India seeks to oust Chinese Firms from Sub-$150 Phone Market

 

Author: Daison David

Mumbai University

Rising disposable income, cheaper internet, and the need to always stay connected are some of the factors that have led the Indian smartphone market to grow into one of the largest smartphone markets in the world. Indian Smartphone market size was valued at US$ 139 billion in 2021 and expected to grow with a CAGR of 10.5% and reach US$ 281 billion by 2028 . The "Make in India" initiative's goal of boosting domestic industry and indigenous businesses is another persuasive justification. The Make in China movement, which has gathered strength over the past several decades, is the main adversary of the Make in India initiative. When it comes to outsourcing, manufacturing, and services, China is the main competitor. India struggles to become a premier manufacturing centre due to its inadequate infrastructure and outdated logistics infrastructure. On 8th August 2022, it was reported that India seeks to restrict Chinese smartphone makers from selling devices cheaper than 12,000 rupees ($150) . With this action, Chinese goliaths are expected to be driven off the second-largest mobile market in the world. 

The names such as Micromax, Lava, Xolo, Karbonn, Spice, and Intex were well known Indian brands. However, none of these businesses can compete in the smartphone industry of today. In fact, Micromax, during 2013-2015 had beaten Samsung India to become a number 1 smartphone company in India.

The portion of Indian brands has now tumbled from 68% in 2015 to a meagre 1% in 2021 concerning shipments, denoting a total inversion in the handset climate. In similar period, the Chinese brands' volume share rose from 32% to a staggering close to 100% in 2021 . The primary explanation for the decimation of Indian brands, be that as it may, is the inability to measure a major change on the lookout — when India unexpectedly moved from 3G to 4G very quickly and Reliance Jio changed the game totally. The Chinese firms were at that point coming from a 4G-predominant market and could carry their 4G-empowered telephones to India. At the point when Reliance Jio constrained telecom players to take on 4G network and voice-over LTE (VoLTE) calling, Chinese telephones were at that point prepared for it. The Indian market was already under severe economic crisis due to the demonetization of currency. Reliance Jio capitalized on this market sentiment and aggressively campaigned by giving away Sim cards and all related services such as calling, data etc. as “Freebies” and within a few months became the market leader. Instead of being charged under unfair trade practices, the government supported and promoted this move . The move which was intended to cause a revolution in the Indian Economy has rather led to the Damnation of Indian Mobile Brands. Since then, Reliance Jio has enjoyed unfettered power and monopoly in the Telecom Industry. According to Vikas Jain, co-founder, Micromax Informatics Ltd, Micromax found itself with a huge stock of 3G smartphones across its supply chain, which it had to get rid of at a time when the market was focusing on 4G devices. “The total addressable market (TAM) went down," he said. While these brands also offered better pricing at times, Jain says that it alone cannot be the differentiator. “If I am able to do that (undercut somebody), then somebody should be able to do that to me too. Price is not the only mantra," he added .

Since 2018, Chinese companies have largely controlled the Indian smartphone market. In reality, according to data from IDC, Xiaomi, Vivo, Oppo, and Transsion hold the first, third, fourth, and fifth places in India's top five smartphone brands rankings, respectively.

Xiaomi remained the undisputed leader in India’s smartphone market in Q1 2022. Multiple launches with 5G, aggressive promotions at regular intervals and revamping worked in Xiaomi’s favor. It also captured the second spot in 5G shipments for the first time.

Samsung recaptured the second spot in Q1 2022. In the 5G segment, it remained the top-selling smartphone brand in India for the second consecutive quarter.

Realme was the only brand among the top five players to experience exceptional YoY growth (40%) in Q1 2022 and captured the third spot during the quarter. Leaner and targeted product portfolio and aggressive channel strategy, especially in the online segment, helped drive this growth.

Vivo remained at the fourth spot in Q1 2022. However, it became the top 5G brand in the mid (INR 10,000-INR 20,000) segment owing to positive consumer response to its T-series launch.

OPPO has been consistent in maintaining its fifth position in India’s smartphone market .

India has always been a price sensitive economy due to extreme income inequality as the Top 1% holds 22% income of our country; as a result, cheaper alternatives are always in demand . The average household wealth in India is Rs. 883010/- India’s largest smartphone segment is around Rs 10,000 price point, followed by the Rs 15,000 price point. People closely associated with some of the major Chinese smartphone manufacturers are claiming that if indeed a resolution is passed, banning the sale of cheap and budget smartphones, they will have to increase their prices .

Post Covid, diplomatic relations between India and China are tense. Recently, Huawei Telecommunications was accused by the Income Tax Department of remitting Rs 750 crore to its Chinese parent company even after it recorded a drastic fall in its revenue . The Government’s move to ban Chinese Firms selling phones below Rs. 12000/- does not makes sense in the long run, as this will only increase the prices of the same phones which were being sold at a lower price, thereby adversely affecting the common man. In order to boost the sales of Indian Cellphone companies, quality products at competitive prices needs to be produced. Instead of making temporary fixes, the government should think about long term solutions as it should be opposed to buying software and processors from China, US by levying higher taxes and provide subsidies to the domestic manufactures and promote research and development in Software development as this not only create employment but also drive overall technological advancement.

Reference:

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