Author(s): Raghu Gopal
India's Micromax began making smartphones less than five years ago. Within a few years, the company went on to ship enough volumes to briefly become a global top-ten player in 2015. Its success came as a result of its clever strategy and good timing: Indian consumers wanted smartphones. While other markets were maturing, demand in India was just heating up.
Other local suppliers including Intex, Karbonn and Lava were also riding the same momentum. Infrastructure in India favours mobile networks over fixed-line with many people using low-cost Android smartphones. This, combined with 3G services, became the main means of Internet access for millions of people in the subcontinent. Thanks to government policies, customer loyalty and local marketing, Indian brands were able to compete against established rivals such as Samsung and LG.
But now, Chinese companies are focussing on growth in India to maintain their volumes, as smartphone sales in their home market have slowed. Indian smartphone makers are certainly aware of the long-term fate of European handset makers which were unable to compete against global brands that had more marketing clout and, quite frankly, more desirable products. From Ericsson to Philips and Siemens, the phone market slipped away from Europe as numerous brands from the East and one from the West began to dominate the market.
Micromax and its compatriots Intex, Karbonn and Lava are looking for ways to prevent a fate similar to that of the many retired European handset brands. Indian smartphone makers, which controlled roughly 40 percent of the market at the beginning of 2016, have seen their share diluted to about 15 percent. Chinese rivals Huawei, Lenovo, Oppo, Vivo, Xiaomi and ZTE have been committed to growing sales in India and their ambitions have shown results. Combined, we believe these companies could control more than 50 percent of the Indian market.
Chinese brands have adjusted their logistics to better match local policies, by setting up their manufacturing units in India. The Indian government is encouraging companies to make devices within the country's borders with its "Make in India" initiative, which has been quite effective: close to 70 percent of handsets purchased in the country are manufactured locally. Increased local production has partly been prompted by goodwill, but increased taxation and import duties on components have also played a major part.
Indian phone-makers are looking for a resurgence with strategies involving tweaking product portfolios and brand placement. At the end of 2016, a combination of Reliance Jio entering the market, demonetisation and a lack of 4G devices severely affected Micromax. The company was caught flat-footed when Reliance Jio introduced LTE-capable phones and consumers started moving beyond 3G. In response, Micromax is attempting to move upstream, selling more higher-end devices. A good example is the Dual 5, priced at 24,999 rupees (about $385). However, we believe that the company's priority should be to offer devices priced at less than 10,000 rupees (about $155) to defend itself against the plethora of Chinese devices on the market.
Micromax also needs to expand its marketing efforts to be able to compete with Chinese brands, which have been splurging on TV and print campaigns and event sponsorships. Vivo, for example, has been sponsoring cricket matches in India and Oppo has movie stars as brand ambassadors on TV and in print media — these have all proved very effective strategies.
It's going to be an uphill battle for Indian brands to capture lost market share. Micromax has the best chance to do so using the right mix of marketing and keenly-priced products. There are currently about 350 million users of feature phones in India who will soon be looking to move up to smartphones. Micromax needs to grab this opportunity.
Mobility is a vital control point of most economies. The Indian government is promoting its "Digital India" programme in an effort to transform the country into a digitally empowered society with a vast knowledge economy, but it will need to prevent a loss of hardware expertise. To truly become a mobile-first economy, it needs Indian mobile device makers to succeed.