Chinese smartphone: Government checking aside, business as usual for Chinese phone brands in India

Eight years after their foray into India, China’s big smartphone brands are too deeply entrenched in the world’s second-largest market to see any significant impact on their business despite government scrutiny, market trackers have said.

While the lack of alternatives – four Chinese brands are in the top five with an 80% market share – is likely to largely protect their market position, any financial restrictions reducing their operating expenses could create short term problems. These Chinese brands realize, however, that India, the world’s second largest market, is too big for them to get out of, especially after investing huge sums in manufacturing, distribution and retail networks, and in research, the experts added.

“The dependence on Chinese brands, both from a consumer and business point of view, is also too high, and you cannot see the government creating a vacuum right now, in terms of jobs, commerce and other things,” said Navkendar Singh, research director. at IDC India.

He added that there is unlikely to be any impact on their market share unless “there are certain restrictions in terms of finances imposed by the government”.

The heat is however on the Chinese entities in India amid the ongoing border struggle with China. Various Indian law enforcement agencies have scrutinized their operations and finances. Huawei and ZTE were nearly forced out of the telecom network equipment supply market, while hundreds of Chinese apps, including popular social media apps like Tik-Tok and games like PUBG Mobile, were banned in the past two years.

The focus is now on Chinese handset makers with market leader Xiaomi, second Vivo and fifth Oppo facing various charges – from money laundering to customs evasion – and their top executives have been questioned . Some of these cases are before various courts. According to reports, these actions have forced several Chinese expatriates working in these companies to leave India.

But despite the scrutiny, Chinese brands’ market share grew steadily in 2022. Vivo gained 3 percentage points to end May 2022 with 18% share, tied with Samsung, while Xiaomi gained 1 percentage point to remain the market leader with 22% share. . Oppo and Realme, however, lost share, closing May with 10% and 15% share respectively.

A big reason is the lack of alternatives, analysts say.

Of the top five smartphone brands, all but one (Samsung ranked second) are Chinese. Market leader Xiaomi, along with Vivo, Realme and Oppo, accounts for around 80% of the Indian smartphone market. According to Counterpoint Research, Oppo led domestic manufacturing with 21.6% in the January-March quarter, while Vivo held 11.7% of the market. Bharat FIH (Foxconn), which makes phones for Xiaomi, held 11.3% of the local manufacturing market.

Exiting India may not be an option for Chinese brands, given that it is the second largest market in the world and their millions of dollars in investments, said Prachir Singh, principal analyst at Counterpoint Research.

And in this event, the local market could face huge disruptions.

“They (the Chinese brands) are expected to produce 70-80 million units in the market, and there are no other players who can step in and do that kind of number. Not even Samsung, in such a short time, which operates manufacturing plants in India, with a capacity of 120 million units, which also includes exports and feature phones, they will probably be able to fill the space in the next couple of years. years,” said IDC’s Singh.

A Samsung executive said he has his ears to the ground and has worked to improve the product proposition for consumers. “We believe we are our biggest competitor, and we must continue to focus on what is good for the consumer,” said Aditya Babbar, senior director and chief marketing officer at Samsung.

However, if it comes to the brands exiting the market, IDC’s Singh believes Chinese handsets will continue to be sold in India, but through licensing agreements with a consortium of distributors and suppliers. agents, who will continue to operate their business in India.

“India is one of the proving grounds, so to speak, for Chinese brands, which allows them to test all kinds of products before launching them in other markets. Along with China, India has been their biggest market. Given the size and the impending rollout of 5G and the one-third penetration of smartphones, these guys will do their utmost to stay in business in India,” Singh said. from IDC.