If you know a thing or two about Madhav Sheth, you’ll know he’s not the one to mince his words. He is open and direct. After building Realme from scratch, his new role as HTech chief executive officer, sees Sheth taking up the challenge to “bring Honor back to our life”. Speaking exclusively to Financial Express.com’s Saurabh Singh, Sheth talks about his “sudden” exit from Realme, reasons for getting behind a brand like Honor soon after and what happens next. Excerpts.
Firstly, congratulations on your new venture— HTech. Most people are wondering, why choose Honor and not a Micromax or a Lava?
It’s all about bringing Honor back to our life and how I can help the Indian electronics industry to grow. We cannot discount the Chinese supply system; we all know that we must be dependent [on it]. The thought process behind why we’re moving in this direction [with Honor] is to ensure how I can make it more indigenized.
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The reasoning is that the supply chain is still [largely] based out of China and to survive in this business, you need to have a robust supply chain and make global partnerships without which your existence would be completely minimalistic. Unfortunately, because of the economies of scale, Indian manufacturers do not have it [yet]. You also need a strong R&D in place [to succeed]. Honor has an R&D of about 17,000 people now.
You’ve launched your first product, the Honor 90 smartphone. Where do you plan to go from here?
We are planning a second launch very soon, probably before the end of this year. We are thinking of bringing more innovations and more localization into the market. Q1 2024 is the timeline that we are targeting internally to start local manufacturing. Where some of the innovations in India would be difficult to assemble, we will be moving a majority of our portfolio to India manufacturing. We have already talked with three partners. We’ll be signing the contracts very soon.
Where does PSAV Global factor in? Will you be looking to onboard more partners as you start to grow?
PSAV was the company that was doing business with Honor for laptops and tablets in India, and it had their licenses. We extended that to mobile phones to expand the network and bring Honor smartphones back to the market. If I had gone to Honor directly and started working on an agreement, it would have taken me six to nine months [to close everything]. So, it saved me time and expedited my launch which is why you see, me leaving Realme and announcing the Honor comeback, took hardly two months. That’s the speed with which I always love to work with. As for working with more such partners, for me, business is all about scaling up. If things and the ecosystem work in this place, I don’t mind taking other routes, which are shorter as well as compliant, and that’s something that we’ll be looking forward to.
What is the problem that Honor is trying to fix? With so much competition, where does it fit in?
Every other brand today has an umbrella brand. Vivo and iQOO have the same products. Samsung’s Galaxy M, F and A-series have the same products. Realme, OnePlus and Oppo have the same products. The same product is renamed and relabeled for different channels under different names with different marketing concepts and different callouts. But people understand that they are all surrogate products. India is a huge market with a huge population, and you cannot fool this population with surrogate products. The time is now right when consumers need a specific brand and not just surrogate products.
Honor will be a substantial player in the next year itself. Even my one product launch, in two months’ time of my exit [from Realme], has triggered a lot of jitters in the industry. I believe a lot of brands in India will have sleepless nights once we start to launch more products and come full-fledged to the market before the end of next year. The way that I am going to do business will create a new benchmark.
People have been critical about the Honor 90’s pricing. Your comment and was this the right product to start with?
We did not want to position Honor just as a value-for-money brand but as a technology, innovation, and disruptive brand. The idea was to be different. So, the Honor 90 was definitely the right product to start with. As for critical conversations about the price point, I have been aware of them since day one and every single comment has been monitored by me personally. I am also aware of how many of those comments were seeded by competing brands. Their nervousness makes me excited.
So, how are you positioning the brand in its second coming?
We want to position Honor as a value brand, and not value for money, that can bring change through innovation and disruption to the industry.
Clean software is something you spoke about openly at Realme, especially during the early days. We all saw how it turned out eventually. You’re making the same pitch with Honor as well. Will you be able to follow through this time?
Having a bloat-free experience is something that I have always dreamed about. I believe that [software] experience should always be a priority and that experience cannot come at the cost of monetisation. Monetisation can be done, but in a way that it does not impact the experience of the user, which must be seamless. Maybe I have failed to convince my management in the past that that is the right way to go ahead, because monetisation always comes as a priority for a lot of brands. This time, the control of the operating system (OS) is in our hands, completely.
What is the kind of investment you’re beginning with and how do you plan to be profitable with the approach that you are taking?
We have already invested more than Rs 350 crore just in launching one product. This is not a small game. As for future investments, my yearly plans will be closed by November. Breaking even is always there on my mind. [Luckily] I have not had any glitches to get funding and so even with my new project, I’ve got money flowing in. Our investors know and believe that whatever I do, they are going to make money out of it.
I’ll be very honest and candid in saying you put up the right price and not change the consumer experience [for monetisation’s sake]. It could take longer [to succeed] but would be more sustainable.
Given your experience, is offline sales on your radar with Honor, a brand that’s largely been online-only all this time?
It would be a mix of both online and offline put together. The reason is because in India, right now, we see the demographics demarcation is 50-50 in terms of the business value of online and offline sales. I believe that offline is over 70 percent and online is 30 percent. Even in the most mature markets in the world, where the 5G penetration is high, online is around 20-25 percent. So, offline experience becomes one of the most critical factors. And hence when you have very high-value products, the touch and feel is extremely important. We will be starting off big with online, but yes, we will be expanding to offline channels over a period.
Honor has been doing foldables for a while and doing well there. Is that something you’re considering for India and if yes, how soon can we expect Honor to launch a phone like the Magic V2 in India?
Unfortunately, the highly affluent users in India are not getting any differentiated products at this point of time. The iPhone 15 is a disappointment for a lot of people who are already using an iPhone 13 and iPhone 14. For them, there’s no difference as such, so probably what they are looking at is some differentiated products. And I think that’s where foldables come into the picture. When you have USD 1000-USD 2000 to spend, you want to be seen. Honor is doing a fantastic job with foldables. If you see the Honor Magic V2, it has a 5,000mAh battery and a slimness of around 9.9mm only. As for launching them in India, we are expecting at least one [foldable] product by the first half of next year. Our product roadmap will be finalized very soon.
You’ve been an advocate of ecosystem play, what are your expansion plans with AIoT at HTech?
I’ve always believed in ecosystems. Ecosystem play is extremely important for the consumers’ acquisition as well as for the consumers to stick to a brand for a longer period. It’s a no-brainer strategy for any brand to have complementing products. We will be planning and launching a few AIoT products very soon.
Your expectations from the upcoming festive season?
Consumers will be looking for better phones this festive season with price points of more than USD 300 or USD 250. Phones below Rs 15,000 will have a lot of struggles and I believe the brands [launching them] will have to face the heat. If you see it right now, you can probably see the price of 5G phones has dropped to around Rs 10,000. It is practically not possible to bring it this low. It has got more to do with the desperation of brands and to clear out their inventories.
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As for HTech, we are happy to inform you that we are rolling out exciting festive offers valued at Rs 60 crores ensuring customer engagement and increased sales.
As always, it was lovely to talk to you and as always, we appreciate the candor. While we’re on the subject, would you want to talk a little about Realme, why you left— what happened there?
Over a period, when a brand is built and when you’re in the position of any CXO, your vision and your speed will be challenged at every single point. I would not like to get into this conversation now because I understand that probably this is [for the best]. What’s gone is gone.
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