IBEF (Feb 28, 2019 10:32)

India is the world’s second largest mobile phone manufacturer after China. And with the current
pace of growth, India is not far from becoming the leading handset market in the world. According
to the Indian Cellular Association (ICA), the annual production of mobile phones within the
country has increased from 3 million devices in 2014 to 11 million devices in 2017. India now
accounts for 11 percent of global mobile production, which was only 3 percent in 2014. In fact,
the telecom industry today is amongst the top five employment opportunity generators in India,
creating over four million direct and indirect jobs over the next few years, according to Randstad
India.
Another feather in India’s cap is that during the first quarter of 2018, India became the world’s
fastest- growing market for mobile applications. In May 2017, the Indian government announced
the Phased Manufacturing Programme (PMP) to promote domestic production of mobile handsets.
This initiative is helping build a robust indigenous mobile manufacturing ecosystem in India, and
incentivize large scale manufacturing. The PMP has successfully helped in nudging companies to
move towards manufacturing from direct imports. According to the ICA, the total capital
investment by device and component players by the end of 2018 under the PMP is expected to hit
INR 57 billion. In fact, Pankaj Mohindroo, President of the ICA says, “I am very hopeful that in
the next two years, with such conducive policies, there would be additional massive investments
coming into the mobile components sector.”
With more than 100 players, the mobile phone market in India has grown exponentially in the past
decade, and with the emergence of smartphones, the growth has increased exponentially

THE SMARTPHONE BOOM

Last year, India overtook the United States to become the world’s second largest smartphone
market, after China. Statistics suggest that there will be 780 million connected smartphones in
2021, compared with 359 million in 2016, according to a study by Cisco Systems. Smartphone
makers from Xiaomi Corporation to Oppo Mobiles are building factories in the world’s fastest
growing market for the product bolstering push by the Indian Government, to encourage overseas
investors to ‘Make in India’. India’s smartphone market grew 14 percent with total shipments of
124 million units in 2017, the fastest pace of growth among the top 20 markets, according to
International Data Corporation (IDC). Demand for new phones is surging in India, helped in part
by the Indian major, Reliance Group, offering USD 23 4G feature-phones, free voice services and
cheap data plans. Further, Xiaomi said in April that it will set up three more factories in India.
India accounts for 30 million smartphone purchases every quarter, and this percentage keeps
increasing several times a year. According to IDC and the Ericsson Mobility Report, mobile
subscriptions in India are expected to rise to 1.4 billion by 2021.
This is the reason why smartphone makers like Apple and Samsung consider Indian consumer
preferences while incorporating changes and new features in their devices. India being a huge
market, wants and desires of Indian customers have a big impact on sales.
Being a price sensitive market, the sub-10,000 segment of smartphones has seen the highest sales
since 2012. Every smartphone maker wants to capitalize on the demand for budget devices with
sub-10,000 offerings. From local brands like Micromax to Karbonn to foreign brands like
Samsung, Xiaomi and HTC, budget smartphones have flooded the market.

AN EXCITING FUTURE
The mobile phone manufacturing industry is expected to reach a size of USD 217 billion by 2020.
Moreover, rise in mobile-phone penetration and decline in data costs will add 500 million new
internet users in India over the next five years. Fast Track Task Force (FTTF), under the Indian
Ministry of Electronics and IT, estimates a 500 million mobile phones production in India by 2019,
valued at USD 46 billion. The target is also to create a component manufacturing production worth
USD 8 billion and employment worth USD 1.5 million by 2019. The factors that will ensure the
market remains on an upward curve, including low smartphone penetration, ease of foreign
investment in India, and the ascendency of Long-Term Evolution

COMPETITOR ANALYSIS OF XIAOMI

Xiaomi showed an impressive 155% annual shipment growth in 2018, widening the gap between
itself and Samsung, which shipped just under 7.5 million smartphones, growing by 24% on last
year.

The market research firm said that Xiaomi’s recently launched Redmi 5, Redmi 5 Plus and Redmi
5A have seen runaway success, with the Redmi 5A reaching record sales of 3.5 million in the
quarter. In comparison, Samsung’s best-selling device, the J7 Next, shipped just 1.5 million units.
Oppo took third place with 2.8 million shipments, and Vivo fourth with 2.1 million shipments
Xiaomi is becoming a force to be reckoned with in India. Apart from being some of the best
value devices on the market, Xiaomi’s smartphones are now available in more places and in larger
quantities. All in all, Xiaomi’s product and channel strategies are working

Lenovo’s smartphone shipments were just short of a million units, falling by more than 60% year
on year, while Gionee shipped an all-time low of 150,000 units with shipments down 90% year on
year.

“India’s massive independent retail channel has always relied on intense competition to negotiate
higher margins and marketing funds. But these funds and margins are vanishing as the competition
continues to wane. Adding to this dilemma are online retailers, such as Flipkart and Amazon,
which remain committed to increasing their share in the smartphone channel. All in all, 2018 will
be a trying year for smartphone retailers in India,"
SOURCE; ET TELECOM (APRIL 24, 2018)