The hold of Chinese smartphone brands in India is weakening. At the same time, due to the rising cost of memory chips, it is becoming difficult to sell budget phones profitably. Their withdrawal has created an opportunity for Indian companies like Lava and Ai+. The total market share of these companies has reached the highest level in the last eight years.

Newcomers in the consumer electronics industry have also raised Rs. Eyeing the sub-15,000 price segment. However, this opportunity comes at a time when the market is shrinking, consumers are putting off purchases and the already existing big companies have a huge advantage in terms of technology and distribution. The challenge before India’s domestic smartphone companies is whether this low-cost opportunity will turn into a sustainable competitive advantage in the future?

A great opportunity at the bottom of the market

According to a report by ET, research firm ‘Omdia’ says that Chinese brands accounted for 67-68% of India’s smartphone shipments in the July-September quarter. According to Omdia, this share was 68%, up from 71% in the last quarter and 75% a year ago. According to Counterpoint estimates, the figure is 67%, the lowest since the first quarter of 2019.

The main reason for this is the huge increase in the prices of memory chips. Memory components can account for around 40 percent of the total cost of a budget smartphone, leaving little room for companies to absorb the cost increase themselves. Chinese companies have established their business in India based on affordable devices and good specifications, so they are the most affected by this situation.

To control costs, companies like Vivo, Oppo and Xiaomi have scaled down their entry-level models, reduced the number of devices in the cheaper price band and also reduced the specifications. They are now focusing more on mid-range and premium handsets, where the profit (margin) is better. In such a situation, consumers with low budgets are now left with very few good options to choose from, while they are reluctant to spend more anyway.

Instead of discontinuing their product line-up, Indian brands are trying to fill this void. According to Counterpoint estimates, their combined market share rose to 7% in the September quarter, from 2% a year ago. This is the highest level since the December 2018 quarter. According to Tarun Pathak, director of research at Counterpoint, Lava and Ai+ accounted for around 95% of the total contribution of Indian brands.

This increase is quite significant, but needs to be understood in proper context. Smartphone shipments in India fell 20-26% year-on-year to 35.8 million units in the quarter, the lowest level in the last decade. Consumers put off the decision to upgrade their phones due to rising costs. So, the market share of Indian brands is increasing, but it is happening in a sluggish market. It is not that there is any major spending spree in the market.

Ai+ and Lava are testing the market

Ai+, launched in July 2025, has emerged as one of the most profitable companies. The company’s founder and chief executive Madhav Seth said in an ET report that the company has sold as many handsets in the current quarter as it did in the entire year last year. Their devices are priced between Rs 10,000 to Rs 25,000. According to Omdia’s latest estimates, shipments rose more than four times year-on-year in the September quarter.

At the same time, Lava is trying to compete on affordable prices rather than relying solely on low prices. The company’s entry-level 5G smartphone, which was initially priced at Rs 7,999, has now been priced at Rs 14,499 due to the increase in component costs. The company says it is improving component selection, software and strategic sourcing to control costs. The company has said that its sales have more than doubled in the current financial year.

This price hike shows the challenges facing local brands. Increasing the cost of memory is not a benefit in itself. This opportunity can only arise if Indian companies strike the right balance between price, performance and reliability, leaving larger competitors behind.

Other consumer electronics companies are preparing to try the same strategy. In the September quarter, Mivi and Bolt sold through Flipkart Rs. has entered the sub 15,000 smartphone segment. Noise and Boat are also looking to enter this market, while Karbonn plans to make a comeback during the festive season and Micromax is also looking to return to the smartphone market. These steps may give consumers more options to choose from, although ongoing discussions and plans should not be taken as a fully established business.

Why is this event different from last time?

Around 2015, Indian brands accounted for around 35% of the domestic handset market, with companies such as Micromax, Lava, Intex and Karbonn competing with Samsung. Later, the reason behind them was not only the extremely aggressive pricing policy of the Chinese companies.

