Can India become a smartphone superpower ?

If you are a phone geek like me, you must have noticed it already. India gets many of the coolest phones these days. Just to name a few, Xiaomi and OPPO have both built whole new brands for India with Poco, and Realme and Samsung made their super aggressively priced new M series phones here. And not only do these India-first offerings put the devices we in the West have to shame in terms of price/performance ratios, increasingly, they are also made in India. So in the post, let’s explore why the Indian Smartphone industry has become so competitive and if the country can take this recent smartphone boom to the next level, and Can India become a smartphone superpower?

History of Indian SmartPhone Industry

If you go through the History of the Indian smartphone industry, you will get an answer to your question Can India become a smartphone superpower? India actually already had a brief moment with home-grown smartphone brands a few years ago. Back in 2014, over 2/3rds of the phones in the country where sold by Indian brands like Micromax, Karbonn, Intex, and Lava, and that same year, Micromax actually managed to outsell Samsung for the first time ever and briefly became the largest mobile brand in India.

This explosive domestic success didn’t last very long though, as just a year later, Samsung re-claimed the throne, and Chinese brands like Xiaomi, OPPO, and Vivo started entering the market. This turns out, the Indian brands didn’t really stand a chance against this new onslaught, as their whole strategy was just to buy ready-made phones from second or third-tier manufacturers in China, stick their logos on them and sell them to customers in India.

Of course, that didn’t hold up against brands like Xiaomi and OPPO, who had large R&D facilities, extensive control over their own hardware, as well as deep, deep pockets from their successful operations in China.

Marketing Strategy 

According to this fantastic article by Gadgets360, when Chinese brands like OPPO entered the market, they initially paid up to $110 per customer acquisition, compared to the $3.2 dollars some local brands where paying at the time. That is an insane 30x increase in marketing spending, even if it was a temporary one. In a similar vein, Xiaomi didn’t spend much on marketing but had no trouble losing money on phones for years in India to build up its brand and drive competitors out of the market.

None of the more simple Indian companies could keep up with either of those, so it’s no wonder that by now, they have lost ground and the only Micromax occasionally manages to make it to the top 5. But in their frenzy to out-spend and out-compete each other.

These foreign companies quickly realized that, in order to win in India, they needed to invest more and more locally. Samsung, OPPO, Xiaomi and Huawei now all have local R&D facilities in India, even if they are somewhat small, and all major brands now assemble the majority of their phones sold in India domestically.

In fact, Samsung has recently opened the largest mobile manufacturing plant in the world by output in India, and Foxconn, the world’s largest electronics manufacturer has also opened up multiple factories here, including ones for Xiaomi and even for apple to assemble some high-end iPhones. These phones, while assembled in India, still use components that are mostly imported, but that’s a major step forward nonetheless. So in a sense, things have kind of come full circle.

Instead of Indian companies selling phones made in China though, now it’s Chinese (and Korean) companies selling phones made and to some extent developed in India. That’s still far from India having its own Samsung or Xiaomi, but it is a significant revival of the industry.

Let’s look at why this revival is happening. It starts with macro-economic factors. India has over time become the second-largest smartphone market in the world and is the only large one that is growing significantly. All other major regions are suffering declines, so India has become crucially important as a market.

At the same time, China, the original factory of the world is losing its attractiveness as a manufacturing hub. With manufacturing wages have tripled over the last decade or so, environmental and labor rules getting stricter, taxes rising and theUS-China trade war in full swing, companies are more eager than ever to move their factories out of the country.

India, together with Vietnam and other South-east-Asian countries are a logical destination country and indeed, India has recently toppled China to become the largest recipient of foreign direct investment in the world. Seeing the increasing attractiveness of India as both a market and a manufacturing hub, the Indian government has implemented the so-called Make in India strategy. Make in India covers many industries, not just phones, but in this post, we’ll just focus on its impact on phones.

Under the plan, the government simplified taxation and labor regulations, it encouraged infrastructure development and it made it significantly easier for foreign companies to invest in India. It has also introduced the so-called Phased Manufacturing Programme, which is a step by step plan to incentivize phone makers to bring their manufacturing to India.

