The Budget Smartphone Is Dead! Long Live The Budget Smartphone!

There have been a few notable trends that have marked the year 2016. One of the conflicting but noticeable trends has been the dichotomy that was seen among device makers to operate in the budget smartphone segment. While there were a few who stuck to the tread and tested segment and stayed away from the higher and seemingly risky bracket, there were others who moved very clearly out of the budget bracket. So what do we make of this trend? Let us take a look at this today

oneplus 3 soft gold

Let us start with the most notable player of the year, OnePlus. The OnePlus One was in many ways a very disruptive entry into the value for money or higher end of the budget segment. And it met with amazing success, but cut to 2016  and OnePlus clearly wants to shed the “VFM” tag and be known as a premium player in the higher segments. They are very clear that the demographic that they are going for are the people who know what they want from their device and do not mind paying for it. The OnePlus to me is a flagship by all means, while there are people who still call it VFM or Flagship-like. I choose to define flagship by experience and not by price alone. Going by price alone, only the iPhone is a flagship and the rest are all VFM devices. Coming back to OnePlus, the successor to the OP3, the OnePlus 3T moves a step further in price band and when I spoke to Vikas Agarwal, Head of OnePlus India, he told me clearly that they are looking to stay profitable and not burn their fingers by sticking to the budget segment. The numbers and the popularity of the OnePlus 3 and the big anticipation for the OnePlus 3T are testament to the fact that this approach is working

Zenfone 3 Laser in hand

Let’s talk about ASUS next. The Taiwanese device maker has moved out of the budget segment altogether with the Zenfone 3 series that they launched this year. They have clearly indicated that they are staying in the mid-range and premium segments with this series. Even the successor to the immensely popular Zenfone 2 Laser which was a big draw in the budget segment has been the Zenfone 3 Laser which is clearly sitting in the mid-range segment. Whether it meets the competition sitting in that range and takes them on is not within the scope of this article. If you take a good look at the Zenfone 3 series, you will see that they are all priced fairly out of the budget bracket. The simple thinking behind the move seems to be fact that it will be nothing short of a disaster  to undercut the BOM when pricing a device. That will definitely plunge the makers into a catching up mode that will run quite a while and erode operating buffers and lead to impending implosion.

Smartron is an indian company that aspires to be a first mover in the IoT space and wants to use their devices as a entry point into their infrastructure to  capture and retain a sizeable user base. Their first phone, the t.phone had impressive design and good specs. While the whole community was expecting them to bite the bullet and get into the budget segment, they boldly priced the device in the mid-range segment and went on to market it on the strength of performance and experience. This they did at a time when major chinese players were entering India and selling their devices at prices that were considerably lower than their BOM for the devices. Pretty bold statement that.

LeEco Le 2

LeEco entered India on the back of their thumping success in China. They came in with the Le 1s and the Le Max. The Le 1s was their key device that was aimed at the first time and budget conscious buyer. The device was very impressive and the buzz was brilliant and off the charts. People thronged to buy it and they raked up amazing numbers using the flash sale model. The second generation devices say the entry of the Le 2 in this segment and the notable feature was the fact that the price range of the device was very close to the previous one. The management representative who were launching the device went overboard with the fact that it was priced BELOW the BOM for making it. While this may or may not be a major reason for it, the company is currently facing a funds crunch and trying to rectify the situation. It is worth noting that the Le Max series which is the pricier one of their devices has not garnered that much traction!

Hugo Barra, VP- Global, Xiaomi announces the launch of Mi 5 in New Delhi

Xiaomi is at the other end of this spectrum. The company has seen healthy numbers running into millions of handsets this year in India alone. But their VP has made it very clear that they are not profitable and profits are currently not on their radar. Their strategy for India has been to get economy or VFM handsets into the market but keep the high end and premium models out of this region. Most of the time, it can be seen that there is one generation of difference between India and China when  it comes to their devices. They have also clearly stated that they are not able to estimate and work with the premium segment easily in India and hence want to stay away from it.

So given the data and cases presented above, we can clearly see that there is a dichotomy here. There are players who are clearly moving into mid and premium range devices and there are ones that are going all out in the budget segment. Is the budget smartphone dead yet? Well I think not. Here’s why

The internet percolation in India has just gone into the right gear, high speed mobile networks are becoming a reality. Rural areas are finally getting covered by functional data networks. This means that the majority of the millions of users in India who are currently stuck in the feature phone segment are going to move to smartphones. When that move happens, there will be a massive demand for budget smartphones. But the economics and the value proposition will need thinking outside the online-only and flash sale models. They need to go offline and have a scalable SCM process. So, there will be a shake-up and the boys and men will be separated. So, in summary – The Budget Smartphone is Dead! Long Live The Budget Smartphone!

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