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The Smartphone Game

How Indian smartphone companies are taking on global giants in one of the world’s fastest growing markets

How Indian smartphone companies are taking on global giants in one of the world’s fastest growing markets

She turns a corner and into a hail of medium-range gunfire. The trees sway with the wind,a bird hoots ominously. It’s an ambush. One look at the commando unit and she ducks,crawls into a ditch and shoots 10 rounds of ammo. Silence. Then cheers as the game ends and Chetna Prasad’s friends crowd around her,desperate to wrest her smartphone. Sleek and glossy,like a sports car,Prasad says it performs like one. Her life as a trainee telecaller in Bangalore cuts her no slack,and she refuses to allow her phone any. “I can switch from a 3D game to an HD video to voice chat,and the phone can handle it; it runs smooth as butter,” says the 21-year-old. Two months ago,when Prasad switched her Samsung Galaxy SIII,the phone that set the standard for the Android market,for an Indian handset that cost half as much,she was prepared to be disappointed. Instead,Canvas HD,one of the most successful smartphones from the Gurgaon-based Micromax Informatics,was everything she wanted. “I passed on the SIII to my brother and bought the Canvas HD as a compromise. But it has turned out to be just as good,” says Prasad.

This is the story of how Indian smartphones are getting “just as good” as high-end phones made by multinationals Samsung,Motorola,Sony and HTC. Low-cost and pumped with features,they are riding a giant wave that will soon see India become the third-largest smartphone market,with a 10 per cent chunk of the global sales. Already,Indian companies control 30 per cent of the smartphone sales in the country — a huge jump from about three per cent a year ago,says a report published in June by market research firm International Data Corporation. Micromax and Karbonn,the two top players,may have got this far by making sub-Rs 10,000 smartphones,but they are now ready to raid Samsung’s fanboy bastion with phones “inspired” by the pricey Galaxy SIV.

“We offer five-star food at fast food prices,” is how Biju Menon,sales head at Karbonn,India’s second largest smartphone company,puts it. The Karbonn office in Bangalore,located in a small lane in Indira Nagar,is brimming with cardboard boxes — a common sight ahead of a launch. The company,which closed the financial year with a turnover of Rs 2,400 crore,has announced the release of its new flagship device,the Karbonn Titanium S9,priced at Rs 19,990. “We are confident of selling at least 30,000 units of the S9 every month,” Menon says.

A year and a half ago,Karbonn didn’t think it could sell a device priced above Rs 5,000. As the market matured,the company invested in brand building and went to town with features everyone craved but couldn’t afford: a five-inch screen,quad-core processor,and good looks. “Our phones look better than Samsung’s,” claims Sudhir Hasija,chairman of Karbonn Mobiles,rubbishing allegations of copied design. Hasija was a distributor for Nokia and then Samsung before he set up Karbonn in 2009. The company’s success story,he insists,lies in its distribution system. “Our phones are available at every street corner. We have tie-ups with 85,000 retail counters and are present in 90 per cent of Indian districts. We work closely with over 500 distributors across India,” he says. The company also spends heavily on advertising — the ad budget for this year is Rs 250 crore — even managing to rope in Tamil superstar Rajnikanth for one of its campaigns.

Karbonn sells 5 lakh smart devices in a month,but feature phones — costing Rs 2,000 to Rs 4,000 — are still its mainstay,accounting for 85 per cent of the one-crore-plus phones it has sold till date. This is set to change. “By Diwali,we will be launching an eight-core phone that is unlike any of our earlier models,” Hasija says. Micromax,Karbonn’s competitor,reportedly wanted to get an eight-core MediaTek system-on-chip on board its latest flagship phone,the Canvas 4,but industry watchers say the chipset wasn’t ready in time. In the fickle world of mobile technology,every day counts. Indian smartphone companies,operating in a fiercely competitive market,are expected to launch phones within three months of the arrival of a new chipset. “Who wants to spend Rs 40,000 on a phone today,knowing it will be outdated soon? We try to offer something new to the customer all the time,” says Hasija.

This year,Micromax,the leading Indian smartphone maker,plans to launch 30 phones,mostly in the mid- to high-end segments. The company has a dedicated team working on software enhancements like blow to unlock,a feature no Indian phone before Canvas 4 sported. The company has always been good at assessing market needs. Co-founder Rahul Sharma recalls how a trip to Behrampur in West Bengal inspired the company’s first popular phone —the X1i Plus. There was no electricity and yet a phone booth was working just fine. Sharma found that the booth owner was using a truck battery. He would lug the battery on his cycle to the nearest village,12 km away,charge it overnight and bring it back to the booth in the morning. Despite this,he was making a profit. Sometime later,Sharma was travelling in Bihar,where he saw people pay Rs 35 to charge their phones. “These experiences led us to take Micromax to the mobile phone market with a phone that could last up to a month on a single charge,” Sharma says.

Indian smartphones appeal to wide swathes of a young population that aspires to own high-tech devices. Rakesh Vats,a 27-year-old student of architecture in Bangalore,recently bought a smartphone by Delhi-based Zen Mobiles that set him back by Rs 11,999. The Zen Ultrafone 701 HD has an attractive five-inch screen and comes with a good battery at a fraction of the price of a Samsung smartphone. “For someone like me who changes phones every six months,buying Indian phones makes sense. They are also easier to resell,” Vats says. “Brand consciousness is fading. People are technology-conscious now,” he adds.

