching tool Counterpoint Research. Within this segment, Samsung, which was the leader until a few years ago, fell down the pecking order to be at number 3 with a 12% share at the end of March, behind the leader Itel (21%) and Lava at 20% share, according to data from Counterpoint Research.

At the end of March, the basic phone segment contributed 1% by value and 20% by volume to Samsung’s overall quarterly shipments, according to Counterpoint. Samsung’s possible exit will leave the market open to rivals in the feature phone segment, namely Lava, HMD Global’s Nokia and Transsion Holding’s Itel sub-brand.

Korean major tries to regain leadership in top value smartphone segment. In that, Samsung executives told ET that the company expects double-digit growth in the June quarter. It had already captured pole position in March, grabbing a 22% share, driven by 5G handsets above Rs 15,000, and displacing Chinese rival Xiaomi in the process, according to Counterpoint. The company has also been India’s top-selling 5G smartphone brand for two consecutive quarters, the research firm said.

Analysts say the government’s PLI program for local handset manufacturing played a role in Samsung’s plans. Under the scheme, multinational brands are required to manufacture phones above Rs 15,000 (factory price) to avail the benefits, while national brands can receive incentives by manufacturing cheaper phones.

As a result, Samsung outsourced its budget phone manufacturing business to local maker Dixon, analysts said. With the request of functional phones At an all-time low, it makes sense for Samsung to stop selling its feature phones in India and focus more on exports, the experts added.

India, however, remains a major feature phone export hub globally, catering to strong demand in Latin America and Africa, recording exports worth Rs 1,496 crore in FY21, a jump of 621% from 2020, according to government data. Market trackers told ET that Samsung can still focus on exporting feature phones from India.