Arrival of Chinese phone brands paves the way for price war in India

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NEW DELHI — Indian cell phone makers who have made a name for themselves by lowering the prices of major global brands such as Samsung Electronics Co.

and apple Inc.

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are now challenged at their own game as Chinese brands land in India.

Micromax Informatics Ltd. and Karbonn Mobiles have come from the relative obscurity of India to dominate the world’s second largest telecommunications market, after China, in terms of the number of handsets sold. But they are stuck in a price and feature war for Indian buyers of low-cost phones, as Chinese mobile phone startups such as Xiaomi Inc., Oppo Mobile Telecommunications Corp. and Gionee Communication Equipment Co. are looking to Indian consumers who value the product cost rather than its brand name.

“To counter competition from Chinese brands, local cell phone sellers and foreign brands need to [offer] the device’s existing feature set at even lower prices, ”said Tarun Pathak, telecommunications analyst at Cyber ​​Media Research.

New Delhi-based Cyber ​​Media estimates that Chinese brands currently have less than 5% market share, but the increase in market share of hitherto unknown Indian brands shows how quickly the market dominance may change when the South Asian consumer is offered a product at the right price.

In 2008, the biggest Indian brands had a market share of just over 1%, according to data from research firm IDC. This share has now climbed to over 40%.

Micromax, which didn’t exist six years ago, dethroned Samsung as the top-selling cellphone brand in India in the second quarter, according to Counterpoint Technology Market Research, a Hong Kong-based research and consulting firm. With the backing of venture capital firm Sequoia Capital, Micromax conquered the Indian market by offering phones at prices 30% lower than major global brands and building its name through a nationwide advertising campaign.

Gionee, one of the biggest cell phone makers in China, is keen to achieve the same kind of market share increase in India. It currently has a market share of around 3%, up from 1% last year. “We have been able to take market share from multinational companies as well as national brands” by offering a range of phones at competitive prices, said Arvind Vohra, India manager of Gionee smartphones.

Oppo, another Chinese cellphone maker that launched its own line of cellphones earlier this year, has stepped up its presence in India, with cellphones priced as low as Rs 8,990, or around $ 150.

“Our prices are reasonable which gives local brands good competition,” said Tom Lu, general manager of Oppo India operations.

Mobile phone companies are suing Indian consumers such as engineering student Shehzaad, who lives in Meerut, a town near Delhi. He says he has always avoided the big global brands to save a few rupees and recently ditched his Micromax phone for a Gionee phone.

“It has more features than Micromax, in terms of quality it’s better and a lot cheaper,” said the 20-year-old, who only has one name.

The weak point of Chinese newcomers is their distribution network in India, where most of the more than 1.2 billion people live outside major cities. One of India’s leading low-cost brands, Karbonn Mobiles, for example, already reaches over 85,000 outlets.

Chinese brands hope to be able to attract consumers through online sales. Selling directly to consumers saves up to 30% on the cost of a handset, said Bin Lin, co-founder of Xiaomi.

Xiaomi will sell through Flipkart Internet Pvt., India’s largest online store, while Oppo will sell its handset on Amazon’s Indian version, Amazon.in.

Chinese cell phone companies will also need to build service centers. Indian consumers use their phones longer than their global counterparts. All new brands that can’t fix broken phones are likely to get a bad rap.

Oppo already plans to set up more than 200 service centers by next May in India, while Gionee plans to have around 750 locations where its phones can be repaired by 2015.

Karbonn Mobiles co-founder Pardeep Jain said he doubts Chinese companies will be able to catch up with their Indian competition.

“I don’t see any threat from them,” Jain said. “If anything happens in the future, we’ll do something to match them as well.”

Indian companies know that the shortcut to gaining market share in India is to sell their products for a few dollars less than the competition. Still, if necessary, it could be difficult for Indian brands to cut prices from Chinese manufacturers.

For example, Gionee’s Elife smartphone retails for roughly the same price as the Micromax Canvas Knight handset, at $ 330. But the Chinese phone looks like a much better deal because it is lighter in weight and has better picture quality. Gionee also claims her phone is the thinnest in the world.

“Indian handset sellers absolutely need to control the price,” said Karan Thakkar, telecommunications analyst at IDC.

Write to R. Jai Krishna at [email protected]

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