Smartphone appetite among consumers of one of the most populous countries of the world, India, has been increasing. In the first quarter of 2013, smartphone shipments to the country rose by 64% year-over-year to 5.7 million units. The global smartphone market leaders Apple (AAPL) and Samsung (OTC:SSNHY) have been doing aggressive sales promotion while fighting for the market share with local rivals and Nokia (NOK). Meanwhile LG Electronics (NYSE:LG) and HTC (OTC:HTCCY) have set ambitious targets for themselves and could pose a significant threat to the smartphone market share of Sony (SNE) and Nokia. In this article, we will have a look at the performance of Apple and some of the biggest players in India's smartphone market.
Although Apple's impressive growth in the country poses no significant threat to Samsung, but it will certainly create problems for Nokia, LG, HTC and Sony in India's smartphone sector.
India is the second most populous country in the world with a growing middle class but the smartphone's share of the total mobile market is very low, as identified by SA contributor Sneha Shah, coming in at below 10%. Its neighbor China has a relatively lower smartphone penetration of 25%, but is still significantly ahead of India. By comparison, the American smartphone penetration has reached 61%. Besides the U.S, there are five other developed countries with smartphone penetration of more than 50%.
According to data provided by CyberMedia Research, last year Samsung topped the Indian smartphone market with 43% share. The company offers variety of phones in different price ranges which makes it appealing for people belonging to different income groups. Nokia has secured the second spot but is significantly behind Samsung while Sony, riding on the success of Xperia series, was able to capture 8.2% of the Indian smartphone market in 2012.
It is highly unlikely that any firm could challenge Samsung's dominance in India's smartphone market in the near term. The real battle between Apple and its rivals is going to be for the second and third spots currently held by Nokia and Sony.
However, when it comes to cell phones, smart and conventional, Nokia dominates India and controls more than one-fifth of the total market followed by Samsung and the local vendor Micromax.
Smartphones Market Share in India CY2012
Market Share Percentage
Mobile Handsets Market share in India CY2012
Where is Apple?
For India, the low penetration also shows that there are enormous opportunities for growth and the positions of the industry's leaders can change as the market grows. This has made India a very competitive market. In 2012 Apple, which largely ignored India, started focusing towards the country. Apple used to work exclusively with Indian telecom operators but it has now started working with two of the leading national distributors; Redington and Ingram Micro.
Here, Apple is relying on equated monthly installment (EMI) plans and cash back schemes to give a boost to its sales. Through EMI, customers are required to make an initial partial payment while the rest is paid in 6 to 12 monthly interest-free installments.
Apple was already offering discounts on its older version of phones. Then it started offering another 18% cash discount which took the total discount to around 25%; making its phones more attractive to Indian customers. According to some recent reports, these measures have been well received by the market as Apple's monthly sales have risen by as much 400% from just 75,000 to nearly 400,000 units per month.
I believe that this is huge achievement for Apple; the company is now selling hundreds of thousands of phones in a market which has traditionally been dominated by relatively less expensive smartphones. Apple's powerful brand continues to lure customers and in the coming years (with a possibility of a cheaper iPhone), Apple could pose a significant threat to Nokia and Sony in the Indian smartphone market.
Meanwhile, Apple's rivals have also ramped up the competition with BlackBerry (BBRY) launching its Hail-Mary BB10 line with attractive data plans while Samsung, which already rules the Indian smartphone market, brought its interest-free 12 months financing plans. Both Nokia and BlackBerry are also offering EMI plans to their customers.
Samsung in particular has been very aggressive with advertising and other marketing initiatives. The company is spending millions to promote its 15% discount on some of its key products. Samsung has partnered with some of the biggest Indian mobile retailers, such as eZone and MobileStores, which have dedicated Samsung sections in their outlets. Perhaps Samsung is offering incentives to retailers who seem to be more eager to sell Samsung products than any other.
As indicated earlier, Nokia, which is a major player in the Indian market and used to earn 50% of its total revenues from the country, had a difficult time maintaining its position amid increasing competition from both Samsung and Apple but it is now rising to the challenge by launching a series of Lumia phones. The new "Lumia-like" $99 Asha-501 phone was launched about a month ago in New Delhi.
Another research by Canalys, has pointed out that the other leading South Korean consumer electronics manufacturer (besides Samsung) LG Electronics has shipped second highest number of smartphones to India as it aims to capture 10% of the market by 2014. To do this, the company will launch a variety of smartphones for each income group. LG will offer interest-and-down-payment-free EMI schemes for handsets priced above $170.
In the meantime, HTC has set itself an ambitious target to capture 15% share of Indian smartphones market by the end of the current year. It launched HTC One in April and is partnering with Reliance Communication to offer 1GB of 3G data free connection for 3 months. Naturally, the phone is accompanied with an EMI plan. HTC has added 2 national distributors taking the total number to 3 -- that are powered by 100 dealers and 3500 stores across India.
One of the biggest threats to the foreign firms comes from the rising popularity of domestic mobile phone vendors who compete on price. As per Gfk's research, India's local smartphone manufacturers have trebled their combined market share in urban areas of the country in just six months from 4.2% in July 2012 to 12.1% in December.
Micromax Informatics and Karbonn Mobiles are two of the biggest firms in this sector. According to IDC, in the final quarter of 2012, Micromax increased its shipments by a whopping 63 times to 633,000 units. Similarly, Karbonn's shipments rose to 304,000 units in the fourth quarter from nothing a year ago. The low prices of the handsets produced by these vendors make it particularly attractive to the 800 million people in India who earn less than $2 a day. As per IDC's data, Micromax was the second biggest smartphone vendor in India in Q4-2012, behind the market leader Samsung and ahead of its close rival Sony. Karbonn was able to secure the fifth spot behind Nokia.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, with the help of my research assistant Mr. G. Yousuf, and it expresses my own opinion. I am not receiving any compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article