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Xiaomi's lead on Samsung fuels Indian smartphone competition

International brands jostle for survival with marketing and production focus

Lei Jun, chairman and CEO of Xiaomi, introduces the Xiaomi Mi Mix 2S smartphone at an event in Shanghai in March 2018. (Imaginechina via AP Images)   © AP

MUMBAI -- India's smartphone market has changed radically over the past six months, with Chinese manufacturer Xiaomi toppling long-time market leader Samsung Electronics after tweaking its pricing strategy and extending its chain of physical stores.

Samsung is now in second place in the country's smartphone market, behind Xiaomi and ahead of other Chinese players including Vivo, Oppo and Lenovo -- all of whom are jostling for position in the top five seller rankings.

The latest data from Hong Kong's Counterpoint Research shows that Xiaomi is leading the Indian smartphone market for the second successive quarter. During the quarter ended March, Xiaomi captured a massive 31.1% market share, against 13.1% a year ago. Samsung's share, in comparison, grew slightly to 26.2% from 25.9%. Vivo and Oppo ran a close race with respective shares of 5.8% and 5.6% although both were down almost half from the same quarter in 2017.

Smartphone makers are rushing into India as the country battles with the U.S. for the title of world's second largest smartphone market, after China. Smartphone sales in India rose 8% to 29.5 million units in the quarter ended March, according to estimates by market analysts Canalys. During the quarter ended September, India's smartphone shipments grew 23% year-on-year to reach just over 40 million units, briefly overtaking the U.S..

U.S. tech group Apple began assembling parts in India just last year after largely ignoring the market. It is still far behind in the local devices market, with less than 2% share, and lost its place at the top of India's high-end smartphone market in the January-March quarter. Apple's market share in the premium price segment -- handsets priced above 30,000 rupees ($448.5) -- stood at 18% in the quarter, compared with 45% in the same period a year earlier.

Analysis by Canalys showed Xiaomi shipped more than 9 million units in the quarter ended March, the highest amount for a vendor since the first quarter of 2014. Samsung shipped just under 7.5 million smartphones, growing by 24% on last year, while Oppo took third place with 2.8 million shipments and Vivo fourth with 2.1 million shipments.

"Xiaomi is becoming a force to be reckoned with in India," said Canalys analyst Ishan Dutt. He said that aside from offering some of the best value devices on the market, Xiaomi's smartphones were now available in more places and in larger quantities than before. "All in all, Xiaomi's product and channel strategies are working."

Xiaomi, which entered India in 2014 with an online-only strategy, began expanding its physical presence last year with its own-brand 'Mi Homes' stores, as well as tie-ups with select partners. The transition was necessary because 70% of mobile devices sales in India still happen offline. The company also signed up a brand ambassador, Bollywood actress Katrina Kaif, in November to endorse its Redmi Y series. Over the past year it has also increased its billboard advertising and that in traditional media, giving its brand more local prominence.

But what has really worked for the company so far is aggressive pricing, says Jaipal Singh, senior analyst with IDC. "For example, their 5000 rupees phones have specifications such 2 GB RAM and 16 GB memory, and comes with a camera. These specifications are very difficult to find in other brands at similar price points". Xiaomi's phones at priced in the range of 5,000-20,000 rupees.

Price-conscious Indian buyers had opportunities to buy handsets ranging from 5,000- 15,000 rupees. 

Local manufacturing has also helped Xiaomi. Manu Kumar Jain, the company's managing director in India, told the Nikkei Asian Review in June that they were working with component suppliers to research setting up factories in India next to its assembly plants.

Xiaomi buys components from around the world, including in China, South Korea and Japan. At present, 95% of its handsets sold in India are assembled at two factories in the country's south. Local assembly has been a major factor in keeping its prices low.

While Samsung face competition from Xiaomi's aggressive pricing, trust in the South Korean group's brand remains strong, as does it distribution network, even as other vendors approach retailers and other partners with attractive offers, according to IDC.

One of Samsung's strategies to fight back is selling models exclusively for online buyers. According to local media reports, Samsung India is planning a new series of smartphones, priced between 5,000 rupees and 15,000 rupees.

The same strategy is being replicated by Oppo, which has stated its aim to be No. 1 in the market and has so far banked on its strong physical presence in stores for its sales. Vivo and Huawei are also following suit.

The result will be a multi-channel line-up of online and offline sales, with the Indian market and its population of more than 1 billion people still offering huge scope for growth. 

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