New Delhi: Eight years since their invasion of India, top chinese smart phone brands are too entrenched in the world’s second-largest market to see any significant impact on their businesses, despite intense government oversight, market trackers say.
While the lack of alternatives — four Chinese brands are in the top five with 80% share — is likely to protect their market position to a large extent, financial constraints that lower their operating costs could cause problems in the short term. However, these Chinese brands are realizing that India – the world’s second largest market – is too important to leave, especially after investing top dollars in manufacturing, distribution and retail networks and research, experts added.
“The reliance on the Chinese brands from both consumer and trade point of view is also too great, and the government cannot create a vacuum in jobs, trade and other issues at the moment,” said Navkendar Singh, research director at IDC India.
He added that it is unlikely there will be any impact on their market shares unless “there are some restrictions on government finances”.
However, the heat is on Chinese entities in India amid the ongoing border battle with China. Several Indian law enforcement agencies have been scrutinizing their activities and finances. Huawei and ZTE have been nearly driven out of the telecom network equipment supply market, while hundreds Chinese appsincluding popular social media apps like Tik-Tok and games like PUBG Mobile, have been banned for the past two years.
The focus is now on Chinese handsets makers with market leader Xiaomisecond ranked Vivo and ranked fifth opposite faced a variety of charges — from money laundering to customs duty evasion — and their senior executives have been questioned. Some of these cases are in different courts. There are reports that the actions have forced several Chinese expatriates working in these companies to leave India.
But despite careful research, the market share of Chinese brands has grown steadily in 2022. Vivo gained 3 percentage points to end May 2022 with a market share of 18%, equal to Samsung, while Xiaomi gained 1 percentage point to remain the market leader with a 22% share. oppo and Empirehowever, lost some share and ended May at 10% and 15% respectively.
An important reason is the lack of alternatives, analysts say.
All but one (second to Samsung) of the top five smartphone brands are Chinese. Market leader Xiaomi, along with Vivo, Realme and Oppo, accounts for about 80% of the Indian smartphone market. According to Counterpoint Research, Oppo led domestic production by 21.6% in the January-March quarter, while Vivo had 11.7% of the market. Bharat FIH (Foxconn), which makes phones for Xiaomi, held 11.3% of the local manufacturing market.
Leaving India may not be an option for the Chinese brands, given that it is the world’s second largest market and their multimillion-dollar investment, said Prachir Singh, senior analyst at Counterpoint Research.
And in that case, the local market could face huge disruptions.
“They (Chinese brands) are expected to bring 70-80 million units to the market, and there are no alternative players that can step in and do that kind of number. Not even Samsung, at such short notice, which operates factories in India, with a capacity of 120 million units, including exports and feature phones, they can probably fill the space in the next two years,” said Singh of IDC.
A Samsung executive said they have their ears to the ground and have been working to improve the product proposition for consumers. “We feel we are our biggest competitor and we need to continue to focus on doing what’s right for consumers,” said Aditya Babbar, senior director and head of marketing at Samsung.
However, when it comes to the brands exiting the market, Singh of IDC believes Chinese handsets will continue to be sold in India, but through licensing deals with a consortium of distributors and agents, who will continue their operations in India.
“India is, so to speak, one of the testing grounds for the Chinese brands to test all kinds of products before launching them in other markets. Along with China, India was their most important market. Given the size and the after the rollout of 5G and the 1 /3rd penetration of smartphones, these guys will pull out all the stops to stay active in India,” said IDC’s Singh.