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Chinese phone makers target India

News, 09 July 2015

HONG KONG: A smartphone price war is looming in India as major Chinese brands turn their attention to overseas markets to maintain their growth as China's economy slows.

Manufacturers such as Lenovo, Huawei, Xiaomi, Gionee and Oppo are all expected to adopt a more forceful sales and marketing approach in India this year.

The signs are already there, according to Alberto Moel, a senior analyst at Bernstein Research, who told the South China Morning Post that Chinese brands had seen year-on-year revenue growth of 214% in the first quarter of 2015.

"They grabbed 12% market share, from 6% a year ago," he said. "We expect further market share expansion in the next few years."

Much of that will be driven by aggressive pricing strategies. Bernstein's own research suggests that by 2019 handsets costing less than US$100 will account for 51% of the Indian smartphone market, up from 42% in 2014.

"We expect the average selling price [in the low-cost smartphone segment] to hit the US$50 mark at some point," Moel said.

The focus on price is in part a consequence of mobile network operators in India providing little in the way of smartphone subsidies, and in part because distribution is largely through retail channels.

Bernstein estimated that 85% of smartphone sales in India in 2014 were via retail, including ecommerce.

Xiaomi made its intentions clear earlier this year when it announced it would be opening an R&D centre – its first outside China – to develop software specific to India.

It has also experimented with different sales tactics, embracing sales through stores in addition to its signature flash sales online. In this case, it tied up with mobile provider Bharti Airtel to sell one of its 4G handsets through 133 stores in six cities.

But 4G will remain a minority option for some time yet, with one forecast predicting that it will only account for 27% of Indian smartphone sales in 2019.

"It will take time [for 4G smartphone demand to develop] because India's telecommunications infrastructure lags behind those of other markets," Moel said.

Data sourced from South China Morning Post; additional content by Warc staff