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India-smartphone: Chinese players expand share in booming market

MUMBAI (NewsRise) - Chinese smartphone makers Vivo, Oppo and Xiaomi are expanding their market share in India, challenging the dominance of local competitors by handing out discounts and boosting marketing spend, as they face a plateauing demand at home.

Smartphone sales in China have fallen in the last three years amid cutthroat competition in an overcrowded market. India, on the other hand, is one of the fastest-growing smartphone markets in the world, where barely a fifth of its more than one billion mobile phone users have high-speed Internet devices, leaving enough room for a sales boom.

According to research firm Strategy Analytics, India will overtake the U.S. to become the world's largest smartphone market after China by next year.

Chinese players, looking for new avenues of growth, have already started chipping away at the dominance of top players in the country. In 2015, the market share of India's top smartphone maker South Korea's Samsung Electronics fell to 26.2% from 29.3% in the previous year. Second-ranked homegrown rival Micromax Informatics saw its shipment share dip to 16.1% from 18.9%, according to Counterpoint Research.

Smartphone maker Vivo Electronics that started operations in India last year has already carved out 1.1% of the market last year, while Oppo Mobile Telecommunications saw its share expand to 0.7%, the agency said.

Xiaomi, one of China's largest smartphone makers, saw its market share expand to 2.8% from 1.6% in the previous year.

"They are disrupting the market with cutthroat pricing and specs," said Neil Shah, research director at Counterpoint Research. "They offer a better value proposition to Indian consumers."

Shah said most Chinese players have the advantage of having built phones at scale in their local market -- the biggest in the world. "That gives them the wiggle room to price themselves competitively in India."

Many Chinese smartphone companies-Xiaomi and Oneplus-sell almost all their phones online to keep costs down, which also allow them to price attractively. Some, such as Oppo and Vivo, are targetting the traditional mom-and-pop stores where most Indians still shop.

According to a report in the Economic Times daily on Friday, many of these phone makers are paying mom-and-pop shops higher fees to push their products and are spending top dollar in marketing.

"We have spent about $10 million on marketing online and print in the first quarter of this year, and we will spend similar amounts for quarters to come," Atul Jain, the chief operating officer of LeEco Technology that sells the LeEco brand of smartphones in India told the Times.

In 2015, Vivo, a brand of China's BBK Communication Technology, signed a two-year title sponsorship deal with Indian Premier League, a hugely popular annual cricket tournament that draws massive crowds. Similarly, Oppo, another brand owned by BBK, struck a global partnership with the International Cricket Council last year, as part of its brand building.

Further, most incumbents are still focused on feature phones that account for a bulk of the sales, in India.

"Being present in that segment is affecting the overall market positioning of these incumbent players, which is not the case of thoroughbred Chinese smartphone brands," said Faisal Kawoosa, head of telecoms practice at Cybermedia Research.

To be sure, smartphone shipments to India declined in the last two quarters. Some analysts attribute that to the tapering online sales and shift in manufacturing base to India by some of the local players, as the government introduced a slew of measures to promote local manufacturing.

"It will be another quarter before the marketing investments of many of these Chinese brands will start bearing fruits for the demand to rebound," Kawoosa said.

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