China Phonemakers Are Taking Over World’s Fastest-Growing Market

Chinese Phones Beat Local Rivals in India

Chinese smartphone brands led by Vivo have muscled out local rivals in India with increasingly stylish yet affordable devices, challenging Samsung Electronics Co. for supremacy in the world’s fastest-growing major phone market.

Chinese labels occupied four of the top five spots in 2016’s final quarter, shoving aside Micromax and Intex, according to a Counterpoint Research report released Tuesday. Samsung held onto top spot but saw its share of nationwide sales slide to 24 percent from 29 percent in the same quarter a year ago. Vivo, Xiaomi, Lenovo/Motorola, Oppo and other Chinese vendors captured a collective 46 percent of the market, the research outfit estimates.

Smartphone rankings are volatile the world over. But the inexorable advance of Chinese brands in India -- where some 500 million smartphones are expected to be sold over the next few years -- has been unusual given the country’s general lack of enthusiasm for Chinese goods. The shakeup came despite calls last year to boycott Chinese goods, triggered by political issues such as perceptions over Chinese support for Pakistan.

Chinese brands are targeting India as sales growth at home flat-lines amid increasingly fierce competition. They became bestsellers last year by incorporating winning features like large displays, state-of-the-art processors and features from dual SIM capability to powerful selfie-cameras. Many signed up Bollywood and cricket stars as brand ambassadors to connect with local fans.

“The Chinese phonemakers’ march will continue next year with a double-pronged strategy,” said Neil Shah, research director at Counterpoint. “Besides marketing spends and generous retailer margins, Vivo, Oppo and Huawei have already paid a premium and are cornering the supply of components like OLED screens and memory for next year.”

Apple Inc. is aiming to increase its presence in India, where it now has little market share. The Cupertino, Calif.-based company is scheduled to meet this week with government officials to discuss the prospects for setting up manufacturing facilities in the country. That may allow the company to be more competitive on price by avoiding tariffs and to set up its own retail stores.

The encroachment of Chinese brands in India accelerated in just the past months. Across all of 2016, Indian brands Micromax, Intex and Reliance Jio were in the top 5 rankings but none of the three made it to the top five in the last quarter. While Apple took 10th position in the fourth quarter after the release of the iPhone 7, it had 62 percent of the premium market for devices that cost more than $450.

Micromax, a perennial runner-up to Samsung that briefly outsold the South Korean brand in 2015, incurred the biggest fall, though it remains in the top 10. One new entry there was Lyf, the new phone from India’s Reliance Industries conglomerate that comes with free data and voice.

Chinese brands commanded less than a fifth of the $10 billion Indian market just a year ago, many in the mid-priced segment between $110 and $200. They enjoyed success by replicating many of the same strategies that served them well back home, said James Yan, research director at Counterpoint.

Where Chinese vendors outdid their local rivals was in shifting online-only sales to brick-and-mortar stores, a tactic that helped win customers across smaller cities and towns and localized devices with numerous Indian languages. Oppo has set up nearly 35,000 sales points with electronics retailers countrywide, as well as 180 service centers.

Xiaomi’s new Redmi Note 4 sold about 250,000 units within minutes on India’s top online retailer Flipkart.com as well as its own online site this week, the company said. The Beijing-based company hit $1 billion in Indian revenues for 2016.

Beyond marketing, several Chinese phonemakers aggressively rode the government’s ‘Make in India’ strategy to enjoy tax breaks for local manufacturing.

— With assistance by Saritha Rai, and Yuan Gao

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