When Apple announced the launch of iPhone 5C last month - the bright candy-coloured, plastic-bodied, cheaper version of its flagship product - the tech industry went abuzz with Apple’s attempt to target emerging markets with cheaper devices.
The emerging market - China, India and Brazil - has seen a tremendous growth of smartphones in the past two years. But market shares (in volume) of giants like Apple, Samsung and the erstwhile leader, Nokia is falling rapidly in these markets.
The reason? A slew of local start-ups flooding the market with high specification smart phones available almost at half the price.
Take Canvas 4, released in July this year by Indian mobile phone brand Micromax. It runs an Android Jelly Bean platform powered by a quad-core processor, packs in a camera of 13 megapixel and a 5-inch full HD display.
Priced at under Rs 19,000, compared with a price of more than Rs 40,000 for Galaxy S4 or iPhone 5, the deal is a complete value for money. Karbonn or Lava, other local brands, also offer devices in similar range.
Rise in numbers
A recent report by International Data Corporation (IDC) says, Micromax (with a turnover of Rs 3,168 crore this year) has moved to the second spot with 22% of the market share and Karbonn is at third with 13%.
Global market giant Samsung (with a turnover of $198 billion this year) that dominated the market a year ago is stumbling at 26%, while Nokia with 5% saw a similar fate. (Gurgaon-based Cyber Media Research’s latest report puts Samsung, Micromax and Karbonn at 31.9%, 22.7% and 10.7% respectively.)
Others like Lava, Xolo and Intex are not far behind either.
Shashin Devsare, executive director of Karbonn Mobiles says, "They [bigger players] are targeting only at the tip of the iceberg. The real market lies at the lower segment where people are still switching from feature phones to smartphones." At around 85%, millions are still using feature phones.
Of the total smartphone market, IDC says, around 70% of the devices shipped are under Rs 15,000 range. The major chunk, thus, lies in the mid to lower segment of the market - the bottom part of the iceberg.
"They (Indian brands) were at the right place at the right time," says Vijay Ramanathan of Convergence Catalyst, a Bangalore-based telecom consulting firm. The popularity of the Android gave these smaller players a level field to take on the bigger fish in the market.
"It’s a strategy that comes close to what Honda did in the 1950s," says Ramanathan. Japanese manufacturer Honda used a highly competitive cost position as a springboard for penetrating Western markets.
The local brands quickly caught on to the growing demand for big, bright screens and dual-SIM facilities, which they bundled out as attractive value -for-money devices.
As per a report by the consultancy firm KPMG, the number of mobile Internet users in India is expected to touch 164.8 million by 2015, from the current 23.8 million.
Well aware of the trend, Indian brands are keeping a foot in each market - the feature phone and the smartphone - so that their devices become a natural successor for those who switch.
The large screen market in India continues to see a rapid growth, and also show a similar trend of Indian brands making a mark. The bulky phablets (5 to 7 inch screen) have grabbed 30% of the market.
Tablet sales are expected to reach 3.84 million by 2014, as per Manufacturers Association of IT, up from 0.36 million in 2011-12. The top two vendors dominating are Indian.
Datawind, the makers of world’s cheapest tablet, Aakash, leads the market with 15.3% (surprisingly though, this excludes shipments of the much-publicised Aakash tablet, but includes the Ubislate series), followed by Micromax (12.3%).
According to Anshul Gupta, principal analyst at Gartner, indigenous manufacturers have grown because they have evolved, expanding their product portfolio and introducing devices at regular intervals.
"This gives the consumer a range of devices they can choose from and keeps them hooked to fresh arrivals," he says. With a list of smartphones, phablets and tablets in their stable - Micromax has 30 products, Karbonn has 20, Lava has 20, and Intex has 23 - the local brands have flooded the market with devices that are in the range of Rs 3,500 to Rs 20,000
Looking up to China
As the pace of technology slows down, smaller players seem to be catching up, producing almost similar devices. China accounts for a fifth of the smartphones shipped globally, according to research firm Canalsys, while Gartner says four of the 10 largest smartphone makers are now Chinese.
These brands are Lenovo, Yulong, Huawei, ZTE - still largely unknown to the outside China, while smaller players like Xiaomi, Coolpad and Oppo are fast reducing the gap too.
While Xiaomi markets the high-end phones online, and uses platforms like Sina Weibo (Chinese equivalent of Twitter) for feedback, Lenovo, has carved out a market around its music services.
Yulong is said to be the Chinese equivalent of Blackberry which prioritises privacy settings and is popular among officials and businessmen.
Innovation is still the core. "Creating a technological niche for themselves might help these smaller players to shake up the industry," says Tarun Pathak, analyst, CMR.
