Since 2015, the share of local mobile brands has been dwindling substantially in India, after the influx of Chinese manufacturers. Indian handset players compete mainly in the feature phone category, and entry-level and mid-level smartphone segments, leaving out the flagship high-end segment to the Korean, American and Chinese giants.
Over time, various international brands have entered the feature phone and budget smartphone space, impacting the sales of their Indian counterparts considerably. As per an IDC report, the smartphone market is currently dominated by Xiaomi, Samsung and BBK Electronics (that owns brands like Oppo, OnePlus and Vivo). “Indian brands have less than 2% share of the overall smartphone market,” says Navkendar Singh, research director, IDC India. He doubts their chances of survival over the next five years.
What went wrong?
Historically, some Chinese suppliers who were making products for Indian mobile brands saw lucrative potential in venturing into the market directly, as opposed to giving off that advantage to a local player. This allowed them to offer high specifications and premium features at the same price. Buoyed by a good response from the market, they also invested heavily in infrastructure — a robust seller, reseller, and after sales service provider network via their own centres and franchise models — along with a strong online presence and tie-ups. Moreover, Indian policies such as Make in India gave a further boost to their local production.
By this time, most Indian brands had run out of steam to invest in higher capacity manufacturing facilities of their own or serve as a manufacturing partner for foreign brands. Their mid-level smartphone market share plummeted, pushing them to capitalise on feature and entry-level smartphones. As a result, some players haven’t had a major handset launch in a long time. Moreover, their market shares are worrisome, with the likes of Karbonn and Intex owning only 0.5% each of the overall smartphone market, as per Counterpoint Research.
With 4G, India saw the rise of 4G feature phones, dominated by Reliance Jio. Indian brands like Lava International continue to make 2G feature phones though. “The 2G feature phone segment is a big market in itself, bigger than the smartphone market in India,” asserts Sunil Raina, president and business head, Lava International. When 2G is phased out, Lava finally plans on catching up, with its own 4G feature phones and newer smartphones to “still be relevant”.
Furthermore, demonetisation has played a major role in stalling sales in entry-level smartphone and feature phone markets, which mostly saw cash-based transactions. Between November 2016 and March 2017, this segment slowed down drastically; festive season sales fell by 80% m-o-m, due to the cash crunch. The same period saw smaller Chinese brands shutting shop, Samsung getting into the entry-level smartphone segment, and Vivo and Oppo expanding into the mid-level smartphone segment. These brands invested heavily during consecutive IPL seasons, formerly used by Indian brands extensively, to make noise.
In the next five years, the entry-level and mid-level smartphone market is expected to boom, with some of the Chinese brands moving into the high-end flagship segment. “With the recent political developments that may affect brands like Huawei, we can expect a void in the market, especially in price-sensitive India,” says tech analyst Jayanta Ghosh. “With Make in India resulting in local manufacturing and cheaper products, it will be tough for all. Furthermore, new brands like Oppo Reno are also coming to India.” As a result, brands operating in the lower segments like Tecno, Infinix and Itel may have to fight it out, just like their Indian counterparts.
According to Singh, Indian brands could soon turn their attention from smartphones to cheap feature phones. “If Indian brands can quickly unveil a 4G feature phone under `2,200, they have a survival chance. Fighting it out in the smartphone business is a real struggle,” he says.
While some players see diversification into other product categories as the magical answer, analysts believe that would be a wrong move as it entails huge investments. Moreover, for a handset company, businesses like television units run independent of the mobile handset vertical, so it may be tough to plough back profits from one to the other, if at all.