Indian phones: Can they take on Chinese brands?

Why did Indian brands lose out?

The advent of Xiaomi in India nearly a decade ago saw the start of a price war among brands. With reducing component prices in the supply chain, Chinese brands undercut device pricing to gain market share. Indian brands struggled to match the scale of Xiaomi, Oppo and Korea’s Samsung. While Samsung, thanks to its global multi-industry presence and long-standing India operations, could rival the Chinese, Indian brands lost out. They could never match the features the Chinese offered on their phones—at less than half the price of a similar device produced by Indian brands.

How is Jio selling phones at under ₹1k?

Industry experts said that Jio’s cost of making the Jio Bharat 4G feature-phone is likely to be around ₹850-900. This is within the average price range of a feature-phone in India today. However, most brands sell their feature-phones at about ₹1,200. With marketing and other indirect costs factored in, Jio is unlikely to make much directly from Bharat 4G. However, Jio could justify this with its bundled telecom plan and other services such as payments and content streaming. Industry estimates suggest that Jio could make around ₹5,000 per phone in four years, which is the average lifespan of a feature phone.

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What does it imply for India’s telcos?

India’s base of feature-phone users is estimated to be 250-330 million. These phones are mostly 2G-enabled. Bharti Airtel holds the biggest chunk of this user base. Vodafone Idea and BSNL are also in this space. Jio doesn’t have 2G spectrum. With a 4G feature-phone and bundled services, Jio will look to convert 2G users to 4G. One can expect user churn.

Can Indian brands see a revival?

Indian companies such as Karbonn, Lava and Micromax are looking at launching sub- ₹5,000 4G smartphones. Tarun Pathak of tech research firm Counterpoint India said they may struggle to find takers. The cheaper phone market will continue to shrink in the long run, so they may not have a business case after all. If there were a good business case Chinese brands and Samsung would have cashed in, instead of withdrawing. Analysts said there may be demand if brands can launch sub- ₹10,000 5G smartphones.

Why aren’t Chinese brands interested?

Elevated input costs, coupled with marketing, distribution and logistical expenses means Chinese brands no longer see value in sub- ₹10,000 handsets. Chinese smartphone brands are now focusing on increasing the average selling price (ASP) of their phones. From around ₹12,000 before the pandemic, the ASP has risen to ₹20,000. Premium smartphones give Chinese phone makers better margin on every unit, which together with their scale, will be difficult for Karbonn, Lava and Micromax to rival.

Updated: 06 Jul 2023, 12:31 AM IST