Micromax, Karbonn, Intex have a new plan to corner Xiaomi, Oppo, Vivo and other Chinese smartphone makers

Indian handset companies like Micromax, Intex and Karbonn have sought government help to stay competitive against cash-rich Chinese rivals whose aggressive moves have pushed the local players down in an intensely competitive market.

Karbonn and Intex argued that the Chinese players — who have rapidly cornered more than half of India’s fast-growing smartphone market — were not expanding the government’s Digital India vision by not launching sub-Rs 5,000 smartphones, a segment entirely run by local players.

Intex Technologies, which once rose to number two among handsets makers before slipping badly since, is asking for some stimulus in the form of infrastructure or taxation support from the government. This is on similar lines as those offered by Chinese, and now American, governments that want to ensure local companies thrive.

Domestic handset makers were the first to contribute to Make in India. Intex has plans to invest over Rs 1,500 crore in its sixth manufacturing facility in Uttar Pradesh to make phones, LED TVs, washing machines and mobile accessories. “Despite all the investments towards marketing and advertising, they’re not contributing to the growth of the smartphone market and not to Digital India… they’re not in the low-cost market, like we are,” said Shashin Devsare, executive director at Karbonn Mobiles.

Devsare added that Karbonn’s aim was to ensure smartphone penetration at the bottom of the pyramid which would then enable them to access essential government services.
Rajeev Jain, chief financial officer at Intex Technologies said he wanted some “protection” from the government.

“All major countries are doing it, why shouldn’t India do too?” Rajesh Agarwal, cofounder of Micromax, said the government “should also support Indian brands” which needed to fight competition on fair grounds. “As an Indian brand, we will have to invest in design, manufacturing and R&D (research and development) because of which we will be competitive,” he added.

Lava International declined to offer any comments for this story. The Indian players plan to approach the government after the dust around GST implementation settles down.

The comments come as moneyed Chinese smartphone makers such as Xiaomi, Oppo, Vivo, Levnovo and Gionee have been rapidly expanding their footprint in India on the back of 60-65 per cent higher margins to trade channel than Indian players, upfront payments to retailers for occupying shop-fronts and in-store branding.

They have also increased marketing spend on TV seven times in 2016 to Rs 509 crore versus 2015, say industry insiders quoting TAM/BARC data.

Experts say the Indian players could count on local manufacturing efficiencies, innovation through research and design, and content and service localisation to beat their deep pocketed Chinese rivals. They come up short against the marketing of the likes of Vivo, which on Tuesday paid Rs 2,200 crore for IPL rights till 2020, a whopping 455 per cent increase over its own highest bid for the previous contract term.

Another way might be to partner the Chinese, like one of the oldest mobile phone companies has done. Spice Mobility, that sells phones under the Spice brand, partnered with China’s Transsion Group, which sells the Itel brand of feature phones and smartphones in Africa.

On Thursday, Transsion and Spice Group formed another joint venture under which the Spice brand of phones will be re-launched in India, and the entire back end operations including, R&D, local manufacturing, distribution and sales will be done by the Chinese player. Spice’s Dilip Modi said that the government was unlikely to provide any support on the basis on country of ownership.