New Delhi: Chinese phone makers that have tasted blood with deep discounts, flashy ads and online offers in India are thirsting for more, as record shipments and rising price points prompt them to pump up investments.
Smartphones have stood out as one of the rare bright spots in India’s economy that has seen cooling demand for automobiles and fast moving consumer goods in a prolonged slowdown. And Chinese firms are cashing in.
As of June-end, out of the top five smartphone sellers in India, four are headquartered in China—Xiaomi (28.3%), Vivo (15.1%), Oppo (9.7%) and Realme (7.7%). South Korea’s Samsung has a 25.3% share of the Indian market.
Market leader Xiaomi, which had one manufacturing unit in India in 2015, now operates seven facilities. Last year, the company also hosted global component suppliers for a three-day tour of Uttar Pradesh and Andhra Pradesh to explore investment opportunities and to set up a local components ecosystem.
Xiaomi’s shipments grew by 4.8% year-on-year to 10.4 million units in the June quarter, and it expects to post better sales in the three months ending September, which includes the festive season.
“Growth in India is coming from two places; existing users are upgrading to better smartphones, and one big trend we are seeing is that most second- or third-time smartphone users are picking up more expensive devices," Raghu Reddy, head of categories and online sales at Xiaomi India, said. “The reason is they are now demanding more from their devices. As a result, they are willing to move to higher price points. That is the reason why the overall average selling price of the market is also trading upwards."
Smartphone brands from China’s BBK Electronics also are lining up investments to get a bigger slice of the market. Vivo plans to spend ₹7,500 crore to expand its manufacturing capacity not only to cater to the Indian market, but also for exports. Oppo, too, is looking to double its manufacturing capacity by 2020 to roll out 100 million smartphones every year at its Greater Noida plant.
“India is an important market and (it) is growing. We want to be a strong player here," Nipun Marya, director of brand strategy at Vivo India, said. “The entire ₹7,500 crore investment would be deployed in phases to develop a new 169-acre land parcel adjacent to the Yamuna Expressway (on the outskirts of New Delhi). Marya did not give a time frame for the investments.
For premium phone maker OnePlus, which also is part of BBK Electronics, India accounts for 40% of global revenue. India will also be the first country where it will launch its smart TV.
On Monday, OnePlus announced an investment of ₹1,000 crore for a research and development facility in Hyderabad. The centre will drive its research in artificial intelligence and machine learning to develop upgraded products. OnePlus, which has 12 stores, wants to take the store count to 25 by 2020-end.
Analysts said Chinese players will get even more aggressive as India, unlike China, is still a largely under-penetrated market for smartphones, and there is huge room for growth.
“While smartphone sales in China account for over 90% of all mobile devices sold, India is still a largely under-penetrated market, with 400 million smartphone users in a country of over a billion people," Anshul Gupta, senior research director at Gartner, said. “Moreover, in this highly competitive market, Chinese players have managed to build brand loyalty and are expanding through retail touch-points."