04-07-2017 Arun Gupta, CEO, MoMagic
Smartphones and Mobile Internet are the two most dynamic sectors of today’s economy and business; where in a few years from now, the Japanese and Koreans dominated’ - Sony, LG and Finnish player Nokia. Then came Samsung and Apple in the foray, emerging as the market leaders and still remain the giants globally. However, the giant leap of Chinese brands in the last 15 years is quiet startling. If we talk about the top 5 brands after Samsung and Apple, its Chinese makers all the way– Huawei, Oppo and Xiaomi’s of the world. A question which is quite pertinent and looming in the minds of all those in the business of mobile handset and manufacturing, as India takes the center stage on the global map, as the most aggressively growing mobile market is – Can Indian players capture the global center stage and be the brand to reckon with?
Mobile production in India is said to have already crossed the 100-million units mark and is all set to touch the 500 million in the next two years with all hinges on the GOI’s ‘Make in India’ initiative. As per market estimates, smartphones sales will grow about 15% to 125 million in 2017 led by Chinese handset makers, from the 5% growth clocked in 2016 when the market was hit by demonetization (and factors such as the Reliance Jio offering 4G whereas all our Indian handset brands were sitting on the huge inventory of 2G ad 3 G), resulting in a major displacement of the Indian brands holding a sizeable market share of the Indian mobile market, reducing to single digit market share and complete washout in the face of competition from international brands. And globally, there is hardly any remarkable footprint by Indian brands to talk about. And this brings us to reflect on how market predictable and technologically ready-visionary, Indian brands are?
The moot question: The latest figures show Korean and Chinese continuing to rule the Indian smartphone market for the second consecutive quarter (Q4 and Q1), with none of the Indian smartphones brands figuring in the top 5 and figured Samsung, Xiaomi, Vivo, Lenovo and Oppo. This takes us to a moot question, will India be just a market place for global brands to imprint a success story or will Indian players take on the market and emerge as global brands. Will India remain a case of having just assembly lines here whereas the components will keep getting exported from China - elsewhere or will it move up the value chain and instead of SKDs, it will be CKDs which will get on to be the center stage of Indian manufacturing and ‘Make in India’ landscape – the core for real success and value addition. India boasts of investments from close 37-38 mobile manufacturing companies in the last 12-18 months with many international brands and Indian players setting up manufacturing units and building new capacities in India; why then all the Indian brands have seen a double-digit decline in their annual growth?
integration ingrained into the manufacturing ecosystem. Which means having your own product design team on the house to continuously innovate and bring world class-user friendly products – in demand in the global arena - to the market. Secondly, have a seasoned and matured leadership team evolved which can gauge the market dynamics globally and accordingly introduce products and build business not only in the country of origin but for elsewhere too. Simply having assembly lines and selling what is in demand and is being offered all across, is good to be profitable and is like skimming the milk- capture the local business but to take on global brands and competition, it’s important to add value to the product – consumer offerings and move a notch above the competition having a technology and service edge over others. The critical elements for having a robust mobile manufacturing ecosystem and henceforth-producing global products in the mobile handset space, will necessary include:
If India needs to win this race, we need similar focused efforts what it showed in the case of IT software and service industry. A robust ecosystem of component makers evolving the assembly lines into full –fledged manufacturing hubs wherein instead of 8-10%, it’s like manufacturing 80-90% of a device in India or else manufacturing will be limited to assembly of imported parts as the present duty structure also makes it significantly cheaper to import components. For Indian handset brands to be reckoned as global brands, major investment in R&D and IPRs is critical, along with highly skilled workforce, visionary management and conducive taxation and infrastructural policies.
The strategy of high import tax to cushion the Indian OEMs and Manufacturers is good up to a point but if we really intend to make Indian players -global brands and a global manufacturing hub, it will be critical to move beyond just the assembly line – SKD driven manufacturing ecosystem and emphasize on CKD driven manufacturing ecosystem. To survive the international competition and emerge as global brands, key is innovation and proactive R&D in the product design and offerings, in house. Because Import tax can help the Indian players ward the competition in house, only to an extent but for global acceptability and market, it’s the product, the quality that has to stand out across: technology, tariff and design. And this will lead to global players looking at Indian manufacturing ecosystem for their further expansion.