Vats’s latest handset is the pride of Deepesh Gupta,managing director,Zen Mobiles. The company,which made the leap from distribution to its own mobile phone brand in 2009,made Rs 430 crore in revenues in the last financial year. The Ultrafone 701 HD is its flagship model and Gupta says no other manufacturer has been able to match its specifications at that price point. “We study trends in two developed countries,two developing countries and China,before deciding on what kind of phone to launch,” Gupta says.

India is ready for homegrown brands,says Vishal Sehgal,co-founder and director,Lava International,which sells over one lakh smartphones in a month. Seventy to 80 per cent of its smartphone customer base,says Sehgal,is made up of former Samsung,Nokia and BlackBerry users. “Compared to Samsung,we aren’t there yet. But a year later,multinationals will face serious competition from Indian companies,” he says. Already,when Samsung representatives visit Lava in their capacity as component suppliers,Lava’s phones draw their attention,says Sehgal. “They make it a point to visit our office,” he says.

Earlier this month,Lava’s mid-to-high-end smartphone brand XOLO launched the Play T1000,the first Indian device to be powered by the Tegra 3 chipset by NVIDIA. The phone is aimed at “technology-seeking individuals” and gamers. “Consumers in India have now matured to the next phase of buying. They don’t want to settle for less. They want access to the latest,at a price point that is not entirely out of their reach. XOLO is one such brand that fits the bill,” says Vishal Dhupar,managing director,NVIDIA,South Asia. Lava was also the first company to partner with chipset maker Intel for a smartphone last year. “A chip is the heart of the phone. We strive to understand its technology at a deeper level and that is why chip companies are willing to work with us closely,” says Sehgal. The company has a team of 150 engineers in Bangalore and China; it employs 550 in all. It has also invested in quality value-adds: some of its phones come with an app called XOLO Switch that compartmentalises memory,so that the user can switch between profiles — one for office,another for home,and even a kids’ mode where there is limited access to multimedia. “The phones are aimed at mid-end consumers — young people in the first five years of their careers,who have another life outside of work. Our research showed there was a gap in the Android phone market here and we tried to plug this,” Sehgal says.

Such insights from the market are the guiding beacons of India’s smartphone industry. Karbonn,for instance,says Indians like multimedia stability,with Tier-II and Tier-III cities preferring louder speakers. Micromax has learned that its users prefer a sturdy build,and consequently,has opted for an expensive aluminium casing for the Canvas 4. “We have captured a 24.3 per cent market share by tailoring our products for Indian users,” Sharma says,adding that Micromax has reached a position where it can influence chipset manufacturers to remove needless features like LTE (4G internet) to suit Indian needs and budgets. This is why a one-size-fits-all multinational phone isn’t the best for India,says Sehgal.

Karbonn’s software testing and technology head Arvind Iyer says the battery and drop tests they conduct in-house are among the most important in the Indian context. Iyer also travels with a team to Tamil Nadu and other neighbouring states to check the handshake between the local and the roaming-area network and maximise the phone’s network stability.

All this,combined with rigorous software and hardware testing by chipset manufacturers,means that the quality of the Indian smartphone isn’t suspect anymore. Intex,a computer peripherals company founded in 1996,ventured into the mobile phone business in 2008. Five years on,it has several phones in the price bracket of Rs 900- Rs 11,900 and its sales last month totalled 8 lakh units. It now claims to hold the third spot among Indian manufacturers. The reason is quality,says Sudhir Kumar,assistant general manager,mobile business,at Intex Technologies. “Among Indian brands,we have the lowest reported device failure rate – less than 0.5 per cent. Software stability is our primary concern,” he says. Intex’s flagship model,Aqua i5,was launched in June.

In an industry that is growing by leaps and bounds,bolstered by sturdy distribution and huge marketing budgets,some companies have managed to break into the big league in record time. A company that started from a small base in Hyderabad in 2010,Celkon Mobiles,now sells 5 lakh phones a month,of which 1 lakh are smartphones. Murali Retineni,executive director,Celkon Mobiles,attributes its success to cricket sponsorships and after-sales service. Celkon was the title sponsor for IPL and the India-West Indies-Sri Lanka tri-series this year; it is also sponsoring India’s Zimbabwe tour. The company’s marketing budget is around 10 per cent of its revenue and it plans to spend Rs 100 crore on branding alone. Celkon’s Monalisa series,costing about Rs 15,000,will be launched next month with a five-inch phone to take on Canvas 4 and Titanium S9.

Encouraged by the growth of these brands,Spice Mobiles,which was primarily a feature phone maker,and Zync,a tablet company,have jumped into the smartphone fray. “The more,the merrier,” says Anusha Aravind,a 44-year-old homemaker,at a tiny mobile phone store on SP Road,a consumer electronics hub in Bangalore. Aravind is spoilt for choice: should she spend Rs 9,000 on a multimedia Android phone with an excellent battery or let herself be seduced by the glossy plastic chassis on a Rs 12,000 ­model? It may still be a while before an Indian phone torches all benchmarks and blows Samsung out of the water. But if home-grown budget Androids continue to cash in on fast product cycles and effective market penetration,they may one day overtake the multinationals. Like in Chetna Prasad’s 3D game,it’s an ambush in the making.

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