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India is the second largest market, after China, in terms of mobile handsets shipped annually. According to an ASSOCHAM-KPMG joint study, Indian handset market recorded over 350 million shipments in the year 2017 as compared to 280 million in the previous year, a surge in revenue from INR 111,000 crores in 2015 to INR 135,000 crores in 2016. India’s smartphone market grew 14% in 2017, with total shipments of 124 million units, the fastest pace of growth among the top 20 markets (International Data Corp (IDC)). By the end of the 1st quarter this year, the Indian smartphone market saw a shipment of 30 million units. Just about one and a half months back, Samsung’s largest mobile factory in the world was also opened in India. All this paint a very attractive picture for mobile handsets in India.

One would wonder that if everything is going so smoothly, then why don’t we see local brands that often. Wherever you look, there are hoardings of Chinese mobile companies. Wherever you go, you find everyone is holding a mobile made by a Chinese company. About 4-5 years back, it was Indian brands like Karbonn, Micromax, Lava who used to dominate the market. It was them who started the trend of budgeted android phones. They came up with 5.6-inch touch screens mobiles with dual sim and that too in a price range of 3K-7K. All this was enough to lure the Indian consumers. But today's scenario is a lot different. Other countries’ brands have shown healthy growth over the past few years which is in contrast to the declining growth of Indian manufacturers. Korean (Samsung), Chinese (Xiaomi, Vivo, Oppo, OnePlus), and other Asian brands have taken over a significant share of the market in a relatively smaller span of time.

In the figure below, the first column is for the year 2015, the second column for 2016, and the third column for 2017. It can be seen that within two years’ time, all the three Indian manufacturers (Micromax, Intex, Lava) lost their place to Chinese brands.

 

 

Source: International Data Corporation (IDC)

Impact of Chinese Brands

So, what exactly went wrong? Well, a multitude of factors can be cited for this downfall. The wide availability of low-cost products and extensive promotional campaigns posed a significant threat to Indian manufacturers. Brands like Oppo and Vivo spent vast sums of money (>$65 million) to aggressively advertise themselves, while the Indian counterparts had only $30 million allocated for the same. Then came Xiaomi, another Chinese brand. Just three years in India saw its market share rise to approx. 21%. The fabulous success of its products is because of the ability to sell value for money products in a very price sensitive market. Selling via e-commerce only coupled with the flash sales helped it in penetrating the market and pushing the local brands out of the competition.

Poor experience with Indian Brands

Before foreign brands entered the India market, the local makers of handsets just focused on selling, often an imported but re-branded version of cheap international brands, all looking alike. It was less on features and quality although it was provided at a low cost. Since the focus was only to sell, the Indian brands did not entirely engage in brand management. Most of the times, dummy phones, which adds to an excellent buying experience by giving a feel of the actual product, weren’t available. After sale services were terrible. All this added to the dismal experience for the buyers.

Failure to shift from 3G to 4G

This is considered to be the single most crucial factor for the debacle of local companies. While the Chinese and other foreign brands were shifting to 4G technology as early as 2015, Indian brands were still dealing with 3G problems. Seeing that 3G devices would soon be out of trend, foreign manufacturers (especially China) started dumping their unsold 3G stock in India and making 4G powered devices. This lack of preparedness exposed the Indian brands and made way for competitors’ 4G enabled products.

Can Indian Manufacturers make a strong comeback?

With an objective of helping local mobile manufacturers, the Central Government of India undertook several measures in the recent past including easing of norms for domestic manufacturing and hiking of customs duty on mobile phones. But, even with the Government’s support, this will be a daunting challenge, as until now, there hasn’t been an ecosystem which is conducive to local manufacturers. However, specific steps can be undertaken to be at least at par with international counterparts. Price, is the single most important factor to be considered keeping in mind the typical Indian consumer, should take the center stage. Nothing is better for them (the consumer) than a product which comes with all the required specifications, but doesn’t burn a hole in the pocket. The kind of disruption Jio did two years ago, in terms of price, is needed so as to remain competitive in the market. Second, due to lack of clear vision and a message, the Indian mobile phone brands fell short of consumers expectations. Taking insightful steps and coming up with aggressive marketing strategies can go a long way in winning over the customers.Third, to thrive in the market, Indian brands need to have a strong R&D department of their own to promote innovation. With the advancement in technology, increased use of Artificial Intelligence and machine learning can help create more differentiated products so as to provide value to the consumer. Last but not the least, being one step ahead is the key to success. For example, today the world is looking at 5G enabled mobiles with wireless charging which lasts at least three days. Keeping a sharp eye on the changing trends like this can give a first mover advantage to the Indian brands.

Summing up

A report by India Cellular Electronics Association (ICEA) says that in the last financial year 2017-18, more than 225 million mobile phones were manufactured in India which translates to about 80% of the total market demand. That being said, it is expected that the manufacturing industry will grow. As mentioned previously, the boom in Indian mobile phone market was primarily due to increase in imported products which are now estimated to go down (ICEA). Though attempts were made to promote domestic brands under the Make in India initiative, the Chinese invasion has somewhat thwarted them. But Indian manufacturers still have a chance to make a positive and effective comeback. They need to get in sync with the dynamics prevailing in this segment and act accordingly. If the trend of copying others and not coming up with a quality product continues, then the local manufacturers might get overthrown in their own backyard by foreign players. With a right kind of ecosystem, support of the government and a change in the mindset can help the Indian brands regain their lost ground.

References

Assocham India. (2018, August 8). Indian handset market crosses 350 million shipments in 2017: ASSOCHAM-KPMG study. Retrieved from http://www.assocham.org/newsdetail.php?id=6423

Bhushan, K. (2018, December 18). Will Made in India phones have a future in the country?. Digit. Retrieved from https://www.digit.in/mobile-phones/will-made-in-india-mobile-phones-flourish-in-india-24787.html

Roy, S. (2018, May 7). POV: Can Indian mobile phone brands survive?. Afaqs. Retrieved from http://www.afaqs.com/news/story/52887_POV-Can-Indian-mobile-phone-brands-survive

Singh, S. (2018, July 24). While we 'Make in India', customers favour Korean or Chinese handsets. The Economic Times. Retrieved from https://economictimes.indiatimes.com/tech/hardware/while-we-make-in-india-customers-favour-korean-or-chinese-handsets/articleshow/65111989.cms

Vamsee, A. (2018, August 14). Can Indian Mobile Phone Makers Ever Be in The Top Position in Terms of Market Share & Sales? iGadgetsworld. Retrieved from https://www.igadgetsworld.com/rise-fall-indian-mobile-phone-makers/

 

Image credit:  electronicsb2b

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Written By Siddharth Jain

Management Student at SSCBS, DU

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