Whalesbook
India's smartphone market began 2026 on a subdued note, with sales falling 9% year-on-year in the first nine weeks. This downturn stems from rising memory component costs and widespread price increases, averaging ₹1,500 across key models, which have dampened consumer spending. While Republic Day sales offered a brief boost, particularly online, this momentum wasn't sustained due to limited promotions and fewer new model releases.
Despite the significant drop in unit sales, the market's overall value has remained steady. This resilience is mainly due to ongoing premiumization, where consumers are choosing higher-priced devices. The premium segment, defined as phones above ₹30,000, captured its highest share in early 2024 at 20% of volume and 51% of market value. This trend continued into 2025, with the premium segment expanding 11% in volume and accounting for 22% of shipments by early 2026.
Brand performance varied within this challenging market. vivo stood out with 19% year-on-year growth in the first nine weeks of 2026, driven by new launches and its popular Y and T series. Apple also posted a 12% increase, supported by strategic discounts and demand for its iPhone 17 series. In 2025, Apple's value share in India reached a record 28%.
However, the broader market outlook remains cautious. Research Director Tarun Pathak projects a potential 10% contraction for India's smartphone market in 2026, citing ongoing global uncertainties, geopolitical tensions, and rising commodity prices that are expected to affect discretionary spending. This aligns with IDC's forecast of a significant market decline in 2026, potentially the sharpest ever, due to severe disruptions in the memory supply chain.
The escalating cost of memory components, like DRAM and NAND flash, is a primary driver of current market strain. Prices for these chips were expected to rise by as much as 40% in early 2026, adding an estimated 8-15% to manufacturing costs. This surge, partly fueled by high demand from AI data centers, forces manufacturers to pass costs onto consumers. Memory chips form a significant part of a phone's total cost, making lower-priced devices particularly vulnerable. This has led brands to introduce new models at higher price points and increase prices on existing devices. The average selling price (ASP) in India has been rising steadily, reaching a record $282 in 2025.
This cost inflation disproportionately impacts the entry-level and mass-budget segments. The entry-level segment (under $100) declined by 14% year-on-year in Q1 2024, falling to a 15% share from 20% a year prior. Conversely, the premium segment continues to show strength. By Q1 2024, it accounted for 20% of volume and 51% of value, reaching its highest share ever. This suggests a market increasingly divided between a struggling affordability segment and a growing premium segment, often supported by financing.
Looking at competitive dynamics in early 2025, vivo led in volume while Samsung led in value. By Q1 2025, vivo maintained its top spot in overall market share, though Xiaomi experienced a significant 37% year-on-year decline. Apple, meanwhile, consistently showed strong growth, especially in premium segments, achieving a record first-quarter shipment in India in Q1 2025 with 23% year-on-year growth.
The current market situation points to a growing affordability crisis for many Indian consumers. Substantial price increases, driven by component costs and currency depreciation, are pushing entry-level and mid-range devices out of reach. Memory chip prices could rise another 40% through Q2 2026, adding pressure that manufacturers may struggle to absorb, especially for devices under $200. This could accelerate market consolidation, as smaller brands with less purchasing power face significant difficulties.
The diminishing appeal of new budget devices is evident. As new models in this segment may have features reduced to manage costs, consumers are increasingly expected to turn to refurbished or second-hand models, or simply extend the lifespan of their current phones. India's used smartphone market is projected to reach $10 billion in 2026, reflecting this shift.
The macroeconomic environment adds another layer of risk. Geopolitical tensions and rising commodity prices, alongside a weakening rupee, are dampening discretionary spending. For brands heavily reliant on the mass segment, these pressures pose a significant threat to volume targets and profitability. While the premium segment shows resilience, its smaller market size means its growth alone may not offset a substantial contraction in lower-priced segments.
Looking ahead, brands are expected to maintain cautious strategies, focusing on premium-led growth through new launches and targeted financing options. Continued demand for premium devices, supported by easier financing like EMIs, enables consumers to trade up. IDC forecasts that while overall volumes might contract in 2026 due to component shortages, value growth should be supported by this sustained premium demand and finance-led purchasing. The average selling price is expected to continue rising, further tilting the market toward higher-value devices. However, recovery is anticipated to be gradual and uneven, with significant challenges persisting in the mass segment.