The Indian Mobile OEMs vs. MNC brands: What lies ahead.

[A lot is happening in Indian smartphone market. Indian OEMs have garnered a good market share (in feature phone space), but cracking the smartphone market is the next big bet. Sachin D Naik, head of R&D at Lava Mobiles shares a great roundup of the OEM industry.]

Indian Mobile growth story is played out everywhere. However the Indian Mobile OEMs who have been playing a  vital role in this growth are never talked about. This article is an attempt to get into details of their existence and future prospects.

The India mobile story started around 2008. Nokia was a reigning star in handset segment and Samsung was still trying to establish itself in India. Handsets now being referred as feature phones released by Nokia were expensive and lagging in multimedia features. There was no other strong brand in India who could reach out to cost conscious consumers.

At the same time in our neighboring China there was a fierce competition among home grown brands to capture the local market. China logged onto Mobile revolution little early. By 2008 most of the local companies including ones who were into kitchen appliances and manufacturing were producing handsets. Chipset companies like MediaTek had enabled Chinese companies to design phones in 2-3 months time which were feature rich and half the cost of Nokia phones.

China embraced locally made phones in big numbers. This in turn reduced the over all cost and intensified competition. To  come out of this red ocean  initially Chinese companies started to focus on tier 2 and tier 3 cities. And then bsmartphone_india_distributionecame pure play ODM houses to manufacture white label phones and sell them outside China.

Few of the entrepreneurs in India saw this as an opportunity and started introducing multimedia rich phones from China ,at almost half cost of Nokia phones. This created a new consumption market where bottom of the pyramid population got access to Internet & rich multimedia.

Then this population was served with few notable frugal innovations(imported from China) mainly loud audio, dual sim and big battery triggering a revolution of mobile consumption. Slowly, these companies started working on building service centers creating proper retail presence etc to build a brand.

As market became lucrative quite a few players entered in triggering a price war.Over a period of time few players have exited out of it because of intense competition. While few have sustained, they are facing intense competition from Nokia and Samsung.

After significant fall in profits, Nokia has renewed  its concentration on the developing world. The company has launched quite a few phones under ASHA series which are priced aggressively. Samsung is now a big brand and has phones across all price points.

Feature phone market has become  highly price sensitive and margins are dwindling rapidly. With feature phones becoming a commodity, Indian OEMs need to re invent themselves. The profits on feature phones will only come from better supply chain management & aggressive pricing.  Acceptability of Indian Handsets among affordable class is very low. This is primarily because of low quality & service problems during the early days of OEM existence.  The tag of “cheap China phones”  has stuck with them despite improvement in quality and service over period of time.

The holy grail called “Smartphone“

Google Android took everyone by surprise. While hitherto unknown companies like HTC & Samsung came into prominence. It pushed the old horses like Nokia and BlackBerry to oblivion. In India too, smartphone consumption, particularly Android is on the rise. As per Nielsen survey there are 27 million smartphone users in urban India. While, the over all mobile segment is growing at 6%, smartphone is witnessing a growth of around 17% .

Indian OEMs have made significant inroads by frugal innovations and taking advantage of Chinese eco system.,However  smartphones provide a much bigger canvas to connect with growing middle class, which has not been that receptive to Indian handset brands.

The Indian Smartphone Consumer

While Smartphone consumption is increasing in Tier 2 & Tier 3 cities in India, its current users predominantly are from cities.

Neilson Smartphone Insights for India survey provides some interesting data (report link). Penetration is highest among the Urban SEC A category. Smartphone has already moved beyond the primary use of voice and messaging. Its being used for location based search, social networking and consuming applications. This clearly shows that the user tech savvy,understands intricacies of smartphones. And is an early adopter.

Opportunity for Indian OEMs

All along, Indian OEMs despite their cost advantage have played second fiddle to MNC counterparts. One primary reason has been very less or no spend on Research & Development,which traditionally has been a main forte for any of the product company. And second one being quality. While Chinese ODMs will be able to produce and sell as many models as possible, Indian OEMs, as brands should have invested significantly in ensuring handsets met highest quality standard.

However Smartphone segment provides an opportunity to become relevant again to the right target segment and compete with MNCs not only in terms of price but also in features and innovation.

Smartphone user activities in India
Smartphone user activities in India

In terms of customers, currently Smartphone usage is skewed towards age 18-25, SEC A urban class, who are well read, tech savvy and ready to experiment. Provided a right innovative product, which resonates with them, this segment is willing to buy.  And for most of the MNC brands, though India is a relevant market, its still too small to invest in building India specific differentiators.

The China ecosystem is now mature enough to deliver smartphones. But ODMs may be reluctant to make either innovations or take quality control to the next level. India by virtue of being host to quite a few Mobile OEMs like Samsung,LG,Nokia & Motorola has a good talent pool. Combining Indian engineering strength with Chinese cost effective manufacturing should give Indian OEMs a headstart.

Maybe time has come for Indian OEMs to think big and build companies based on innovation.

Recommended Read: Sad but true: Many Indian brands do not prefer being called Indian.

[Guest article contributed by Sachin D Naik, head of R&D at Lava Mobiles. Follow him on Twitter @sachindn. Views expressed are his personal opinion only.]

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