Xiaomi announced a drop of Rs 5,000 on its top-of-the-line Mi 4 smartphone on June 19, four months after its launch. Not to be outdone, Samsung offered a discount of Rs 6,000 on its Galaxy Grand Max but just for one day. These dramatic cuts reflect the intensity of the fight for buyers and the volatile nature of the Indian market, the world’s largest after China.
Samsung and Micromax are the top two smartphone sellers in India with a combined share of 48%, although it’s not always clear which one of the two is ahead. But even more hotly contested are the next three slots. Five companies are locked in battle for rankings three to five. Of these, Intex, Lava and Karbonn are Indian, while Xiaomi and Motorola are from overseas — China and the US, respectively.
The rankings change nearly every quarter, highlighting the intensity of the competition as they fight thin margins, shorter lead times and new entrants, mainly from China, every other month.
“It’s a tough market for anyone. India is like a continent in itself — there are many markets, segments and parts of the population,” said Caesar Sengupta, vice president of product management at Google and the man responsible for the company’s Android One project. He should know. Despite being priced competitively, Android One hasn’t exactly been a runaway success.
Ceaseless vigilance is the norm, given market conditions. “You can’t be complacent in this business. The moment you are, you’re gone,” said Sanjay Kalirona, business head for mobile phones at Intex, which emerged from the pack to become No. 3 in the January-March quarter.
This is an obvious learning from the experience of Nokia and BlackBerry. The Finnish company, which sold its devices business to Microsoft in April 2014, had a 70% market share in India during its peak in 2011. Its failure to capitalize on that dominance meant Micromax and others were able to break into the market with dual-sim phones, a concept Nokia eventually adopted but by then it was too late.
Besides, Nokia’s problems went deeper than the lack of dual-sim phones. Lava and Karbonn emulated the Micromax model—get the phones made in China, undercut prices offered by established brands and work on wafer-thin margins to carve out a place in the market. Intex, a relatively later entrant, chipped away at the market share of Lava and Karbonn with each passing quarter. In the threemonth period ended March, it increased its share to 11% from 8% in the December quarter, according to International Data Corp. (IDC) India data.
Companies track competition, market share and industry developments constantly. “If you take your eyes off the ball, someone would have shot past you,” said a senior executive at a top handset maker. Planning and the ability to forecast market trends are crucial. “The lead time for any model is two months, after which price undercutting begins,” said Kalirona.
This means it takes about two months for a rival to come up with a smartphone with the same specifications at a lower cost. On top of this, the lifecycle of a model is generally about five-six months. So, while the company is squeezing the maximum out of a model in a short period of time, it needs to think about the next in the line-up in order to retain any first-mover advantage.
While all this is going on, money needs to be poured into marketing, people and design capabilities while all the while scanning for opportunities to assemble locally, something that’s set to become a viable proposition thanks to the government’s Make in India initiative. Mobile phone companies are also upbeat about local manufacturing after this year’s budget made imported phones more expensive than ones made in India.
“We’re running a marathon race, but in short bursts,” said Hari Om Rai, chairman and managing director of Lava International Ltd. Lava has maintained its fourth position since the first quarter of 2014, except for the July-September period when it rose to three with an 8% market share, pushing down Karbonn.
Overstocking, or having excess inventory, can hit numbers for an entire quarter, said insiders. That in turn can impact market share—a case in point being Karbonn Mobiles, and lately even Micromax, which has seen its share slip.
Karbonn was No 3 for consecutive quarters ended June 2014 but has been pushed down the order ever since. In the first quarter of 2015, it was ranked at seven with a market share of 3.3%, as per IDC data.