Indian handset makers can join Chinese companies to stay afloat
Handset makers Intex , Karbonn and Lava – pushed out from the top rung by Chinese rivals – said the Indian market still holds potential for smartphones.
NEW DELHI: Most Indian handset makers, faced with survival challenges, have few options to get back into the reckoning. Industry experts said one way could be to tie up with rival Chinese companies and leverage their strengths in design and full-scale manufacturing. Another could be to raise funds to build local capabilities and marketing might, although it may be a difficult option.
Handset makers Intex Technologies, Karbonn Mobiles and Lava International – pushed out from the top rung by Chinese rivals – said the Indian market still holds potential for smartphones. That, combined with their local manufacturing capabilities, could give them a price edge and provide opportunities to bounce back. They added that the fall in market share rankings is temporary, primarily due to demonetisation, which was announced in November.
“We don’t have to fight them (Chinese brands), we have to work with them. If you look at devices or retail stores, we-’re partnering with them,” said Dilip Modi, chairman of Spice Mobility, referring to its partnership with China’s Transsion Group, which sells the Itel brand of feature phones and smartphones in Africa. Spice is a small-sized handset vendor.
Navkendar Singh, senior research manager, client devices, at IDC India, backed the view, saying to fight Oppo, Vivo and Samsung Electronics without their scale of marketing and distribution spending, Indian companies must strategically combine with them.
Itel entered India in January last year as part of the joint venture and Transsion became the No. 2 brand in the quarter ended December with a 7.5% market share, mainly due to its feature phones, according to IDC.
In the same quarter, all Indian brands were pushed out of the top five smartphone ranks by Xiaomi, Lenovo, Oppo and Vivo.
“The trade partnerships have to give way to joint ventures, where Indian companies leverage their market presence in terms of distribution, brand awareness and get the Chinese to come and partner with them, who then benefit from the strength of the Indian companies and Indian companies get Chinese design and manufacturing capabilities,” Modi said.
Coming off growth of as much as 161% in 2013, the expansion of India’s smartphone market has slowed to 18% in 2016 and is expected to see marginal to flat growth in 2017.
Migration to smartphones may slow further as low-cost 4G feature phones enter the market. Indian companies, which have traditionally dominated the feature phone market, now face challenges from Chinese players in this segment, too.
The option of Indian handset companies raising funds to take on Chinese rivals appears difficult, analysts said.
“Apart from widespread sales and distribution network into the lower-tier cities and towns, they lack enough ammunition to command high valuations,” said Singh of IDC. “Raising money is not impossible but tougher than earlier because this market has become more unforgiving now.”
Lava has held talks to raise funds but put those plans on hold due to the slump in sales following note ban, said a person familiar with the matter.
Analysts at IDC expect some Indian brands to be weeded out completely this year. While some agree that this may happen, they’re quick to point out that there may be mergers or tie-ups among lesser-known local brands.
“There are over 80 mobile phone brands currently importing smartphones in India. With the smartphone growth slowing down, it is natural for consolidation to happen but that would be by the way of exit by smaller/local players and not necessarily consolidation among local Indian players or with Chinese players,” a Karbonn Mobiles spokesperson said.
Karbonn executives added that they can rely on local manufacturing strength to bounce back, rather than look at quarterly market share rankings.
Nidhi Markanday, director and business head at Intex Technologies, said the company believes that 70% of the Indian market is still underpenetrated by smartphones, giving them ample opportunity.