Cellphones- a perfect Chinese & Indian Mariage

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May 4, 2015 by ...

Chinese handset makers are rushing to the Indian market. ‘Why?’ You ask, well let me tell you.

The reasons are:

1-less strict IP laws

2-huge market which is growing

3-ideal target market from price point ratio

4-great consumer base for ‘starter smartphones’

Reason 1

Favorable IP – less protection

To be blunt, India is not the strictest country when it comes to enforcing IP. Sure it is much better than China, but still has a long way to go.

This is an ideal environment for Chinese manufacturers, many of whom borrow heavily from major players. And when I say ‘borrow heavily’ I mean obvious infractions such as this:

iPad and it’s evil twin from Xiaomi   

Mi-too knockoff of the real thing


Cloners ‘gonna clone

  

‘Originality’, Xiaomi style

 

Simply put, India is a great place to sell gear that might not pass muster elsewhere. Even though Indian courts may take IP lawsuits much more seriously than their Chinese counterparts, permitting the sale of knockoffs is still widespread. 


Reason 2

India is a huge market which is growing 

The reasons that Chinese firms such as Xiaomi, Huawei, Lenovo OnePlus and others are flocking to India are its sheer size and potential. 

The Indian population is bigger than three America’s. Even though not nearly as wealthy, they still have purchasing cred. On top of this factoid, and even more importantly, it is growing. 

By sheer size, China is huge. That market consumed 452 million smartphones in 2014. This equates to roughly 113 million units per quarter. In contrast, the Indian market was worth 21.6 million units in Q4 of last year. 

While the Chinese stats look good, there is a caveat. Last year’s sales dropped almost 22% from the year before. This year looks just as bad as handset purchases decreased 5.6% Y-O-Y in Q1. 

Yes the Chinese market is tapped and losing steam. The Indian market is surging, however as their Q4 demand was up 90% Y-O-Y. 

It makes sense to bet on the future and based on the action of Chinese companies, the future is India. 

3- Ideal market from price point ratio

Over 65% of all handsets purchased by Indians in Q4 of last year cost $200 or less. This price point is ideal for Chinese firms which are deeply entrenched there. In fact, Chinese firms produce the majority of their kit for this spectrum.

What this means is that existing production can be utilized with minor modifications and product sold directly to India. The Chinese own this space, which makes it a winner.

4-Great consumer base for ‘starter smartphones

A major difference between The two cell markets is that China’s is more mature. This is true in both manufacturing and from a consumer perspective as well. Chinese have had more experience with smartphones and the market is glutted. They expect more performance at a better price. This is why many are eschewing Chinese brands for something foreign.

Many Indians have less experience with smartphones and less discerning. They seek to buy the first of a genre that they’d not previously owned. To them a handset need be fully functional and have a modicum of quality too. This demographic is less concerned with high end bells and whistles, but happy to have a utilitarian toy.

Great for China and India too

What stands out is how the China/India relationship is like a match made in heaven. With the decline of the Chinese market, those manufacturers shift sales to India. Slight modifications are necessary to the phones, but nothing China can’t handle. 

Indian consumers get decent quality phones at a price they can stomach, and better access to information as well. The Chinese invasion into the Indian market is a winner all around.

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