China’s domestic smartphone industry, including buzzworthy newcomers like Xiaomi and Huawei and stalwarts such as Lenovo, is facing a quandary. Many of its biggest names quickly rose to prominence in the past couple of years by making cheap, high-quality knockoffs of global brands like Apple and Samsung. But as Chinese shoppers become more affluent and sophisticated, they increasingly want the real thing. The trend has the country’s handset makers scrambling for new markets, and many are now targeting India – a potentially huge growth opportunity where consumers are tech-savvy but generally can’t afford status symbols like the iPhone 6 or Galaxy S6 Edge.
As a result, Indians are being bombarded with enticing mobile-phone offers like they've never seen before. A Moto E, from Lenovo’s Motorola unit, costs less than $100, a Huawei Honor Holly can be had for $110, or for $15 more one can get a Lenovo A6000 4G handset.
Meanwhile, Xiaomi Inc.’s Mi4i, which the company released globally from India last month, is priced at about $205 -- without a contract. That the phone was launched from India is a significant departure from Xiaomi’s global launches from China, underscoring CEO Lei Jun’s view that the subcontinent will be at the heart of the company’s overseas expansion this year.
Many of these new phones, regardless of brand, are priced at less than $200 and offer more features with each new iteration. Better displays, processors, battery capacity, 4G support, image stabilization, dual SIM slots and more. That’s been helping Chinese brands win customers like Sachidananda KJ, a painter in Mysore, a university town a couple of hours drive from Bangalore. “I maintain a visual diary and the phone comes in very handy to take a quick snap when I see something that appeals to me,” Sachidananda said. He bought a Moto G second-generation some months back on India’s online shopping site Flipkart for about $200. “I didn’t do a lot of research, but friends recommended it.”
A Domestic Slowdown
All this comes amid a major slowdown in China’s domestic smartphone market. Research firm Canalys estimates just 7 percent growth for the January-March period, while IDC expects 2015 sales to grow about 10 percent versus 60 percent in 2013 and 20 percent in 2014. So as their home market cools, China’s incumbents are gearing up for a fight that will decide who gets the top smartphone seller’s crown in the subcontinent. “Major local vendors face the strongest headwinds in their home market since the smartphone boom began in 2011,” Jingwen Wang, an analyst at Canalys, said in a recent report.
Besides an overall demand slowdown in China, there are other factors that have the country’s device makers looking for robust export markets. Chinese consumers “are losing their appetite for ultra-low-cost devices, as expectations increase in line with spending power,” Wang wrote. The success of Apple’s iPhone 6 in the Middle Kingdom points to a “major shift to devices that provide better user experience.” In other words, as China’s population of urban professionals grows and becomes more affluent, it’s no longer satisfied with the low-cost knockoffs that many Chinese manufacturers offer.
Enter India. The country has almost as many wireless subscribers as China, with one big difference. Fewer than one in six own smartphones, as opposed to less-advanced-feature phones, whereas China is not too far from the time when every other person will have a smartphone. More than 420 million smartphones were sold in China in 2014, research firm IDC estimated. In India it was about 80 million. India’s smartphone market is some years behind China in other ways, too -- its 4G network market is nascent. Carriers offer 4G services only in some cities, while they have begun to expand networks, and the smartphone makers that support 4G in India are still limited.
Xiaomi and Lenovo-Motorola lead the Chinese race for Indian market share, with the latter already at No. 5, after market leader Samsung, which still accounts for nearly one in three smartphones sold in the country, and local companies Micromax Informatics Ltd., Intex Technologies (India) Ltd. and Lava International.
Xiaomi is not far behind, and its latest offerings for India could bolster its position. Its Redmi 2 handset, which supports 4G, comes equipped with a 4.7-inch screen, dual SIM slots, and a Qualcomm Snapdragon processor -- all for $110. The only slightly pricier Redmi Note 4G, with a 5.5-inch screen, has sold out at carrier Bharti Airtel's stores across Bangalore, salespersons at four such stores told IBTimes on Friday, as the phablet has been mopped up by customers very quickly.
There is clearly demand, as Xiaomi has already announced its third online sale of the Mi4i in as many weeks. Meizu and Coolpad have said they will soon enter India, whereas Huawei, which already sells its phones in the country and has its biggest overseas research and development center in Bangalore, will seek to improve its market share.
For China’s biggest smartphone makers, 2015 may well be the year of India or bust.