Chinese cos lose India, one budget phone at a time

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Rising memory chip costs push Chinese smartphone brands to cut budget models

New Delhi: The share of Chinese smartphone brands in the Indian market shrank to 67-68% in the July-September quarter, the lowest in more than eight years, as record-high memory chip prices led them to cut budget models — a segment that traditionally drove their sales.

Technology market research firm Omdia estimates the share of Chinese brands at 68% in the last quarter, compared with 71% in the previous three months and 75% a year earlier. The peak was 80%, recorded in the April-June quarter of 2020. According to Counterpoint Research, they had a 67% share, the lowest since the first quarter of 2019.

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Companies such as Vivo, Oppo and Xiaomi are cutting down on budget models, the segment most impacted by high memory costs, opening space for domestic players like Lava and Ai+ to capture demand from price-sensitive consumers ahead of Diwali, experts said.

“What Chinese OEMs have been doing over the last four to five quarters is that they’ve been trying to cut down their specs to manage their costs. Essentially, cost optimisation through spec cuts,” Omdia principal analyst Sanyam Chaurasia told ET. Manufacturers also reduced the number of models offered in lower price bands, while prioritising mid- and premium-segment sales to support profitability, he said.

Record-high memory prices are changing the dynamics in the smartphone market, experts said, with the Chinese suffering disproportionately due to wafer-thin margins in the industry and big players like Samsung and Apple gaining share due to premium offerings.

Demand exists in the entry-level market, but consumers are reluctant to stretch budgets as device prices rise. Indian brands are taking advantage of this, maintaining their product line-ups with a primary focus on volume growth. According to Counterpoint Research, Indian brands’ combined share last quarter increased from 2% a year earlier to 7% in the last quarter ended September 30, their highest since October-December 2018.

Tarun Pathak, research director at Counterpoint Research, said Ai+ and Lava accounted for almost 95% of the contribution within Indian brands, alongside newer entrants such as Mivi and Boltt.

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Ai+, launched in July last year, posted a more than fourfold year-on-year increase in shipments in the three months ended September 30. Both Mivi and Boltt were launched in the last quarter.

The market backdrop remains uncertain. Smartphone shipments in India fell 20-26% year-on-year in the July-September quarter to a decade-low of 35.8 million units, according to Counterpoint Research and Omdia, as high memory costs pushed up prices and consumers delayed upgrades. The slowdown comes ahead of Diwali, when purchases of discretionary goods such as smartphones typically receive a seasonal boost.

The opportunity for Indian brands may be difficult to sustain, said experts.

Omdia estimates smaller domestic brands were shipping around 300,000-500,000 units per quarter. Scaling beyond that would require strong distribution, inventory availability, after-sales infrastructure and channel economics, according to Chaurasia.

Growth cannot rely solely on competitors pulling back, said Pathak of Counterpoint. “Indian brands must invest in R&D, product quality, and scalable customer service operations,” he said, adding that deeper value-chain localisation and better user experiences would be crucial to retaining customers beyond their first purchase.