Amidst the noise around Make in India, the smartphone sector is seeing a challenge from across the Himalayas. Chinese smartphone manufacturers have over the past year or so become significant players in the Indian market, often at the cost of the so-called ‘Indian’ manufacturers, who too import all their phones from China.
For now, the biggest market share among these new entrants is that of Lenovo, the numbers driven up primarily by its acquisition of Motorola, which has at least two very popular budget smartphones in India. Of late, Lenovo has also been pushing affordable smartphones that could eat into the share of companies like Micromax, Lava and Intex. In fact, these phones are even cannibalising their own Motorola range.
The Chinese players, significantly the start-up Xiaomi, have made inroads by playing the value smartphone segment better. This is the same strategy that brought success to local brands like Micromax when large global players like Nokia had the market tightly in their grip. Now, however, Indian buyers seem to have realised that Chinese brands offer better value at better prices.
Take the case of another startup, called OnePlus. Their only phone OnePlus One offers specs that a brand like Samsung would charge double for. Xiaomi phones too do the same. Both are able to subsidise their phones by opting for the online only model, and by not spending a single paisa on marketing or advertisements. The older brands can’t afford to take this route, because they are heavily invested in the traditional channels. Neha Dharia, Senior Analyst, Consumer Services, at research firm Ovum says Chinese brands will grow at the cost of smaller brands, such as Karbonn and Intex, but will need to ramp up efforts to compete with an established player like Micromax.
What is happening in India is also indicative of how smartphone preferences are changing. The volumes are now in the $100-$200 mid-segment, or the “super mid” range, where all manufacturers have been able to offer what buyers think is more than what they paid for. Those who can afford to buy a costlier phone now prefer to settle for a cheaper option, and those who can’t afford one are pushing themselves to buy one. This is why full bouquet players as well as low segment players are now feeling the heat.
Most Chinese brands prefer to offer phones only in this mid range. Xiaomi often has just one phone selling at any given time, OnePlus still has just one mid-range phone. The startups have spurred the larger players into action. Convinced by one successful launch, Huawei is using its muscle to offer more choices in this mid-range. Another Chinese giant ZTE has been winding up for a few quarters.
For now there doesn’t seem to be too much of a fight for top slots. After a couple of scary quarters, Samsung has managed to widen its gap with Micromax. The third slot is now with Intex. Lenovo is at fifth this quarter, Xiaomi held this slot last time. Don’t be surprised if you see at least three Chinese names here by the end of the year, when the demand for 4G devices, where these brands have an advantage, are set to peak. “Their biggest challenge will be to take on strong established home-grown players like Micromax. They would need to work on their marketing efforts to ensure that they come across as an Indian brand to become local favourites,” Dharia adds.
Indian players, meanwhile, will have to offer better phones and value to stay relevant. Their only advantage for now seems to be their offline channel strength. But as Xiaomi has shown, the new players are not wedded to their online strategy. They too could start selling in places where customers don’t understand e-commerce. The Chinese, on the other hand, can’t remain one-trick horses either. They will need to start widening their portfolio, for you never know when the market trends change, again.
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