The Indian Mobile Handset Market – A Future Outlook

Multi-national mobile handset manufacturers such as Nokia, Sony Ericsson, Samsung, Motorola and LG, have dominated the Indian mobile handset market for several years. In the next decade though, these handset moguls might soon face a new challenge. The challenge this time will not be from the cheap unbranded handsets imported from East-Asia; but from the unprecedented increase in small and medium Indian handset manufacturers.

In the past year alone, more than 26 new mobile handset vendors have entered the Indian mobile handset market. This includes entry of well known electronics vendors such as Intex and Videocon as well as a number of new entrants such as Spice Mobiles, Micromax, Karbonn Mobiles, Lava Mobiles etc. This surge can primarily be attributed to the Indian Government, which recently released a directive on banning all mobile handsets with false or no IMEI (International Mobile Equipment Identity) number. This directive effectively eradicated the cheap unbranded Chinese handsets from the Indian market and produced a new breed of competition.

What makes this scuffle all the more interesting is the confidence that these domestic companies are radiating while taking on the big global multi-nationals. Their strategy to beat the stiff competition is astoundingly notable. These companies offer feature-rich mobile handsets at very lucrative prices to the Indian customers. These domestic companies are split into groups – the first who purchase handsets in bulk from countries such as China, Taiwan and Hong Kong, and then market the phones under their brand offering warranty and after-sales service. The second group includes companies that import cellular chipsets from China and design the phone themselves.

One such company that offers chipsets is Mediatek - an Asian chip company which was established about a decade ago to supply chips for TVs and other appliances. The company shifted its attention towards the mobile chipset market five years ago. Since then, the company has been on an upward growth spree offering stiff competition to chip giants such as Infineon and Qualcomm. In 2009 alone, the company sold more than 300 million core cellular chipsets globally - approximately 22 percent of the global market.

Today, approximately 20 mobile brands in India include Mediatek-branded chipsets command a market share of almost 20 percent. Market leader, Nokia has seen its market share decline from around 65-70 percent to 50-55 percent over the last two years. The three global brands – Nokia, Motorola and Sony Ericsson, together have lost close to 30 percent market share over the last two years, some of which has been grabbed by Samsung and LG. This dynamic shift in the market share is mainly attributed to the change in purchasing patterns of the Indian consumers who are more ‘feature conscious’ than ‘brand conscious’. Another reason cited by experts for the change in market share, is the fact that retailers get a higher commission (10 percent) on these domestic brands as compared to the established brands (2-3 percent).

Looking at these developments, things in the Indian mobile handset market is definitely going to heat-up in the near future. Success of early entrants such as Spice Mobiles should be enough to cause jitters among the international brands and force them to pull up their socks. They need to come up with a strategy to countervail this local competition. Otherwise these timid looking domestic companies will eat-into the market share of the major companies – like termites eating-into wood. No longer will any company hold a monopoly over the market and the handset market might follow the similar suite as the current mobile operator market, which has become one of the fiercest markets in modern times.