The share of Chinese smartphone brands in the Indian market fell to 67-68 percent in the July-September quarter, the lowest level in eight years. Due to the record rise in memory chip prices, these companies have had to reduce their budget models (cheap phones) – even though this was the segment from which they had the highest sales. Let us try to understand in the language of statistics what kind of report has come out.

The share of cheap Chinese smartphones in India has declined

According to technology market research firm Omdia, Chinese brands accounted for 68% in the last quarter, compared to 71% in the previous quarter and 75% a year ago. In the April-June 2020 quarter, this share reached the highest, 80%. Their share was 67%, the lowest since the first quarter of 2019, according to data from Counterpoint Research.

Experts say that companies like Vivo, Oppo and Xiaomi are reducing their budget models. This segment has been the most affected by the high cost of memory. This has created an opportunity for local companies like Lava and Ai+ to meet the demand of low-budget consumers ahead of Diwali.

Trying to control prices by reducing facilities

Omdia principal analyst Sanyam Chaurasia said in an ET report that since the last four-five quarters, Chinese companies have been reducing the specifications (features) of phones to control their prices. Simply put, they are trying to cut costs by cutting back on features. He said companies have reduced their number of models in the low-cost segment, while focusing more on selling mid-range and premium segments to maintain profitability.

According to experts, the record price of memory has changed the equations of the smartphone market. Chinese companies are suffering the most due to very low margins in this industry, while big companies like Samsung and Apple are helping to increase market share due to their premium products.

Share of Indian brands increased

There is still demand in the entry-level (cheap phone) market, but consumers are reluctant to stretch their budgets due to rising device prices. Indian brands are taking advantage of this situation and focusing mainly on increasing sales volumes while maintaining their product line-up. According to Counterpoint Research, the overall share of Indian brands rose to 7% in the last quarter, from 2% a year ago. This figure is the highest since October-December 2018 recorded in the quarter ended September 30.

Tarun Pathak, director of research at Counterpoint Research, said that Ai+ and Lava accounted for around 95 percent of the Indian brands. Along with this, new entrant brands like Mivi and Bolt are also included in this market. Ai+, which was launched in July last year, saw a four-fold growth in shipments in the three months ended September 30 compared to the same period last year. Both the MiV and the Bolt were launched in the last quarter.

Decrease in smartphone shipments

Market conditions are still uncertain. According to Counterpoint Research and Omdia, smartphone shipments in India fell 20-26% to 35.8 million units in the July-September quarter from last year, the lowest level in the last decade. This is due to the rising cost of memory, which has led to an increase in smartphone prices and consumers postponing the decision to upgrade their phones. The slowdown comes ahead of Diwali, when there is usually a surge in purchases of things like smartphones during this time. Experts believe that it may be difficult for Indian brands to sustain this opportunity for long.

In this way development will increase

Omdia estimates that smaller local brands used to ship around 300,000 to 500,000 units every quarter. According to Chaurasia, moving forward will require a strong distribution network, adequate inventory, after-sales infrastructure and better channel economics. A Counterpoint reader says that growth cannot rely solely on the fact that competing firms are retreating. He said Indian brands have to invest in R&D, product quality and customer service that works at scale. He further said that in order to retain customers even after the first purchase, localization (operating at a local level) in the value chain and providing a better customer experience will be important.