Companies such as Micromax, Lava, Lemon Mobiles, Karbonn etc. are playing a vital role in promoting the use of mobile VAS among people in lower income groups, who were earlier unable to explore such features due to the high prices of GPRS-enabled handsets.
These companies have been giving tough competition to established players such as Nokia, Sony Ericsson, and Samsung etc., which are now losing market share. A recent report by International Data Corporation (IDC) showed that Nokia's market share in India dipped from 64 per cent between 2008 and 2009, down to 52.2 per cent in 2009 to 2010, while Indian brands had a 14 per cent market share in 2009 to 2010, up from about 3 to 4 per cent in the previous year.
Currently, Micromax has a 4.1 per cent share in the Indian handset market, Spice has 3.9 per cent, Karbonn has 3 per cent, Lava has 1.1 per cent and Lemon and Max have 1 per cent and 0.9 per cent, respectively.
Today, most of these companies depend on China for manufacturing their handsets, mainly owing to better infrastructure, stronger supply chains and a capable and cost effective workforce there.
According to NK Goyal, member, governing council, Telecom Equipment & Services Export Promotion Council, out of 100 to 125 million handsets sold in India every year, 80 million are imported.
However, lately, there have been several security issues with Chinese handsets missing their International Mobile Equipment Identity (IMEI) numbers, as well as other issues with equipment companies, which could soon cause handset imports to face the axe.
Last week, Union Minister of Communications and IT A Raja had asked the department of telecommunication to consider a curb on imported Chinese mobile phones, which are rebranded and sold in India. He also signed a proposal to encourage handset manufacturing in the country in order to generate employment, apart from benefitting the economy in other ways.
This can put local handset companies at a disadvantage as India currently imports eight million handsets every month.
However, it presents a good opportunity for India to gear up for setting up manufacturing capabilities similar to those present in China.
Gopal Kalra, director, Fastrack Communciations, the parent company of Lemon Mobiles, says, “We respect A Raja's vision of creating employment and job opportunities for Indians. As specified by the honourable minister in his proposal, it will also help set up a robust manufacturing hub of mobile phones in India. It is certainly a positive development for the telecom industry, however, let us wait and watch the final moves from the telecom ministry.”
Lemon currently has collaborations with fabrication partners based in low cost manufacturing hubs across Asia. Some of them are situated in Taiwan, Japan and China.
Kalra says, “Unlike other companies in our segment who simply label imported phones, we work closely with our partners to innovate and design new products specially conceptualised for the Indian customers. Moreover, we get the device fabricated in the above mentioned countries in a manner similar to all major global handset companies.”
Several Indian handset companies have already announced their plans to establish manufacturing bases in the country. Micromax, Lava, Wynn Telecom and Karbonn are some of them.
Vishal Sehgal, co founder and director, Lava Mobiles, says, “The manufacturing system in China is superior, but the same ecosystem can be developed in India as well. We have been in discussions with the government from the last three months for establishing a manufacturing unit in India and have also submitted a list of things on which we need help. We are keen on India, provided we get the required government support.”
Lava currently has a tie up with five manufacturers in China.
Wynn Telecom, the handset company of Luminous Group, also is setting up a manufacturing plant in Himachal Pradesh with an investment of Rs 270 crore. The company currently imports its handsets from its own plant in China.
Rakesh Malhotra, co founder and chairman, Wynn Telecom, says, “Companies with small volumes cannot start manufacturing in India. Thus, China is a better option as it has an advantage of a strong supply chain and skilled labour. But this can be easily built in India too.”
He adds that not all handset companies in India will have a chance to survive as manufacturers. Only the top three to four companies which have a stable business model and solid volumes can be successful in this.”
According to Sudhir Hasija, managing director, Karbonn Mobiles, a company intending to start manufacturing handsets in India must arrange for an assembling plant and 140 components that go into the assembly of a mobile phone. The company can then undertake the process by tying up with outsource product development (OPD) and original equipment manufacturing (OEM) partners.
Lemon, for instance, is working with original design manufacturing (ODM) and original equipment manufacturing (OEM) partners, and plans to establish a manufacturing facility in the near future. The company is also in talks with a design house to set up an innovation center in North India to design and develop handsets as per trends in the Indian market, according to Kalra.
He adds, “Any outsourcing model depends on multiple macro economic factors and in the telecom domain, these are currently favouring low cost manufacturing destinations. While the current scenario favours the outsourcing model, we may see some changes in the near future.”
Indian handset companies are not the only ones that are looking at setting up plants in India. Even some Chinese companies are now exploring the option. China Wireless Technologies is planning to set up a handset assembly plant in India by 2012 through Coolpad Communications, its local subsidiary. It will also open research centres in Delhi and Mumbai by next year.
India has an advantage of inexpensive raw materials, cheap labour and software support. These factors can help it to leave China behind to become the biggest mobile assembly hub in coming times.
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