Free Smartphone Government Phones, How Chinese mobile phones took over the Indian market

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Free Smartphone Government PhonesFour years ago, the Micromax office in Gurugram was equivalent to people like Google. Multi-storey buildings have open spaces, lots of rooms, and even balconies and terraces where parties can be thrown. At present, the company operates from one floor in a public office complex in Gurugram. The formerly magnificent office now only has a few cabins, far fewer employees, and quite narrow.

Incidentally, in 2014, Counterpoint Research put Micromax at the helm of the booming Indian smartphone market. Even surpassing Samsung, and sending more phones than other brands in India. In fact, home smartphone brands such as Micromax, Lava, and Intex have been cornered by almost 54% of market share. The same brand has a market share of less than 10% today. What really happened?

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A review of recent years shows that the home-based smartphone brand lost their dominance over the gradual Chinese attacks. Today, the top players in India are Xiaomi, accounting for 29.7% of all smartphone shipments (IDC data). The company – which introduces itself to competitively priced devices – is slowly building its base in the country for the past five years, and is now reaping its benefits.

In fact, according to data from IDC, four of the top five smartphone brands in India came from China – Xiaomi, Vivo, Oppo and Transsion each holding positions 1, 3, 4 and 5. Samsung, which overthrew Nokia from the Indian market, remained in number two, but feel hot too.

Meanwhile, Intex (which does not offer comments for this story) and Micromax have sold consumer equipment. Micromax says it sells nearly one million TVs every year, while the Intex website is proud to declare itself the number one Indian LED TV brand. Intex also experimented with air conditioners and speakers.

Offline story

Chinese brands always offer low prices, and they continue to do so. However, the market has also changed. Now, low device prices have become a barrier for others to compete.

In one of its launch events in China a few months ago, Lei Jun, CEO of Xiaomi, has said that if his company generates more than 5% of its net income from its hardware business, it will aim to provide benefits to its customers.

According to industry sources who are very close to selling smart phones, Oppo and Vivo sell cellphones in India with margins of around 12%. Both of these companies traditionally sell cellphones with prices higher than Xiaomi, because they trade in offline-centric models in India.

In the offline space, companies spend higher overhead costs, which increase the overall cost of the device, and hence, the final price as well. According to a distributor who asked for anonymity, when Oppo and Vivo began to dominate the offline segment, they paid a lot of money to retailers and distributors to keep their brands visible. However, that does not reflect the actual price of the product. “They will even pay to redecorate the retail store,” said the source.

Oppo and Vivo not only pay for Indian Premier League (IPL) advertisements and sponsor Indian cricket teams, but also pay a lot of money to retailers who will install their boards; provide the main positioning of their products; or sell their devices exclusively. “Xiaomi, Vivo, and Oppo provide targets to distributors based on volume. Instead, brands like Samsung provide targets based on value, “said the distributor based in Gurgaon.

This means retailers can make easy money from Chinese brands by showing the number of devices sold, while brands like Samsung demand that they sell a certain number of phones. In a market that mostly buys cheaper cellphones, achieving value targets, such as Samsung, is more difficult.

Mudit Sethia, which runs a smartphone distribution and retail channel in Kishanganj, Bihar, said that some Chinese brands offered 150 per unit sold as incentives. This can go up to above $ 200 per unit, depending on how expensive the phone is intended.

In addition, other sources in Gurgaon said some distributors sold Xiaomi, Vivo and Oppo cellphones to the gray market with almost zero margins. This allows them to meet the volume targets desired by Chinese brands, thus getting the incentives they offer on these sales.

Sales to the gray market not only allows them to meet the volume – it also gives them far wider coverage than the store and network can offer today.

He also said that distributors who do businesses worth $ 20 lakh per month selling previous Xiaomi phones have suddenly seen a sharp increase in business transactions – up to ₹ 4 crore per month just before the festive season, thanks to this strategy. Another reason for this sharp increase is due to financing plans, which allow customers to get cellphones today and pay for them later.

How it happened

The main reason behind the fall from grace for Indian brands, however, is the failure to measure fundamental changes in the market – when India suddenly moved from 3G to 4G in a matter of months and Reliance Jio changed the game completely. According to Vikas Jain, co-founder, Micromax Informatics Ltd, Micromax found itself with a large stock of 3G smartphones throughout its supply chain, which must be eliminated when the market is focused on 4G devices. “Total addressable market (TAM) has dropped,” he said.

The inventory, which is intended for 60-75 days, is extended to 365 days. Singh agreed with this, saying that the Indian brand “has a lot of commitment” in China for 3G phones, when Xiaomi and other brands sell 4G devices.

Jain said that this was something that hit all Indian players, and because market leaders could not meet consumer demand for 4G-enabled devices, large gaps were left to be filled. Their Chinese colleagues should be capitalized.

