India Beats US As World’s Second-Largest Smartphone Market

India has overtaken the United States to become the world’s second largest smartphone market.

According to news from a report by Canalys, smartphone shipments in India grew 23 percent year over year in Q3 2017 to reach just over 40 million units, making the country the world’s second largest smartphone market after China.

“This growth comes as a relief to the smartphone industry. Doubts about India’s market potential are clearly dispelled by this result,” said Canalys Research Analyst Ishan Dutt. “There are close to 100 mobile device brands sold in India, with more vendors arriving every quarter. In addition, India has one of the most complex channel landscapes, but with low barriers to entry. Growth will continue. Low smartphone penetration and the explosion of LTE are the main drivers.”

The top five vendors (Samsung, Xiaomi, Vivo, Oppo and Lenovo) now account for 75 percent of total shipments in India. Samsung shipped 9.4 million smartphones, almost 30 percent more than in Q3 last year, while Xiaomi increased shipments by over 290 percent to 9.2 million units.

“Xiaomi’s growth is a clear example of how a successful online brand can effectively enter the offline market while maintaining low overheads,” said Canalys Analyst Rushabh Doshi. “But Xiaomi focuses on the low end. It struggles in the mid-range (devices priced between INR15,000 and INR20,000 [US$230 and US$310]), where Samsung, Oppo and Vivo are particularly strong. Nevertheless, we predict Xiaomi’s continued go-to market innovations will allow it to overtake Samsung within a couple of quarters.”

Even Apple’s iPhone shipments in India have more than doubled to 900,000 units in Q3 — impressive growth considering it’s a market skewed toward low-end smartphones.

“The Indian economy is proving very strong in the second half of 2017, now that the twin shocks of GST and demonetization are behind it,” added Doshi. “Reduced indirect taxes have added new equity to the market, with distributors and retailers able to serve areas beyond their home regions as inter-state operations become easier. As the infrastructure matures, consolidation in distribution is inevitable.”