After all, there isn’t much local R&D, industrial designing happening when it comes to local brands - it is all done by OEMs in China and elsewhere.
With ambitions to expand their businesses, leading Chinese brands are eyeing India. Xiaomi’s recent star hire from Google, Hugo Barra, in an interview said that in markets like India, Xiaomi can replicate [the model] what it has done in China.
Analysts say it remains to be seen how Chinese entrants will affect local brands once they start eating into the same market pie. But as far as the likes of Samsung and Sony are concerned, if they don’t maintain their technological lead, there are local players that’ll do it for them.
Mobilescape: Top Indian smartphone brands
"We were born out of innovation," says Rahul Sharma, 38, co-founder of Micromax. Born out of an idea to solve battery issues plaguing mobile devices, a company that provided tech solutions to multinationals, came out with their first mobile device that claimed to have a month’s battery backup.
That was in 2008. By 2010, Micromax became the largest domestic handset company. In a market where established companies like Siemens, Panasonic, TCL, Kyocera, Alcatel failed to survive, new kid on the block Micromax thrived.
According to Sharma, the success is all due to their intuitive understanding of the market.
"We gave people what they were looking for," says Sharma. "For example, in a Rs 6000 phone, you take out 3G and put in EDGE because the person using it probably won’t have the connectivity. Similarly, you replace HD screen with a WVGA one, throw in a 3 MP camera instead of 8 MP. All within the same 5-inch screen range."
Tailored, needs-based products are what the company depends on to cut costs.
Micromax, which claims several firsts in the market - from a marathon battery phone, dual-SIM phones, motion sensor gaming phones and devices targeted at women - has been offering devices that look and work similar to that of Samsung’s or Sony’s.
According to Sharma, innovation is only possible at a software level now. But it remains to be seen if Micromax can shake off its image of being just a cheaper alternative with the brand’s core motto - innovation.
Micromax’s latest product: Canvas 4 (launched in July)
Price: Rs 17,800 Specs: 5-inch, 1.2GHz quadcore processor, IPS LCD display, 1 GB RAM, 13 MP camera
- Micromax recently launched a Canvas Tab, broadening the portfolio of their flagship series.
Started in 2009, Lava is currently the third largest Indian mobile brand. Lava claims to be the first Indian brand to launch a phone with gesture control, in their Iris 504Q.
The functionality can be used to change music tracks, FM station, click pictures and browse gallery without even touching the screen. According to Navin Chawla of Lava International, Lava is the only local smartphone brand which has a complete in-house R&D set-up in India and abroad (China).
Lava’s latest product: Iris 504Q (launched in mid-June)
Price: Rs 13,500
Specs: 5-inch, 1.2GHz quad-core processor, 1 GB RAM, 8 MP camera, IPS HD display
- Lava will soon launch its premium series - Iris PRO, which promises to take the user experience to a higher level.
Although a part of Lava International, right from its inception, Xolo has projected itself as a separate premium brand. It is also the brand that has made its name in bringing in mobile gaming experience.
"We have tied up with Intel to cater to those looking for high performance in phones and with NVIDIA (a leading maker of gaming processors) to provide high gaming experience to users," says Sunil Raina of Xolo. NVIDIA’s Tegra processor was used to power Xolo Play, designed for gaming enthusiasts.
Xolo’s latest product: Q1000s (launched in August)
Price: Rs 18,999
Specs: 5-inch, 1.2 GHz quad-core processor, 1 GB RAM, 13 MP camera, IPS LCD display
- Xolo has recently announced the addition of a new Tab to their stable with the launch of Xolo play Tegra Note.
Founded in 2009, Karbonn Mobiles has shown a steady growth in the past one year. Just like Micromax, Karbonn too fights this price-war.
"In an attempt to provide better user experience, the company has recently launched Karbonn Smart, under whose umbrella a new range of technologically advanced products like smartphones and tablets from the stable will be marketed," says Devsare.
To exploit the smartphone-internet market, their A series comes out with a free internet usage package.
Karbonn’s latest product: Titanium S9 (launched in September)
Price: Rs 19,900
Specs: 5.5-inch, 1.2GHz quad-core processor, IPS LCD display, 1 GB RAM, 13 MP camera
After making a name for themselves in the multimedia speakers and computer accessories market, the company forayed into smartphones and Tabs. IDC has recognised Intex as one of the rising players in the emerging smartphone market as their sales recently crossed the 1 million unit mark.
Intex’s latest product:Aqua i7 (launched in August)
Price: Rs 21,900
Specs: The 5-inch, 1.5GHz quad-core processor, 2 GB RAM, 13 MP camera, full HD display
- Intex is aggressively promoting its own app Matrabhasha, a multi-lingual application developed to capture regional markets.