Author(s): Raghu Gopal
For years, Samsung was the largest smartphone manufacturer in India. The South Korean company had a sizable lead in the Indian smartphone market, beating local and international brands. But at the end of 2017, Samsung suddenly found itself as the challenger when it was surpassed by Xiaomi. Being second creates a different mentality and it's clear Samsung's leadership wants to regain the number-one spot in the world's second-largest smartphone market.
Earlier this month, Samsung officially opened a new mega smartphone factory in India. The state-of-the-art 35-acre facility will be able to produce 120 million smartphones a year, which is about twice as many as Samsung sold in India in 2017. The new facilities show Samsung's ambitions. The company will manufacture all tiers of smartphones in its new factory, from entry-level devices to flagships to be sold in India and other markets. At the factory launch Samsung also announced its Make for the World initiative, which will see it export mobile handsets made in India to overseas markets. Samsung also claims the move will also allow it to reduce the cost of shipping devices to several Asian and European countries.
Samsung's factory is not so much a response to the challenge from Xiaomi, as it is encouragement from India's government to produce more goods within the country. The current administration's Make in India campaign, launched in 2014, entices foreign companies to bring development into the country by allowing complete foreign ownership. On the other side of the equation, increased tariffs have discouraged the import of foreign-manufactured goods. Xiaomi has built a total of six production facilities in India to remain competitive in the country.
As the number of smartphone owners in many markets has approached saturation and sales have flattened or even declined, India has remained a growth market. Only about 30 percent of India's 1.3 billion population currently have a smartphone. In many Western markets, smartphone penetration is over 90 percent. We expect the level in India will reach 75 percent by 2022. This rapid rise illustrates the enormous potential of the smartphone market in India. India has become a smartphone-first nation. As 4G networks become widely available and connectivity affordable, many people have skipped PC ownership, relying on smartphones for all their communications and content consumption.
In 2017 about 120 million smartphones were bought in India. Samsung's new factory alone can pump out that many, a clear indication that the company expects the market to continue to grow over the coming years. It's also an indication that Samsung fighting back, ready to build up its market share in India and beyond.
Samsung is being challenged in the region by other Chinese smartphone brands alongside Xiaomi. Huawei, Vivo and Oppo have emerged among the front runners in China, the world's largest market. Samsung can't afford to lose scale to other phone-makers.
Samsung's brand is still very meaningful in India, but that will only go so far. Indian consumers are value-conscious, and Xiaomi has built a reputation for providing good value for money. Samsung's new factory is certainly going to produce a great number of smartphones, but to produce meaningful results, the company will have to ensure its products are competitive as well.