Indian brands lose 2G smartphone shipments share

By Faisal Kawoosa

While the India mobile phone market grew to 59 million units in the first quarter of CY 2014 (Jan-Mar) as compared to 54.1 million for the same period in CY 2013, the contribution of smartphones more than doubled to 25% of the total shipments. It is hardly a surprise, given that smartphones is the segment where the future of the industry lies.

Indian brands of mobile phones, as followers in this industry, impressively made a mark in the highly competitive market standing up against the might of global giants like Nokia and Samsung. While, Nokia, Samsung and of late Apple all played crucial roles in promoting the global Mobile Phone industry, in India, among the home-grown brands, the players that stood out for taking lead are Micromax, Karbonn and Lava. These brands first popularized mobile phones among the masses in the country with a phone that not only was a feature fit for the market but was also irresistible from the price point.

The factors that led to this success include aggressive marketing, competitive pricing, compelling proposition (in terms of features) and looking beyond the metro cities of India, where the tier 1 brands have a strong hold. Over the years, these India brands have also established a decent service network as well.

However, on a deeper analysis, one can decipher that this success is attributed to their strong presence in 2G smartphones segment. The 2G smartphone segment contributed 32% to the total smartphone sales in Q1 CY 2014 compared to 18% in Q1 CY 2013. This segment almost doubled in a year’s time and this is where the India brands are predominantly strong. However, the India brands seem to losing grip in this segment now.

As compared to their strong dominance of 2G smartphone segment at the beginning of CY 2013, the India brands contributed a little more than half (56%) of the total volumes produced in the first quarter of CY 2014. And a point to note is that no other major brand category, be it tier 1 brands or the new entrant Chinese OEMs/ODMs is focusing on this segment, which implies it is going into the hands of low rung Chinese brands. This is very odd, as such low rung brands usually don’t have a definite marketing strategy or a strong presence and brand reputation in the market.

In terms of 3G smartphones, the share of Indian brands has dipped by 2% to 26% in Q1 CY 2014 compared to the same period in CY 2013, which could be attributed to the emergence of direct presence of Chinese OEMs/ODMs like Gionee, however, a dip further than this could be jeopardizing and the Indian brands need to rework the strategy. Though dominance in the 2G smartphone segment has paid the Indian brands well, but that is not a segment that will dominate or grow in the long run. It has to be 3G and higher cellular network mobile phones that these brands need to strengthen and focus at.

In terms of the overall contribution, of the top 10 smartphone brands in India, 4 are domestic brands as per Q1 CY 2014 data. These top 10 brands contribute over 88% of the total sales of which the domestic brands contribute over 30%. Comparing this with the same period for CY 2013, India brands were contributing 33.3%, while top 10 were contributing 90% of the total sales. So, while the contribution of top 10 smartphone brands has gone down by 2%, the contribution of Indian brands has diminished by 3.3%, definitely not a positive sign.

Other significant brands from India in the smartphone segment include Intex, Spice, iBall, Maxx, Celkon and Videocon.

So far, so good...

So far the strategy of Indian brands has paid them off very well and these have become respectable brands in the market. However, looking at the overall dynamics of the composition of India smartphone market, the focus needs to be aligned accordingly. The Indian brands need to look at how they can carve out a space of its own within 3G and higher versions of the smartphone market particularly in the backdrop of emergence of Chinese ODM/OEM brands in India. This is where R&D, product design and development will be a key differentiator for the Indian brands. So, it’s time to look at “Made by India” and strengthen the manufacturing ecosystem in the country.

The time is ripe as the governments are already focusing on promoting Electronics manufacturing within the country. There are already a lot of enabling steps taken by the Department of Electronics and Information Technology (DeitY), Government of India as well as by various other proactive state governments. What is required is how these home-grown brands can channelize their learning as well as strengths to make India a mobile manufacturing country. And the focus has to be on smartphones, 3G or higher, that is where the market is moving towards.

( This analysis is authored by Faisal Kawoosa, Telecom Practice Lead at Cyber Media Research)