India’s smartphone market is expected to witness a 12percent decline in sales volumes this festive season, even as the overall market value is projected to grow 5percent, according to reports. Rising memory costs are pushing up device prices, prompting consumers to postpone upgrades and reconsider discretionary purchases.

The contrasting trends indicate a shift towards premium smartphones, with market demand increasingly driven by existing users replacing their devices rather than first-time buyers. Financing options, exchange offers and buyback programs are expected to play a greater role in supporting sales as manufacturers face limited scope for offering substantial discounts.

“The key challenge this festive season will be the size of the active consumer pool,” said Tarun Pathak, research director at Counterpoint Research.

Higher prices are likely to keep consumers on the sidelines, delaying discretionary upgrades and making replacement-driven purchases a key contributor to demand, he added.

The growing importance of device trade-ins reflects this shift. Servify, which handles more than 3 lakh device trade-ins annually, said trade-in volumes during October and November are typically around 50percent higher than in regular months.

“This festive season is shaping up as an upgrade season more than a first-purchase season,” said Sreevathsa Prabhakar, founder and chief executive of Servify.

According to Prabhakar, upgrades in the Rs 60,000-1 lakh price segment are being driven largely by financing options and trade-ins. Demand for devices priced above Rs 1 lakh, including foldable smartphones, is primarily coming from existing premium users who typically upgrade their devices every 12-24 months.

The trend is also expanding beyond metropolitan areas into tier-2 and tier-3 cities, suggesting that premiumisation is gaining traction in smaller markets.

With rising component costs putting pressure on affordability, smartphone brands are likely to depend more heavily on exchange programs and flexible payment options to sustain festive demand.

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While higher-priced devices could help support overall market value, declining sales volumes highlight the challenges facing manufacturers in attracting new buyers and encouraging consumers to upgrade.