From China, With Love

They are sleek, stylish, they have the works, they come cheap and they are Chinese-made. Yes, the Chinese mobile phones are sweeping the Indian shores and have become a rage with youngsters and adults alike. The latest thing people want to flaunt, in the last 6-12 months, Chinese phones have clocked more numbers than established brands like Samsung, Motorola and Apple and are fast becoming the most preferred device of young India.

According to data by Counterpoint Research, Chinese phones currently have a marketshare of about 22 per cent—a 100 per cent increase from last year. Korean phones, such as Samsung and LG, once the largest players in India, have seen a reduction in sales from 25 per cent to 20 per cent in the last one year. “Chinese phones offer cheaper prices with competitive features, making them an obvious choice,” says Kuldeep Chengappa, a scientist in Bangalore. Such brands have limited playing field only in the mid-range of around Rs 10,000.

The aspirational new-age Indian youth has always been technologically driven and the smartphone has now become not only something to send and receive a call on but a way of life. India is now the second-largest growing smartphone market in the world with more than 220 million smartphone users, a figure only exceeded by China. Chinese smartphones have managed to capture the imagination of youngsters with their flexibility in software and cheaper prices—a combination that was earlier unavailable for (mostly price-conscious) Indians.

Chinese brands are now flooding the market with phones priced as low as Rs 6,000 and going up to Rs 15,000 which has made smartphones more affordable than ever before. “Chinese brands click in India because they offer good technology, better pricing and good form factor. The bar is being raised by them,” says Atul Jain, India chief operating officer, mobile phone maker LeEco.

According to a report released by IDC’s Mobile Phone Tracker, the Indian market remains a largely untapped market— quite unlike the Chinese market, which is now heading to a point of saturation forcing Chinese brands such as Xiaomi and Yu to strive for a bigger share in India instead. Pankaj Mohindroo of the Indian Cellular Association attributes this surge primarily to the competitive prices. “India still rem­ains a low-cost market when it comes to cell phones,” says Mohindroo. “While the Indian consumer wants a range of good features on their phones, they are not necessarily driven by aspirational brands and don’t mind buying a cheaper brand which fulfils their requirements,” he adds. Moreover, high-end companies such as Samsung’s manufacturing units in China have diminished previous concerns the ‘Made in China’ brand carried.

Chinese brands have managed to bring a unique combination of quality design with competitive software at an affordable price range. “Such brands are learning from the mistake of bigger brands which manufacture in China and sell across the world,” says Prasanto K. Roy a tech analyst. This has also enabled such brands to reduce cost on research and development compared to other high-end players such as Apple which spends almost 30 per cent of their revenues on research. Roy adds that the software used by these companies—be it the camera or the processors—are sourced from the same suppliers as other high-end phones, albeit in smaller quantities.

Such phones have also increasingly bec­o­me the go-to for most technology freaks because of their unique ability for customisation of its software. “Most Korean and American brands have warranties for both the hardware as well as software of the phone, making it impossible for people to experiment with the phones software,” says Ankush Chandran, an architect and tech enthusiast from Kerala. “Chinese phones only offer a warranty on the hardware which enables people to instal custom ROMs just like in a computer,” he adds. Phones such as Yu and One Plus are most popular in this section as they offer warranty even if the phone gets ‘bricked’ (shutting down of software) forever. The increase in popularity for such phones can also be accredited to the alternate marketing routes. Instead of spending crores on advertising and celebrity endorsements, Chinese brands are focused on online sales. The ‘online only’ route enables companies to produce only a limited stock, sometimes as low as 10,000 to 15,000 units and sell through online retailers.

Recently, Xiaomi’s flagship phone Mi3 was launched on Flipkart through flash sales receiving 3,50,000 registrations in a matter of 45 minutes. “The lean portfolio with organic marketing by such brands ensures fewer overheads which in turn helps them to position their products as affordable flagships,” says Shobhit Sri­vastava of Counterpoint Research.

The decline of the Indian smartphone industry in the mid-range market since the closing of 2014 has also left a space open for such brands to fill. Micromax, the biggest Indian company, alone lost half its share in the Indian market within 2015. As Indian phones became more prominent in the low-range smartphones market, Chinese companies have mostly stuck to this range using the USP of offering high utility products at lower prices.

“There has been a positive feedback from customers about the product quality in terms of the design and innovation, and on the after-sales service,” says Sky Li, the global vice president of Oppo. One plus also offers a high-end smartphone with features which usually sells at around Rs 40,000 at almost half the price.

The competitive prices have driven even the Korean brands such as Samsung, which earlier played mostly in the high-end bracket, to come out with competitively priced products catering to the lower end of the spectrum. Samsung’s Galaxy J7 offered at Rs 14,000 is a prime example. Pranshu Singh, a photographer based in Delhi says, “Chinese phones have managed to drive down prices of even the higher-end brands, making it more possible to buy for people who would like the tag of owning a renowned brand.”

Resources remain one of the biggest problems for such companies. While the product quality is competitive, innovation remains low for most. This is largely ­because of lack of funds and limited ­resources such companies work with. Disruptive pricing has resulted in even lower profit margins for most companies. “One has to offer disruptive pricing in India and we are able to offer such prices without depending on making profits from it,” says Jain. Such brands are also facing a huge supply challenge as they are unable to meet the volumes demanded by the market. The flash sales carried out by such companies make these volume challenges even more evident. The mid-range market for smartphones now borders about 150 brands. The next few years will witness a highly competitive market with more brands entering the market and more competitive marketing strategies.

Chinese phones have given an affordable option to Indians to own a feature-rich and ‘loaded’ smartphone which till rec­ently was out of bounds for most of the middle class. This has forced many bigger brands to reconsider their India strategy by launching cheaper smartphones.

Going forward it will be an interesting fight in battleground India. This is something the Indian consumer will not mind.