Chinese phonemakers are using advertising to edge out their Indian counterparts
Chinese smartphone makers have put a substantial amount of investment into advertising expenditure to build a strong brand.
Key highlights:
- Chinese mobile phone manufacturers grow by 3.4 times in 1 year
- Indian players market share has now declined to just 14% in Q1 2017
- Chinese players have see their share in the market grow from just 15% in Q1 2016 to 51% in Q1 2017
India's mobilephone market looked very different just a year ago.
Chinese smartphone makers have successfully beaten their Indian counterparts by gaining 51% market share in the first quarter of current year, Indian Ratings and Research (Ind-Ra) and IDC research said.
Indian smartphone makers had a 41% market share in Q1 2016 which is now declined to just 14% in Q1 2017.
At the same time Chinese players have see their share in the market grow from just 15% in Q1 2016 to 51% in Q1 2017.
“There is a complete change in the market position of the top five smartphone players in FY17, as Micromax Informatics, Lava International Ltd. and Karbonn Mobiles Pvt Ltd were replaced by Xiaomi Inc, Vivo Mobile and Oppo Mobiles,” said the report.
Oppo and Vivo India have recorded sales increases of seven to nine times over FY17 respectively. Ind-Ra expects Vivo India and Oppo’s smartphone sales to grow by around 40-50% over FY18.
While the global vendor Samsung remained the market leader with 28% share in 1QCY17, the share of Indian vendors downsized to a mere 14%. Lenovo also sustained its position due to the established brands and products in the diversified price segments, said the report.
The report attributes the success of Chinese mobile phone players to their strong brand which has been built through high advertising expenditure and sales channel building funded by the sponsors.
“Chinese smartphone makers enjoy a debt-light capital structure and healthy liquidity due to the long payable period extended by their suppliers. Better technological capabilities of the Chinese players leading to superior product offerings have also contributed to their success,” said the report.
Apart from this, large investments by Chinese mobile phone players towards brand building and manufacturing facilities in India show their long term strategic intent.
Ind-Ra opines that established Indian vendors will face difficulty in sustaining, despite the early mover advantage and a more diversified product profile. Thus, Indian players’ recent investments into mobile phone assemble lines will face an elevated stabilisation risk, while advertising spends and fierce price competition will directly hit the operating margins.
It says that the Indian smartphone markers have been slow in reacting to ongoing product innovation in the market, and are further constrained by limited marketing budgets.
Another reason for the rapid growth of Chinese players was the entrance of Reliance Jio into the telecom market. Reliance Jio by giving free data and voice services pushed the demand for 4G Volte enabled smartphones and led to a faster migration for people from feature phones to smartphones.
This big opportunity saw aggressive marketing and competitive pricing strategies from Chinese vendors primarily in the budget to mid-price segment leading to market share gains, it said.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Top Gold ETF vs Top Large Cap Mutual Fund 10-year Return Calculator: Which has given higher return on Rs 11 lakh investment; see calculations
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
01:50 PM IST