Indian smartphone vendors suffer as Chinese players gobble up share

By Nishant Arora

New Delhi, Feb 23: Aiming to help domestic smartphone manufacturers recover lost ground, the government has taken several measures in the recent past, like easing norms for local manufacturing and hiking customs duty on mobile phones.

The efforts, however, have brought little cheer for the beleaguered local vendors, as Chinese players — now a dominant force — have begun manufacturing/assembling nearly 100 per cent of their products being sold in the country.

The collective market share of China-based vendors — especially Xiaomi, Vivo, Lenovo, OPPO and Huawei (Honor) — in India stands at 53 per cent in 2017, says International Data Corporation (IDC).

According to Counterpoint Research, the combined market share of four top Indian brands — Micromax, Lava, Intex and Karbonn — was a mere 12.5 per cent last year.

Domestic players do take cognizance of the government’s efforts, but realise the strength of the Chinese vendors when it comes to providing superlative user-experience at affordable prices — and robust distribution networks and mass-scale indigenous production.

“China-based vendors are producing handsets that give enhanced experience to the Indian consumers which is not being provided by the domestic manufacturers. Most of the Chinese vendors are now manufacturing and locally sourcing parts so they are not affected by changes in the policy,” Jaipal Singh, Senior Market Analyst, IDC India, told IANS.

Chinese vendors are very aggressive when it comes to market expansion. Backed by top-of-the-line innovation, they know the game when it comes to product line-up, distribution network and presence in both online and offline segments.

Tarun Pathak, Associate Director at Counterpoint, believes the issues which local brands are facing have more to do with their target audience than anything else.

“While Chinese players are able to attract new users across different price bands, the Indian players have largely been restricted to the sub-Rs 6,000 price category. On top of it, they are heavily outspent by Chinese brands in terms of marketing and advertising,” Pathak told IANS.

Four-five years back, when smartphone players like Sony, HTC and Samsung were ruling the roost, local mobile accessories distributors sensed the immense opportunity and launched affordable handsets.

In the 2013-2014 period, the domestic brands quickly gained traction and enjoyed 40-45 per cent market share — till the time Chinese behemoths entered the fray.

Indian players feel that lack of a level-playing field in terms of cost of capital, logistics or production has hampered their prospects.

“In China, every state has a separate budget to support local manufacturers, apart from what the central government offers. There are several problems local manufacturers are facing in India while operating businesses in the states,” Nidhi Markanday, Director, Intex Technologies, told IANS.

“A separate budget would help local manufacturers attract new businesses, apart from adding positive impact on the ease of doing business agenda of the government,” she added.

In addition, the Intex executive stressed, local manufacturers must be incentivised in order to achieve economies of scale and exports of electronics, including mobiles and accessories.

The government has already come up with a phased manufacturing plan to boost indigenous production of mobile phones by providing tax relief and other incentives on components and accessories used for the devices.

In this scenario, Sanjeev Agarwal, Chief Manufacturing Officer, LAVA International, is still confident of growth despite fierce competition.

“We believe that the appropriate way to handle competition is to play on your strengths. Our biggest strength is that being an Indian multinational company, we understand the pulse of the consumers well. We understand the market dynamics and the requirements of the Indian consumers,” Agarwal told IANS.

For 2017, Micromax had 5.4 per cent market share, followed by Lava at 2.6 per cent, Intex at 2.5 per cent and Karbonn at 2 per cent. Xiaomi alone had 20.9 per cent market share for the entire year.

“We have several strategic tie-ups in the e-commerce space as well. These have been our strengths, helping us to maintain good growth despite tough competition. Counting on these advantages, I am confident of maintaining and further reinforcing our presence in the market,” Agarwal hoped.

In order to make a real comeback, said Pathak, local brands need to scale up the price bands by targeting a multi-channel distribution approach and introducing key features at a similar pace, if not faster, than the Chinese competitors.

“This will not happen overnight and till that time, they need to play to their strengths, which means capturing a larger pie of the sub-$75 (less than Rs 5,000) segment,” Pathak added.

Here, domestic brands now have to deal with another local giant — Reliance JioPhone. With 27 percent market share (by shipment), Reliance JioPhone became the leading feature phone brand in the country in the fourth quarter last year.

“In a value-conscious market like India, another option is to partner big telcos and offer bundled products with free data. This will give the Indian vendors some base going forward,” added Singh.

(Nishant Arora can be contacted at nishant.a@ians.in)