If you have observed, companies like HTC, LG, and Sony who once ruled the market are completely out of the competition in this price bracket. They haven’t been releasing a substantial number of devices either to boost their position. So can these companies afford to ignore the budget and mid-tier segments? Before jumping to a conclusion, let us first see the current distribution of different price brackets and their percentage of share. The smartphone market has been skyrocketing in India with smartphone sales accounting nearly fifty percent of total mobile phones sales in India. Seventy percent of the total smartphone sales fall under sub-Rs. 10,000 bracket. The mid-tier segment ( Rs. 10,000 – Rs. 20,000) accounts for nearly fifteen percent. The high-end section (above Rs. 20,000) constitutes 8 percent; whereas, premium devices account for approximately six percent of the overall smartphone sales in India. If we consider sub-Rs. 20,000 smartphones, they add up to about 85 percent.
Issues Faced By HTC, LG and Sony
Fierce Competition
Though sub-Rs. 20,000 make up 85 percent, there are too many players vying to gain a stranglehold over the market. Chinese OEMs have started the price war by offering incredible specifications at an affordable price. Not surprisingly, three out of the top manufacturers are from China. Despite Xiaomi selling millions of devices, it couldn’t make it to the top three, which explains the state of affairs in the price bracket.
No more stigma on Chinese Companies
A few years back, there was always an apprehension over buying Chinese smartphones, as they were considered to be of inferior quality with lackluster OS. However, they have been evolving over the years, and now they are no slouch compared to tier one manufacturers. Consequently, Sony, HTC, and LG started bleeding market share to Chinese companies.
Margins
Smartphones in this segment are sold at wrapper thin margins. Companies should sell a sizable number of devices to enter into the profit zone. Considering the specifications offered by the budget and mid-tier phones from HTC, Sony, and LG, they stand no chance to sell a considerable number of devices, as Chinese manufacturers offer superior specifications at a lower price.
Mobile Divisions suffering massive losses
LG, and HTC’s mobiles division have been incurring losses for many quarters. HTC reported $133 million loss and LG reported $389.4 million is Q3 2016. Though Sony mobile division recently posted slender profits, it just sold 15 million smartphones throughout 2016, which is the lowest number of handsets sold in a full year since 2012 by the company. It is also worth noting that profits may be the consequence of Sony’s decision to ship only high-end and premium devices in certain European markets, India, etc. Maybe it is the time for LG and HTC to take a leaf from Sony’s book.
