Chinese Mobile Phone Companies To Comply With Govt’s Upcoming Guidelines To Stay In India

With an aim to provide domestic manufacturers room in mobile phone market in the country, the central government has come up with a three-pronged strategy to create entry barriers for Chinese manufacturers in the below INR 12000 cell phone segment.

If the Chinese handset makers do not agree with the set of conditions the government wants them to comply with, handsets priced below INR 12,000 will be subjected to various Bureau of Indian Standards checks in addition to security and safety verification. This will be quite similar to Trusted Telecom Portal, which the government launched last year under the National Security Council Secretariat (NSCS) where telecom operators have to submit details about their equipment vendors.

First Condition

The first condition government wants to lay down for Chinese manufacturers like Oppo, Vivo, Realme or Xiaomi is to export handsets from India in similar volumes as they sell in the domestic market. Currently, while Chinese handset makers have a share of around 75-76 per cent in the domestic market, they do not export from India. None of the Chinese manufacturers are part of the smartphone production-linked incentive scheme.

Second Condition

The second condition the Chinese firms would have to agree to is broad-basing their distributor network, which is currently fully-owned by their own entities. Further, government sources said that these distributors are also shareholders of the handset firms. As a result of this arrangement, these firms are able to undercut the Indian manufacturers as distributors work on zero margins and are able to earn as shareholders with growing market share.

Third Condition

The third condition, which the government plans to lay down for these firms is to create an Indian supply chain, which they haven’t built in all these years. According to the sources, the Chinese handset players simply import components from China and assemble the phones here. They have not built a supply chain network for component manufacturing in the country.

The decision to come out with stiff conditions for Chinese handset makers – to begin within the sub-INR 12,000 market in the country – is being discussed in the government, as post-2016, domestic players have completely lost out their market share, being only 8-9 per cent currently. Prior to 2016, a set of Indian manufacturers – Micromax, Intex, Lava, and Karbonn, popularly known as MILK – were growing but the Chinese strategy of undercutting completely edged them out from the market in which they were operating.

After the Chinese handset manufacturers’ high 75-76 per cent market share, next comes the South Korean phone maker Samsung, which has a share of around 13-14 per cent. Apple’s share is a little over 1 per cent as it operates only the premium and super-premium category.

The sub-INR 12,000 phone category has a share of 31 per cent in the overall smartphone market as per the April-June data released by Counterpoint Research. Of this, the Chinese manufacturers have a share 75-80 per cent. Just two manufacturers, Realme and Xiaomi have a 50 per cent market share in this segment. Among the Indian manufacturers, Jio (which makes JioPhones) and Lava are the major players. Jio has ramped up its capacity in the last few quarters while Lava has good design element, so it is able to compete in the market to an extent.