India's Devices Market: Chinese Dragons Versus Indian Tigers

Indian device makers have started to feel the heat from Chinese rivals such as Lenovo, Gionee, Oppo, Vivo and Xiaomi. According to a recent IDC report, the Chinese device vendors grew their Indian shipments by as much as 142.6% in the first quarter of this year. That translates to a little more than one half of all smartphone shipments. And growth is coming at the expense of the Indian players, which have seen their market share fall from 40.5% in the first quarter of 2016 to just 13.5% a year later.

Two years ago, Indian brands including Micromax, Intex Technologies (India) Ltd. and Lava International Ltd. had seemed to pose a major challenge on the global stage. Micromax Informatics Ltd. had even emerged as a challenger to market leader Samsung Corp. Yet while Indian companies continue to fight for market share in the low-cost feature phone segment, Chinese brands have been charging into the smartphone space, according to a recent report from venture capitalist Mary Meeker.

One of the reasons for the swift ascent of the Chinese vendors is their focus on online retail channels. This strategy helped them not just to offer products at a much lower cost than other players but also to ensure that sales were not hit by India's recent "demonetization," when some banknotes were taken out of circulation.

That move saw India's government withdraw the banknotes carrying values of 500 Indian rupees ($7.3) and INR1,000 ($14.7) in November last year. It led to a crash in the Indian devices market but ultimately benefited the Chinese vendors that had online strategies. Although demonetization led to a decline in demand across the market, the impact was mainly felt by Indian brands focused on Tier 2 and Tier 3 cities and with a large bricks-and-mortar retail presence. (See Demonetization Hits Indian Device Makers Hard.)

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But Indian brands also look to have suffered because of their weak track record on innovation. Not known for their investments in research and development, they have tended to compete on price.

It could also be argued that Chinese device makers have been successful in changing views about Chinese products, which used to be seen as low-price and relatively low-quality goods. By recruiting famous faces as brand ambassadors (cricketer Virat Kohli for Gionee, for example) they have been able to shake off their former reputation.

Indian device makers will have to think fast to regain their market share and challenge their Chinese rivals once again.

— Gagandeep Kaur, contributing editor, special to Light Reading

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