LATEST TECHNOLOGY NEWS | GADGET REVIEWS | SOCIAL MEDIA UPDATES | INFORMATION TECHNOLOGY NEWS | MOBILE WORLD | CAR WORLD | NATIONAL-INTERNATIONAL NEWS AND MANY MORE..........

Pages

Translate My Page

Friday, September 28, 2012

Indian phonemakers not ready to be global players yet

 
India phonemakers are being held back from global success due to a legacy of protectionist policies, the absence of a strong domestic supply chain, and inadequate market share which is n
ecessary for them to generate economies of scale to compete effectively worldwide.

According to Alok Shende, principal analyst at Ascentius Consulting, these factors mean the country's handset makers are "unlikely to be a force to be reckoned with" on the world stage, at least, in the medium-term.

While the Indian and Chinese telecom markets appear similar in terms of population traits as well as telecom penetration, the comparison stops there, said Shende.

"At the end of 2012, smartphone sales in China is expected to be close to 150 million versus 20 million devices for India," he pointed out.

The principal analyst noted a bigger contrast when comparing domestic smartphone makers in both countries, with local companies accounting for 61 percent of device sales in China, compared with only 6 to 8 percent in India.

Historical baggage in India

There are historical elements as well as issues relating to the industry structure that explain the contrasting roles of domestic phone manufacturers in the two Asian nations.

India, for a long time in its post-independence history, relied on import substitution as an economic policy versus the export-led strategy pursued by many of the other Asian economic tigers, Shende explained.

"The import tariffs turned India into a protective fortress, immune to the forces of innovations across the globe," the analyst elaborated. "Many of the domestic brands which came into fore in the protectionist regime floundered significantly once the economy opened up in 1992."

Pradeep Singh, analyst at Itim Research, pointed out that international players also advanced much faster against Indian manufacturers and dominated market share.

India's market players also were now competing against cheaper rival offerings from other countries, Singh said, adding that the falling rupee also led to increased overseas production costs.

Niche in dual-SIM phones

According to Shende, the Indian mobile phone market was a predominantly Nokia market for a long time, with the Finnish company holding as much as a 64 percent market share in 2008.

"Domestic players started coming into being in 2009 to 2010 when [Indian handset makers] Micromax and Karbonn acquired 4.1 percent and 3 percent market share, respectively.

"This growth in market share also coincided with growth of dual-SIM phone category--a category where Nokia had no presence," he added.

Some of the gains by Indian companies were made through their distribution strategies in the hinterland markets as well as more aggressive price points, which helped tap rural markets, Shende explained.

However, this meant branding was compromised, leaving Indian companies in a "price-positioning trap" and unlikely to be able to move up the brand and value ladder, he said.

Yet, Indian phonemakers "never" acquired enough market share to give them the size and economies of scale, which enabled their Chinese counterparts to be competitive in international markets, he noted.

Shende added that India lacked a strong supply chain or ecosystem of electronic design shops, contract manufacturers or economic hubs which would have provided unique competitive advantages.

"Hence, it's unlikely Indian players will become a force to reckon with the medium-term," the analyst concluded.

No choice but to go overseas

Faced with severe competition in the domestic market, Indian handset makers have had no choice but to venture overseas for growth opportunities, pointed out Singh.

It would be difficult for them to catch up with more established brands, he said and stressed the importance for these players to find relatively untapped markets.

Some examples include brands such as Karbonn, Maxx and Micromax, which have expanded into neighboring countries including Bangladesh, Nepal and Sri Lanka, and are eyeing new markets in South America and Commonwealth of Independent States.

"One of the largest brands in India, Micromax, has already entered the high-end handset markets in Saudi Arabia and Brazil," Singh said.

He added that rival brand Karbonn Mobiles has also expanded recently into Hong Kong, Nepal, Indonesia, the Philippines and Fiji Islands.
Share My Posts! :)

No comments:

Post a Comment