Xiaomi, Vivo, Oppo and Realme resorted to large scale purchases, rapid new product launches, heavy marketing and extensive retail distribution. They were constantly improving the hardware and software that customers were getting for their money. Indian companies are struggling to keep pace with this pace of product development. Also, they could not build a large enough scale to spread research and development (R&D) costs across millions of devices. By the early 2020s, the total market share of these Indian companies had declined to less than 1 percent.

The situation has since changed. India has now become the world’s second largest hub for mobile phone manufacturing, with local manufacturing catering to the needs of both domestic and international brands. Mobile phone production in 2014-15 was Rs. 18,000 crore, which in 2025-26 will increase to Rs. 6.27 lakh crore will be. Similarly, a decade ago exports were around Rs. 1,500 crore, which has now increased to Rs. 2.59 lakh crore has reached around.

This expansion, aided by schemes like ‘Manufacturing-Linked Incentives’, has attracted many factories, suppliers and manufacturing specialists to the country. Contract manufacturing companies like Dixon Technologies are already making phones for international brands. This entire ecosystem gives Indian companies a strong industrial base, which earlier companies did not have. However, that doesn’t mean they will automatically have great products or customer loyalty.

Trying to make an Indian champion

Govt Rs. 62,500 crore ‘Mobile Phone Manufacturing Scheme’, which was announced in August, aims to bridge the gap between smartphone manufacturing in India and ownership of the brand and technology behind it.

Under the ‘brand-centric’ part of the scheme, eligible Indian companies can get a 5 percent incentive on their sales. In addition, an additional incentive of 3 per cent for Indian design and research and development (R&D) and up to 1.5 per cent for local sourcing of major components and sub-assemblies may be provided. The program will run from FY 2026-27 to FY 2030-31.

Its eligibility criteria are designed to distinguish Indian-owned brands from companies that manufacture only locally. Eligible companies must meet conditions related to Indian ownership, management control, intellectual property, trademarks and in-house design and R&D capabilities.

The expansion of manufacturing in India has benefited foreign brands like Apple and Samsung as well as Chinese smartphone makers. The next policy challenge is to ensure that Indian companies capture a greater share of the value created from product design, software, patents and brand ownership.

Lava could be the big company to take advantage of this scheme. The company has managed to overcome the previous tough times and is now investing beyond just assembly. In the next five years, it will spend approximately Rs. 1,100 crore is planned to be invested.

Micromax’s manufacturing unit, ‘Bhagwati Products’ is also a part of this entire ecosystem. The company is planning to set up new facilities in Greater Noida in association with Chinese original design manufacturer ‘Huaqin’.

More difficult to win customers

The biggest risk is that the gains we have made so far may only last for a short time. According to Omdia’s estimates, small domestic brands are able to sell only 300,000 to 500,000 units per quarter. Moving beyond this level will require reliable inventory, extensive distribution networks, better retail economics and after-sales service that customers can trust.

The ‘online-first’ strategy adopted by many new companies can help reduce costs. But smartphone is a product where buyers pay a lot of attention to its durability, camera performance, software updates and service availability. A low price may make customers buy a product for the first time, but it does not necessarily make them buy it again.

Therefore, the R&D incentives provided under this scheme may prove to be more important than immediate sales subsidies. Indian brands need to improve industrial design, camera processing, software and component integration as well as quality control. Also, they have to ensure continuous availability of ingredients even when the global supply situation becomes difficult.

There is a chance, but Chinese brands will not disappear completely. Their declining market share is due to temporary cost pressures. If memory prices go down or they change their manufacturing strategy, they can re-consolidate their position. At the same time, Samsung and Apple are capitalizing on their strong premium positioning. This shows how difficult it is to compete without a clear product proposition.

India has built a manufacturing base that can help any local smartphone brand achieve huge success. The next challenge is whether Lava, Ai+ or any new company will be able to take advantage of this opportunity to create products that consumers want to choose again and again. The temporary retreat of Chinese companies can create a niche in the market, but to maintain that niche, it is important to have excellent technology, strong distribution and customer trust.