Step one of the program is to first slap import tariffs on finished phones coming into the country, but let components come in mostly untaxed. This is supposed to encourage phone brands to assemble their phones in India from imported components first, and it seems to have worked very effectively. India has recently become the second-largest phone manufacturer in the world after only China, there are now well over 200 manufacturing plants across the country, up from just 2 a few years ago, and the ratio of imported devices dropped from 78% to below 18%.

Step two in the program is slowly implementing import duties on components one by one to encourage also the domestic manufacturing of the individual components, not just the assemble them. As you can see, the government planned to start with simpler components like chargers and batteries and is planning to add increasingly complex components like microphones, printed circuit boards, camera modules, and touch screens over time.

Progress with this plan has been made too, but it’s slower than expected. According to Counterpoint Research, India still imported $13 billion worth of components in 2018, which accounted for 80% of the value of the phones made in India, and domestic component manufacturing is lagging behind the planned output significantly.

While the first two stages have seen some success, the third and current stage, which is the most important as it accounts for 62%of the value, has seen very little success so far, meaning that more complex components are still mostly imported. The first PCB manufacturing plants are already being set up by companies like Vivo, but things are taking longer than expected. Either way, despite being behind schedule, I think the direction is pretty clear.

India went from being a completely import-driven phone economy to having a reasonably large manufacturing sector, and there are no signs of a slow-down. In fact, the government has set the goal of manufacturing 500 million phones in 2019, of which it actually wants to export 120 million.

Now, I think that’s a little optimistic, given that we are pretty deep into 2019 and we haven’t seen any exporting activity yet, or at least I couldn’t find it, but it is an impressive state nonetheless. Now, the last question is how this smartphone boom will impact Indian companies. Cause having foreign companies manufacture stuff domestically is of course better than nothing, but in the long term, it can’t be a sustainable strategy.

I personally think big, homegrown success stories will take a significant amount of time to develop and I also think that India might be a little late to develop its own major smartphone brand, this market feels very mature, extremely competitive and extremely oversaturated already. But there are other areas that we could see promising Indian companies in.

In fact, the first crop of them has already arrived. Reliance Jio, a gigantic Indian conglomerate, has wiped the floor with competitors in the smart feature phone business with its home-grown JioPhone line selling tuns of millions of units out of nowhere, and while these aren’t advanced smartphones but they are hugely important for the Indian market.

Similarly, chipmaker Signalchip is the first Indian company to bring microchips to the market. They are currently focusing on 4G and 5G modems and microchips for base stations, which are the units that beam radio waves for mobile networks around, and it’s still unclear just how good their chips really are, but the fact that an Indian company was able to design and bring something as complex as semiconductors to market at all, It is a massive step forward for the country.

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As foreign companies bring more and more knowledge and capital into the country, as the infrastructure and the supply chains improve, I see no reason why similar success stories wouldn’t become more common in the future. Success breeds success, and overall I’m very positive about the outlook of Indian tech companies. One last way I’d like you to think about the rise of Indian tech companies is through this model of technology transfer that I admit I just made up. Let’s take a look.

Typically, the more complex a technology gets, the more profitable it becomes to make it. Countries and companies typically work their way up this ladder, chasing each other over time. And what we are seeing is India entering at the bottom, taking away some of the low-end assembly work and simple component manufacturing from China.

China is moving up this latter, making better and better phones like the Huawei P30 or the OPPO Reno, for example, squeezing companies like HTC, Sony, and LG out of the commodity smartphone business. Korean, Japanese, and Taiwanese companies are also moving up the ladder, focusing more and more on high-end semiconductors, memory chips, camera sensors, and so on.

Of course, all of this is an oversimplification, but I think it illustrates quite well how countries and companies have to move up this value chain quickly enough to offset losses they see at the bottom. And it will be really interesting to see how quickly India can take over parts of China’s old business while China is trying to encroach on those of the others.

Conclusion

I hope Can India become a smartphone superpower post will give you deep knowledge about the Indian smartphone industry if you like my post share these articles to your loved one thank you