Desi Vs. Videshi
A campaign for boycott of Chinese products is opening up opportunities for local brands in smartphones and TVs. But do they have the scale to upstage the Chinese?
A campaign for boycott of Chinese products is opening up opportunities for local brands in smartphones and TVs. But do they have the scale to upstage the Chinese?
the afternoon of June 18, a video featuring a group of men in Coimbatore shouting anti- China slogans and smashing smartphones went viral on social media. The same day, another group of men, this time in Surat, were seen doing the same to a TV set. This beat the earlier one in internet popularity due to its higher drama quotient.
The videos emerged less than 72 hours after the clash between Indian and Chinese forces at Galwan Valley in East Ladakh that led to the death of 20 Indian soldiers. Since then, relations between the two countries have been strained. This has manifested itself in a public campaign to boycott Chinese goods, especially smartphones and TVs, the two segments dominated by companies with Chinese origin. This swirl of nationalism has given fresh wind to local brands steamrolled into dust by the Chinese a few years ago. Companies such as Micromax, Karbonn and Lava in smartphones, and Onida, Weston, Salora, once household TV names, along with new entrants like VU Technologies, are sensing an opening to increase market penetration. Any real dent in demand, howsoever small, for Chinese products in the two categories, will throw up a sizeable opportunity for these local players.
Take smartphones. Around 158 million smartphones were sold in India in 2019. This made it the world’s second-largest market behind China with revenues of $ 8 billion. Four of the top five bestselling brands in the country are Chinese, led by Xiaomi and Vivo and followed by Realme and Oppo. Together, they account for over 80 per cent of the market (Q1 2020). The domestic feature phone market is worth another 130 million units. The market leader is iTel, owned by Shenzhen- based Transsion Holdings. The hold of the dragon is relatively weaker in this segment.
In the nascent smart TV segment, which is in many ways seen as an extension of the smartphone market, China again accounts for the lion’s share. Xiaomi is the market leader. It enjoys the company of compatriot TCL in the top five. Others are gearing up for action but more on that later.
In a highly competitive and technology- driven sector like consumer electronics, consumers rarely opt for newer or smaller brands. The anti- China sentiment, however, could provide a springboard for local brands to beat the heavyweights. But do they have the ability to exploit this opportunity or will it be business as usual once winter sets in and dust settles in the cold desert of Ladakh? Or will non-Indian, non- Chinese companies benefit?
Away from the border, a battlefield of another kind is being readied.
The Rise of the Chinese
The Chinese domination of India’s mobile handset segment may seem overwhelming statistically but is very recent. In 2015, Chinese brands accounted for less than 20 per cent of the market. The majority pie was with local brands, as Micromax, Intex and Lava, among others, cornered nearly 40 per cent of the market.
Since then, the rise of Chinese brands has been as exponential as it has been relentless. By 2017, they had more than half the market. So much so that towards the fag end of the year, when Xiaomi upstaged
Samsung to emerge as India’s biggest smartphone maker, it did not feel like a flash in the pan. It has since then consolidated its position at the top.
The rise of the Chinese came at the cost of local brands. The local players were hamstrung by technology (most were sourcing it from China) and did not have pockets deep enough to withstand the onslaught. By 2018, their share had shrunk to 10 per cent.
Today, less than 2 per cent buyers opt for local smartphone brands. “I can't think of any country where the Chinese have dominated like this,” says Tarun Pathak, Associate Director, Counterpoint Research. “Everything fell in place perfectly for them from 2016 when they started accelerating. They were ahead of the curve and invested in 4G when local companies were still into 3G. Decline in data prices also helped companies like Xiaomi that had an online-first strategy. They also went for innovation in devices for India. Indian brands, on their part, were facing headwinds such as demonetisation and GST and were vulnerable as the Chinese built momentum.”
Opening for Local
More than 75 per cent smartphone volumes come from phones that cost less than ` 15,000. This is also the segment where Lava, Micromax, Karbonn and Intex operate. These brands are supported by government poli
Lava plans to take advantage of government incentives for local manufacturing. It is planning R&D investment of ₹ 800 crore over the next five years
For example, the product linked incentive scheme, launched by the Ministry of Electronics and Information and Technology in April this year, provides a 4- 6 per cent incentive on incremental sales over FY20 levels. It favours local brands as, for international companies, a threshold value of ` 15,000 has been stipulated, while there is no such condition for local firms. The investment criteria for local companies are also less stringent. Domestic firms need to invest just ` 50 crore initially and ` 200 crore incrementally over four years to avail the incentives, while for others, it is ` 250 crore initially and ` 1,000 crore over four years.
“Local players like us will get the benefit of various government schemes. It will enable us to build capacity to cater to export markets. This will facilitate building of a cost- efficient mobile manufacturing ecosystem with a huge potential to create employment opportunities,” says Tejinder Singh, Head- Product, Lava International. “We plan R& D investment of ` 800 crore over the next five years. We are already among the top five feature phone brands in the world. Our vision is to raise the Indian flag high in global skies.”
While the anti- China sentiment is palpable, right from the man on the street to the bureaucrat in government offices, the most vocal voices against Chinese dependence have come from the trading community. Encouraged by policies such as Atma Nirbhar Bharat that aim for bringing down import dependence and catchy slogans like vocal for local, the Confederation of All India Traders (CAIT), the umbrella body of 40,000 trader organisations, is at the forefront of this campaign. CAIT has made a list of 500 products that it wants its seven crore member retailers to stop importing with an aim of reducing Chinese imports by $13.3 billion by December next year.
There is confusion, though, on classification of Xiaomi, Vivo, Oppo, Realme, Poco and One Plus — companies with Chinese origin but manufacturing facilities in India. Like others, their phones are made locally, in factories run by Indians. Besides, their wide retail network provides livelihood to thousands of people across the country. “Anybody who is manufacturing in India should not be considered a foreign company,” says Pankaj Mohindroo, Chairman, India Cellular and Electronics Association ( ICEA). ICEA has joined hands with CAIT and is assisting the government in framing policies to bring down the import content in mobile phones. CAIT has written to celebrities like Aamir Khan, Virat Kohli, Ranbir Kapoor and Ranveer Singh, who endorse phones from these brands, to stop promoting these Chinese companies.
From toys and T- shirts to handicrafts, coffee mugs, watches and spectacles, Chinese goods are omnipresent in Indian markets, though a lot of them are classified as unorganised merchandise. But the ubiquitous mobile phone has earned the ire of the populace and become a symbol of Chinese domination. “Considering the impact of this movement, it will give impetus to Indian brands which have the capability to build products offering great experience and quality,” says Singh of Lava International. “We are in the process of building a robust portfolio, which will have offerings for every segment.”
Lava is the second-largest feature phone brand in Incies.