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  1. Bit by bit: The Chinese challenge

Bit by bit: The Chinese challenge

Indian smartphone firms have to wake up to the threat from across the border.

By: | Updated: May 19, 2015 11:40 AM
Chinese smartphone manufacturers have, over the past year or so, become significant players in the Indian market, often at the cost of Indian manufacturers such as Micromax and Lava, which also import all their phones from China. (AP)

Chinese smartphone manufacturers have, over the past year or so, become significant players in the Indian market, often at the cost of Indian manufacturers such as Micromax and Lava, which also import all their phones from China. (AP)

So, how much do you think this phone should cost?” Micromax founder Rahul Sharma asks me, holding the YU Yuphoria, the second phone from his new company YU Televentures. It is a bit of a sinister question, given that his first phone was priced much lower than what everyone expected it to be. A day later, this phone, too, touted its entry-level price despite its mid-range specifications. Sharma is clearly talking back to Chinese smartphone makers in their own language. He has no other option.

Chinese smartphone manufacturers have, over the past year or so, become significant players in the Indian market, often at the cost of Indian manufacturers such as Micromax and Lava, which also import all their phones from China.

For now, the biggest marketshare 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. Lenovo has also been pushing affordable smartphones that could eat into the share of Indian companies, even its own Motorola range.

Chinese players, especially the start-up Xiaomi, have made significant inroads into India by playing the value smartphone segment better than most other players. This strategy endeared brands such as Micromax to Indians when large global players such as Nokia had the market tightly in their grip. Now, however, buyers here seem to have realised that Chinese brands offer better value at better prices.

Let’s take the case of another start-up called OnePlus. Its only phone, OnePlus One, offers specifications that a brand such as Samsung would charge double for. Xiaomi phones, too, do the same. Both OnePlus and Xiaomi are able to subsidise their phones by opting for the online-only model and by not spending a single paisa on marketing or advertisements. Older brands cannot afford to take this route as they are heavily invested in 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 such as Micromax.

What is happening in India is indicative of how smartphone preferences are changing globally. Volumes are 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 prefer to settle for a cheaper option and those who can’t afford one are pushing themselves to buy one.

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. These start-ups have spurred 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, is all set to launch its latest phones here. Meizu and Coolpad are also following up this week.

For now, there doesn’t seem to be much of a fight for the top slot. 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; 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, is set to peak. “Their biggest challenge will be to take on strong, established home-grown players such as 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 have to offer better phones and value to their customers to stay relevant. Their only advantage, as of now, is their offline channel strength. But as Xiaomi has shown, the new players are not wedded to online strategy.

They, too, could start selling in places where customers don’t understand e-commerce. Our Chinese friends, meanwhile, will need to start widening their portfolio, for you never know when market trends will change, again.

nandagopal.rajan@expressindia.com

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