Diwali Smartphone Sales at India's Retail Stores Fall Up to 20% as Rising Prices and a Shortage of Affordable 5G Models Hit Demand

Diwali is traditionally the biggest shopping season of the year for India's smartphone retailers. This year, many of them saw far fewer customers buying phones.

Sales volumes at offline smartphone retailers fell 18% to 20% over the four days of Diwali from November 6 to 9 compared with last year's festive season, according to the All India Mobile Retailers Association (AIMRA), as reported by Inc42 on Thursday, November 12.

Sales value was broadly flat compared with last year, supported by higher average selling prices, according to Inc42. But margins and store profitability were squeezed, the association said.

The affordable segment hit hardest

The weakest part of the market was the sub-₹20,000 segment, which accounts for a large share of smartphone sales in India. Retailers said this segment was hit by a shortage of fresh, competitive 5G models, according to Inc42.

Affordable smartphones are particularly important for India's mass market, where many buyers are upgrading from older devices or buying their first 5G phone. A lack of attractive new models in this price range can deter purchases, particularly when prices are rising.

Loan approvals fall

Consumer finance has become crucial for smartphone sales in India, where many buyers pay through equated monthly instalments (EMIs). Only 60% to 70% of loan applications were approved during the Diwali period, according to Inc42. Tighter lending standards mean that some customers who wanted to buy phones on credit were unable to do so.

Lenders have become more cautious about unsecured consumer loans after regulatory tightening by the Reserve Bank of India and concerns about rising defaults among some borrowers.

A difficult year for smartphones

The weak Diwali sales follow a difficult period for India's smartphone market. Shipments fell 26% year-on-year to 35.8 million units in the third quarter of 2026, a decade low for that quarter despite the festive season, according to research firm Omdia.

Rising memory prices have been a key factor. Demand for memory chips from AI data centres has pushed up prices of DRAM and NAND flash, increasing the cost of making smartphones. Manufacturers have passed on some of these costs through higher prices, which has hurt demand, particularly among price-sensitive buyers.

Shipments of phones priced below ₹20,000 fell 47% in the third quarter, according to Counterpoint Research, as reported by Communications Today. Manufacturers held back channel inventory even ahead of the festive season, and Counterpoint expects a post-festive slowdown and another round of price increases.

Premiumisation's limits

India's smartphone market has been undergoing premiumisation, with buyers increasingly choosing more expensive phones, often financed through EMIs. This trend has supported the value of sales even as volumes have stagnated. But the latest data suggest that rising prices may be reaching the limits of what many consumers can afford.

The flat sales value reported by AIMRA, despite lower volumes, reflects this dynamic: fewer people are buying phones, but those who buy are spending more on each device.

Online versus offline

The AIMRA figures cover offline retail stores, which compete with e-commerce platforms such as Amazon and Flipkart. Online platforms often launch exclusive models and offer aggressive discounts during festive sales, and offline retailers have long complained that they face unfair competition. However, offline stores remain important, particularly in smaller towns, where many buyers prefer to see and touch phones before buying and rely on store staff for advice and financing.

The squeeze on margins and profitability for offline retailers could lead to store closures or consolidation if weak demand persists.

The brands

India's smartphone market is dominated by Samsung, Vivo, Xiaomi, Oppo, Realme and Apple, with OnePlus, Motorola and other brands also competing. Apple has gained market share in India in recent years, helped by local manufacturing and financing offers, but its iPhone sales in India also declined in the third quarter of 2026, according to Apple World Today.

Chinese brands, which dominate the affordable segment, have been particularly affected by rising costs, since they operate on thin margins.

Wider consumer signals

The weak smartphone sales contrast with strong festive season demand in some other categories, such as automobiles, where makers have reported robust sales. This suggests that consumer spending is uneven, with buyers prioritising some purchases over others, and that price increases have hit smartphones particularly hard.

Policymakers and economists watch festive season sales closely as a barometer of consumer demand. The divergence between categories will be an important input in assessing the strength of India's consumption recovery.

Implications for Make in India

India has become a major smartphone manufacturing hub, with companies such as Apple, Samsung and others producing phones in the country for domestic sales and exports, supported by the government's production-linked incentive scheme. Weak domestic demand could affect manufacturers' production plans, although exports, particularly of iPhones, have continued to grow.

The memory chip squeeze

The surge in memory prices stems largely from the AI boom. Data centres running AI models require enormous amounts of high-bandwidth memory and server memory, and memory makers such as Samsung, SK Hynix and Micron have shifted production capacity towards these more profitable products. That has tightened supply of memory for smartphones and personal computers, pushing up prices.

For smartphone makers, memory is one of the most expensive components, particularly in phones with large storage. Higher memory costs therefore translate directly into higher retail prices or thinner margins, with the affordable segment, where margins are thinnest, hit hardest.

Retailers' concerns

Mobile retailers have long sought a level playing field with online platforms, arguing that exclusive online launches and deep discounts funded by brands and platforms undermine their business. AIMRA has raised such concerns with manufacturers and policymakers in the past.

Weak festive sales add to the financial pressure on independent retailers, many of whom are small businesses with limited capital. If demand does not recover, some may be forced to cut staff or close stores.

Retailers will also be watching the wedding season, which typically follows Diwali and can provide another boost to sales of smartphones and other gifts.

What comes next

Retailers will watch whether demand recovers after the festive season or whether the slowdown predicted by Counterpoint materialises. Manufacturers will need to decide whether to launch more affordable 5G models or continue raising prices as memory costs rise. For India's smartphone market, the coming months will test whether rising prices are a temporary pressure or a lasting barrier to growth.