Chinese companies have come from the dominant 4G market and can bring their 4G phones to India. When Reliance Jio forced telecommunications players to use 4G connections and voice-over LTE (VoLTE) to call, the Chinese telephone was ready for that.

While these brands also offer better prices at times, Jain says that alone cannot be a differentiator. “If I can do that (weaken someone), then someone must be able to do that to me too. Prices are not the only mantra, “he added.

An industry veteran who wants to remain anonymous further adds that Chinese brands have been known to even sell cellphones with a loss, only to gain consumer interest.

Kapal Pansari, director of Rashi Peripherals, one of the top five IT distributors in India, also said that Chinese companies are very concerned about the distribution ecosystem, even when treating offline and online channels on an equal footing. He said, “Indian players do not manage the cleanliness of distribution well and create dissatisfaction and distrust among distribution stakeholders. Chinese brands, on the other hand, continue to improve the channel with various new experiments, and introduce innovative channel financial models to build trust among the partners involved. ”

S.N. Rai, founder of Lava, further added that Chinese brands also have control of the business value chain – the design and manufacturing side. While Rai claimed that Lava also had control of aspects of such businesses in India, the Chinese evolved more.

Expectations of a possible comeback

However, because every intruder in the industry knows, technological excellence does not last forever and burning cash is not a long-term strategy. That is why Indian brands are beginning to feel the possibility of a comeback. According to Sethia, people like Oppo and Vivo have stopped paying to install their boards, and other advertising tactics.

Rai from Lava said that the distributor had asked the company for the product, “now Oppo is struggling.”

Sethia currently runs distribution for Tecno, a brand owned by Transsion – the fifth largest smartphone seller in India with shipments. He previously worked with Oppo and Vivo devices. He explained that while Xiaomi was the top brand in India, it was still quite weak in terms of distribution channels.

There are rumors circulating in the industry that Xiaomi executives have met with Micromax to buy its formerly strong retail presence, and use it to its advantage.

The concept of “preferred” or “exclusive” retailers is also dying, Sethia said. In this case, brands like Oppo, Vivo and others will prioritize shipments to retailers who choose to only sell their products, and incentives will also be different.

Lava’s Rai also said, “Today, what we can produce at the cost of the $ 1.3 assembly, Foxconn cannot produce even $ 2.8, despite having such a large volume.” He cited an increase in costs in China as an excuse, and added that China’s support program for ‘low manufacturing value added’ moved away, because they felt it was hampering their economies.

The company, today, thinks that this is equivalent to any global manufacturer, and the Government’s Specific Phase Program, which has a combination of import tariffs and incentives for local assembly, will also help them. In addition, while Indian brands have lost their dominance in India, they still sell cellphones in other countries, such as Mexico.

In addition, distributors began to consider other brands as an option too, although none of those who spoke with Mint mentioned Indian brands, in particular, because they were being considered.

But the unwanted side effects of the disruption released by Jio, which caused the temporary fall of feature phones, have become a massive expansion in the market itself. Many mobile internet users are the first to be able to join through previous feature phones – such as Micromax and Lava.

Medium mobile phones are also a segment where Indian brands have never really lost their presence completely. In fact, in December 2017, Micromax claimed to have sold three million handsets under the cheap Bharat smartphone range.

Launching new Jiophone2 and Airtel plans to launch its own low-cost devices means the telecommunications company may be looking for a number of partnerships with cellphone makers.

Micromax’s Jain dreams of a future where the ideal smartphone strategy is not only launching new products, but binding with telecommunications companies, so that consumers buy a cellphone and get a 4G package bundled with it.

“There is a general belief in Tier III and Tier IV cities that if you use a smartphone, your data will be consumed automatically,” Jain said. He thinks this is why Jiophone is a subsidized feature cellphone, not a subsidized smartphone. “Slowly and steadily, consumers are starting to consume data … And even 1GB is too less for a full month,” he added.

IDC’s Navkendar Singh agreed that Micromax and Lava “still have the remaining juice”, although he also mentioned that Intex had “almost moved” from the market. “They must choose and choose their battle. Don’t fight Xiaomi in the range of $ 7,000 – $ 10,000, “Singh said. He suggested that the right government and telecommunications relations could help.

Micromax recently won a 15.00 ringgit deal from the Chattisgarh government to distribute 50 lakh smartphones – some of the emerging trends in politics where free telephones swing to win youth support.

But just relying on such populist, or the possibility of bonding with a telecommunications company, is not a strategy. Unless Indian cellphone makers can quickly find ways to reduce “relatively inexpensive premium routes” – a OnePlus segment really dominates – their hopes of returning dramatically to 2014 dominance may depend on very weak threads.

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