(Chinese Version)

Almost all the latest market reports suggest that India has already surpassed China and become the largest smart phone market in the world. No smart phone manufacturer dares to lose the Indian market. Whether it’s smart phone giants such as Samsung and Apple or Chinese leading smart phone makers, they all want a share of the Indian market.

Recently, Samsung announced that its previous evaluation on its performance in India had been wrong and on the contrary it had already taken up a market share of more than 40% in the Indian smart phone market. At the same time, Chinese smart phone makers also boasted a lot of their progress in Indian market.

While Samsung focused more on offline promotion, Chinese smart phone makers promoted their phone models more via the Internet. Now that Samsung turned out to be grasping a large share of this market, people might wonder if Chinese smart phone makers shouldn’t have adopted such a promotion strategy.

The current situation of Indian cellphone market

Why are Chinese smart phone makers so eager to penetrate the Indian market? According to the 36th Statistical Report on Internet Development in China conducted by the Internet Network Information Center (CNNIC), the number of Chinese netizens has already surpassed 668 million, in other words, 48.8% of Chinese now have access to the Internet. Although the Internet coverage in India is lower than that of China, the number of Indian netizens has also hit over 300 million. Moreover, the number of mobile Internet users in India is increasing faster than that in China.

Yet, there are three facts we have to take into consideration before we jump to the conclusion that India is a promising smart phone market:

1. Poor infrastructure

Judging from a series of media reports, shoddy infrastructure in India is holding the India smart phone market back. Indian people tend to communicate with each other more via wireless tools such as cellphones than the Internet, since there is often an outage of electricity, even in first-tier cities. Thus, there should have been a great market demand for smart phones in India. However, Chinese smart phones promoted their products more via the Internet and failed to reach a large number of consumers.

2. Ill development of online retailers

According to a report conducted by the Federation of Indian Chambers of Commerce & Industry (FICCI), the transaction volume on Indian online retailers has only reached 1.7 billion dollars by last December. Suppose the transaction volume is increasing by 35% every year, Indian online retailers would have to wait until 2019 to harvest a transaction volume of over 100 billion dollars. At the same time, however, iResearch’s statistics suggest that the transaction volume on Chinese online retailers has already surpassed 2.8 trillion RMB (around 437 billion dollars) by the end of 2014. Even though Alibaba, Foxconn and Softbank invested over 500 million dollars in the leading Indian online retailer Snapdeal just recently, it would still take a long time before online shopping boomed in India. Worse still, Indian logistics industry isn’t thriving either.

3. Low demand for smart phones

According to statistics from the International Data Corporation, 1.1 out of 9 cellphones on average in India are smart phones, which is to say, smart phones are still not widespread in India. Although the shipment volume of smart phones is increasing by over 20% every year, the overall demand for smart phones remain low. This may help explain why Chinese smart phone makers didn’t sell as many smart phones as they had expected in India.

Sure enough, India smart phone market is going to boom one day, but before infrastructure is improved, online retailers embraced, and smart phones preferred, no smart phone makers can succeed in India.

Chinese smart phone makers’ major challenges in India

According to Gfk, Samsung ranked the first and took up 40% share of the Indian cellphone market, and Micromax, a local cellphone maker, ranked the second and took up another 15%. Chinese smart phone maker Xiaomi and Huawei followed up, but only account for a minor share of the market.

Besides that, Chinese smart phone makers also face competition from smart phone giants Apple and other local brands such as Karbonn, Intex and Lava, etc. To stand out, Chinese smart phone makers also face the following two challenges:

1. Price

At present, low-end cellphones (400 to 800 RMB) dominate Indian cellphone market and take up 70% of the whole market, mid-end cellphones (800-2500 RMB) take up another 20%, while high-end cellphones take up the rest 10%. While low-end cellphone market is dominated by around 150 local cellphone brands, whose phone models are mostly low-end (Yureka, a phone model promoted a lot by Micromax, is only sold at 882 RMB), Samsung and Apple dominate the high-end market. It is reported that the sales volume of iPhone in the second quarter increased by 93% compared to the first quarter. Indeed, Apple is penetrating the Indian market.

Chinese smart phone makers focus more on the mid-end market, yet are constantly caught in a dilemma: one the one hand, their brands are not as popular as Apple and Samsung; on the other hand, their phone models are too expensive than local cellphone makers’. For example, Mi 4i’s price is 300 RMB higher than that of Micromax’s similar phone models. Vivo, a master of price strategy in China, has got to lower its price so as to attract more consumers.

In conclusion, Chinese smart phone makers still lack a good price strategy.

2. Marketing

While Samsung has over 2,100 exclusive shops across India, and outlets in over 1,500 major supermarkets and malls, Micromax, nicknamed as India’s Xiaomi, spends half of its money in marketing after it received a recent round of financing. Chinese smart phone makers, however, promote their phone models more through discount activities on Indian online retailers.

For example, Xiaomi chooses to team up first with Flippkart, and then with Amazon, Snapdeal to promote its phone models, and gives up promoting on its own website Xiaomi.com. Up till now, no Chinese smart phone maker has adopted an effective marketing strategy yet.

With the lack of good price and marketing strategies, Chinese smart phone makers still have a long way to go before finally outperforming its competitors.

Possible ways out

However, we have to admit that smart phones are gradually replacing feature phones, and the mobile Internet is thriving in India. Some industry insiders compare Indian market to Chinese market three years ago. Thus, Indian smart phone market might be promising in the future.

For fear of patent controversy and policy change, Chinese smart phone makers seem to be pretty cautious and conservative in the Indian market, so they choose online retailers to promote their products instead of opening exclusive shops and carrying out offline marketing activities. Now that the market saturation rate has already reached over 90%, Chinese smart phone makers need to be bold enough when entering foreign markets if they really want to register a good sales volume. To stand out, Chinese smart phone makers need to do well in the following three aspects:

1. Developing phone models of better quality and lower price

At present, Huawei has already set up a research and development center in India, while OPPO, VIVO and Foxconn are all planning to set up factories. Chinese smart phone makers can just use their phone models back in China and do a little bit adjustment, and develop phone models that are both of better quality than those of local brands, and of lower price. To avoid competition among themselves, Chinese smart phone manufacturers should develop phone models of their own characteristics, just as Japanese smart phone maker Samsung and LG did in the Chinese market.

2. Teaming up with Indian telecom carriers

While European and American smart phone markets are controlled largely by telecom carriers, three Chinese telecom giants also play a great role back in Chinese smart phone market. To reach more customers, Chinese smart phone makers might as well team up with Indian telecom carriers, so that consumers might be attracted to buy their phones along with SIM cards.

3. Opening exclusive shops across India

Now that online retailers are still not widespread in India, Chinese smart phone makers should shift their focus to offline retailing. The other days, Xiaomi announced that it would open 100 Xiaomi Stores in major cities across India. While Vivo plans to set up 15 exclusive shops by the end of 2015, OPPO also intends to spend over a billion RMB in setting up offline shops across 22 states in India. However, this is only the beginning, and more efforts need to be made to better promote Chinese smart phones to Indian consumers.

The Indian smart phone market is a showcase of the fierce competition among Chinese smart phone makers back in the Chinese smart phone market. Those who succeed in India will also stand out in the Chinese smart phone market.

In a word, it’s high time Chinese smart phone makers gave up Indian online retailers and became bold enough in penetrating Indian market through offline channels. Those who still hesitates will ultimately fail.

[The article is published and edited with authorization from the author @Alter, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.