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Samsung taps Indian mobile software ahead of output surge

Galaxy maker adopts local-language operating system to win back share from Xiaomi

South Korean President Moon Jae-in speaks during the inauguration of the Samsung Electronics smartphone manufacturing facility in Noida, India.   © Reuters

MUMBAI -- South Korean smartphone maker Samsung Electronics has expanded local procurement in India to software as it tries to regain the lead in the country's growing market from low-cost Chinese rival Xiaomi.

Samsung recently formed a tie-up with Indian software developer Indus OS to enable its Galaxy Apps store to support different local languages.

The phone maker, which in July opened what it called the world's largest mobile factory on the outskirts of New Delhi, looks to nearly double the number of smartphones it makes in India to 120 million a year from 68 million by 2020. The Indus tie-up provides an advantage over competitors such as Xiaomi and Vivo, which have yet to introduce apps in local languages.

The output expansion seeks "to cope with fast-rising demand in India's smartphone market as well as increase exports to overseas markets," Samsung said in a statement.

With its population of over 1 billion, India provides an opportunity for smartphone makers trying to expand beyond slowing markets such as the U.S. and China. But to do so, they need to reach further than India's urban areas.

The simplified Indus operating system lets rural users of Samsung Galaxy phones download apps without signing in with an email address, which many of them do not haveThe software supports 12 local languages in addition to English.

"With a spurt in number of users from smaller towns and cities, we foresee a tremendous growth in demand for vernacular app economy," said Sanjay Razdan, senior director at Samsung India, adding that consumer feedback had driven the move to support more languages.

Rakesh Deshmukh, co-founder of Indus OS, told a local newspaper that Samsung wants to create more Indian services and products, and that the new partnership fits the South Korean company's strategy. For Indus, the tie-up will translate into access to 30% of the market base in India.

Indus OS has been available on some phones made by Indian manufacturers, such as Micromax, Karbonn and Intex, but as Chinese brands have pushed aside these once-dominant players, the software startup has had to look for other partners to carry its operating system.

Companies including Xiaomi, Oppo, Vivo and Apple already assemble phones in India but have yet to make big local investments in production of important parts such as the display panels and batteries. Most of the parts for their phones are still imported from China.

The Indian operations of smartphone makers are already shifting to higher-value processes from basic assembling, says Tarun Pathak, associate director at Counterpoint Research. "Though we are far behind China in terms of manufacturing of mobile phones, value addition in India has increased to 17% in 2018 from 5.6% in 2016," he said.

Pathak adds that Samsung is weighing the potential for exporting from India, especially after it scaled down operations in China last year. The company also is looking at opportunities to lower production costs so it can compete with Xiaomi.

According to research company IDC, Xiaomi held a 28.9% share of the Indian smartphone market in 2018, leaving 22.4% for Samsung and 10% for Vivo. Samsung, which dominated the Indian market for several years, lost its lead to Xiaomi about a year ago.

In February, Samsung launched a new line of budget smartphones for India called the Galaxy M series. Priced between 10,000 rupees ($145) and 20,000 rupees, the phones are positioned as competitors to Xiaomi devices. Market watchers say this shows Samsung takes pricing seriously as a way to win back market share.

Meanwhile, India is trying to boost local production by levying import duties on parts such as phone chargers, headphones and batteries.

Xiaomi uses Taiwan-based Foxconn's unit in southern India to assemble its phones at a total of six facilities. The Chinese company also has been trying to lure its parts suppliers to shift to India.

Apple, too, has been quietly expanding its sourcing in India over the last two years, in a bid to catch up with South Korean and Chinese rivals in the fast-growing market.

While it still relies on manufacturing partners in China for more than 90% of its annual shipments, Apple now has five sites supplying iPhones and components in India against none two years ago.

Analysts say that the supply base in India is still developing and that it will take some time before companies consider relying on Indian manufacturers rather than local subsidiaries of global manufacturers.

Nikkei staff writer Kim Jaewon in Seoul contributed to this story.

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