The global smartphone industry is big business, and it has been so for nearly a decade now. In fact, Statista estimates that the global smartphone industry amassed a revenue of nearly $431 billion in 2016 alone! Traditionally, the majority of this revenue has come from elite markets such as North America and Europe. However, with slowing smartphone sales growth due to market saturation, smartphone manufacturers increasingly need to look towards other markets for alternate avenues for growth. In this vein, there is no market with more potential in the world right now than the Indian market. Until very recently, this market was dominated by homegrown players, but they have been dealt a catastrophic blow in the past year. Chinese vendors now dot the landscape, having decimated their Indian counterparts.
So what went wrong for Indian smartphone manufacturers over the past few quarters? And how the Chinese vendors managed to gain so much ground so quickly? Let’s find out.
The Changing Climes Of The Indian Smartphone Scene
New data by India-Ratings and Research reveals some damning statistics for Indian smartphone manufacturers. In the calendar year Q1 2016, domestic vendors such as Micromax, Karbonn and Lava accounted for 41% share of the Indian smartphone market. In contrast, Chinese vendors had a much smaller 15% share. The single largest vendor was Samsung, with a 25% market share.
However, the picture is very different just a year later. Indian vendors’ share has fallen dramatically to mere 14% in the calendar year Q1 2017, a significant 27 percent point YoY decrease. Meanwhile, Chinese vendors have claimed an iron grip in the Indian smartphone market with a 51% share. In the short span of one year, Chinese players have more than tripled their market share. In fact, they have also experienced a significant 16.9% QoQ growth in smartphone shipments in India. In particular, Ind-Ra expects an impressive growth in smartphone sales for Vivo and Oppo in the fiscal year 2018 as well, at a rate of around 40-50%.
The only other manufacturer maintaining an appreciable market standing is Samsung, whose market share increased to 28% in 1QCY17. Despite the Chinese onslaught, the South Korean smartphone giant has managed to stand firm, and even increase their market share. The top 5 spots have been taken by Samsung, Xiaomi, Vivo, Lenovo and Oppo. Indian manufacturer – Micromax – placed at the 6th position, with a mere 3.3% market share.
Interestingly, the increasing dominance of Chinese vendors is resulting in the increase of the average selling price of smartphone in India. ASP (Average selling price) of the smartphone has increased from $131 in Q1 2016 to $155 in Q1 2017. And almost 67% of smartphones, sold in India by Chinese vendors, are now available in the price range of $100-$200.
The Methodology Behind The Meteoric Success Of Chinese Manufacturers
This unprecedented shift in the market in such a short period begs the question – how did these Chinese companies manage to win the Indian smartphone market so quickly and efficiently? What is the blueprint for their success?
- Effective Marketing – One of the biggest factors behind the success of Chinese manufacturers are their large scale and well-funded marketing campaigns. Companies like Vivo and Oppo have spent incredible amounts of money to increase their brand awareness and make themselves household names. They have even roped in famous celebrities like Ranveer Singh and Virat Kohli to endorse their products to drive up appeal and demand.
- Offline Sales Strategy – To this day, Indians have somewhat limited access to the internet. Many parts of India, especially in rural areas are still offline. As a result, a large proportion of smartphone sales still occurs offline, in brick and mortar stores. Companies like Vivo and Oppo are opening up numerous stores and service centres across India, even in remote rural regions. Oppo alone has nearly 35,000 stores across India. These stores are under direct control of the company itself, not run by third party retailers. Xiaomi is also following a similar sales strategy and expanding its offline sales network.
- The Shift To 4G – The Indian telecom industry has undergone a revolution over the past year. Reliance 4G brought high-speed internet to the masses and forced incumbent telecom providers to lower their costs significantly. As a result, there has been an exploded demand for 4G VOLTE-enabled smartphones. Chinese vendors took advantage of this vacuum by flooding the market with high quality, yet affordable 4G handsets.
- Better Technology – While most Indian vendors have only had limited experience with smartphone production in their home country, the Chinese vendors have a greater global presence, especially in their home country of China. Their larger budgets and experience means that they have access to better technology, and thus, can produce higher quality products. As a result, Chinese vendors are offering better-built phones with better specs and lower prices as compared to Indian vendors.
- Focus On Desirable Features – Chinese vendors have studied the Indian market deeply. They are focusing on what the Indian consumer wants from their smartphone and providing exactly that. Dual sim capability, removable storage are a couple of notable examples. However, the biggest example of this is surely their focus on selfie cameras. We at Dazeinfo recently reported about just how desirable good selfie cameras are among the Indian smartphone users. Vivo and Oppo in particular focus on providing the best possible selfie experience to their users. Camera quality on Chinese phones is generally good across the board, with 62.2% of them having a resolution of 13 megapixel or higher.
- Indianizing Themselves – A huge factor that driving the success of Chinese vendors is how well they have integrated with Indian culture and mindset. Xiaomi co-founder Lin Bin spoke about his desire for Xiaomi to “become a truly Indian company“. A very crucial manifestation of this is the extensive language support provided by Chinese companies. Multiple regional language support extends the reach of Chinese companies to even more regions of India. This is especially the case in regions where English or Hindi is not prevalent.
- Well-Oiled Production Process – Their vast experience, along with access to cheap parts from China means more efficient production compared to Indian manufacturers.
- Larger Funding – Greater sponsor funding, a debt-light capital structure and healthy liquidity has given a significant leg-up to Chinese vendors compared to their Indian counterparts.