Chinese smartphones take over India, domestic firms lag

In an indirect blow to Prime Minister Narendra Modi's 'Make in India' programme, latest figures show that Chinese mobile handset makers are edging out their Indian counterparts on their own turf.

There is a complete change in the market position of the top five smartphone players in FY17, with Micromax Informatics, Lava International and Karbonn Mobiles being replaced by Xiaomi, Vivo Mobile India and Oppo Mobiles India, according to a study by India Ratings and Research (Ind-Ra).

In the first quarter of calendar year 2017, Chinese mobile phone manufacturers' market share was about 51 per cent.

While South Korea's Samsung Electronics remained the market leader with 28 per cent share in the first quarter (25 per cent in the year-ago quarter), the share of Indian vendors was down to a mere 14 per cent from last year's 40 per cent.

Lenovo, another Chinese manufacturer, also sustained its position due to having established brands and products in the diversified price segments. Oppo and Vivo India have recorded sales increases of seven to nine times over FY17, respectively. Ind-Ra expects Vivo India and Oppo's smartphone sales to grow by around 40-50 per cent through FY18.

Much of the reason probably lies in the meticulous care with which even the cheapest Chinese goods are manufactured, compared to Indian manufacturers.

The success of Chinese players can also be attributed to their strong brand presence through substantial advertising expenditure and sales channel building. Chinese smartphone makers enjoy a debt-light capital structure and healthy liquidity due to the long payment period extended by their suppliers, the study said.

Better technological capabilities of the Chinese players leading to superior product offerings have also contributed to their success, it said, adding that large investments by Chinese players towards brand building and manufacturing facilities in India depict their long-term strategic intent.

Indian smartphone makers have been slow in reacting to ongoing product innovation in the market, and are further constrained by limited marketing budgets.

Reliance Jio Infocomm's free data and voice services has pushed up 4G VoLTE-enabled smartphone demand, despite headwinds of slowing feature phone-to-smartphone migration rates and liquidity shock due to demonetisation.

Average data prices bottomed at around Rs130 per GB in first quarter of 2017, providing a stimulus to smartphone sales. The incumbent telcos are also offering differentiated data offerings for 4G smartphone users, hence pushing a higher smartphone replacement demand to 4G from 3G.