Competitive Landscape Mobile 201064

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DataquestPublication Date: 29 June 2010 ID Number: G00201064

2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any formwithout prior written permission is forbidden. The information contained herein has been obtained from sources believed tobe reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. AlthoughGartner's research may discuss legal issues related to the information technology business, Gartner does not provide legaladvice or services and its research should not be construed or used as such. Gartner shall have no liability for errors,omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed hereinare subject to change without notice.

Competitive Landscape: Mobile Devices, India

Anshul Gupta

The entry of Indian mobile handset players focusing on low-end, value consciousconsumers has intensified competition in the Indian mobile device market. A largevolume of mobile device sales in India come from the low-end device segment. Theaverage selling price (ASP) of a mobile device is approximately $52, with 85% ofdevices sold costing below $100. With the growing influence of local handset players inthe low-end segment, the traditionally stronger, big global players have had theirpositions weakened. At the same time, the midrange to high-end market is gettingincreasingly competitive too, with a greater focus from global players on the Indianmarket and the launch of competitively priced midrange and high-end mobile devices.

Key Findings

Mobile device sales in India are expected to touch 138.6 million in 2010, representinggrowth of 18.5% over 2009.

Established global device manufacturers are losing ground due to fierce competitionfrom local and Chinese manufacturers in the low-cost segment.

Price remains the main criteria when buying any consumer electronic device in India,including a mobile device.

Carriers strategies, lower tariffs or third-generation (3G) data plans will continue toshape the mobile device market in India.

Recommendations

Set up local R&D and consumer insight teams to understand the requirements of localconsumers.

Collaborate with communications service providers to reach your target segment; itcould be rural consumers with low-cost devices or young consumers in cities withintegrated application offerings.

New local manufacturers may explore the possibilities of local manufacturing, but beaware of the importance of high volume.

Manufacturers, including global ones like Nokia and Samsung, should focus on featuresuseful to the specific target consumers in order to enhance the overall value proposition

to the end user per dollar invested.


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Publication Date: 29 June 2010/ID Number: G00201064 Page 2 of 22

2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

TABLE OF CONTENTS

Analysis ....................................................................................................................................... 31.0 Introduction ................................................................................................................ 32.0 Competitive Situation and Trends ............................................................................... 3

2.1 Reaching Out to Consumers Remains Critical ............................................... 42.2 Value for Money Is a Big Differentiator ........................................................... 82.3 Voice-Centric Market Focused at Low-End Segment ..................................... 9

3.0 The Future of Competition ........................................................................................ 103.1 Local Manufacturing Will Increase ............................................................... 103.2 Market Consolidation Will Happen at the Lower End .................................... 113.3 Device ASP Will Remain Under Pressure .................................................... 113.4 Low-Cost 3G Devices to Spur Growth .......................................................... 123.5 Manufacturers' Possible Action Plan ............................................................ 12

4.0 Market Players ......................................................................................................... 135.0 Competitive Profiles ................................................................................................. 14

5.1 Nokia ........................................................................................................... 145.2 Samsung ..................................................................................................... 155.3 LG ............................................................................................................... 165.4 ZTE ............................................................................................................. 175.5 Research In Motion (RIM) ............................................................................ 185.6 HTC ............................................................................................................ 185.7 Micromax .................................................................................................... 195.8 G'Five.......................................................................................................... 20

6.0 References and Methodology ................................................................................... 21RecommendedReading ............................................................................................................. 21

LIST OF TABLES

Table 1. MobileDevice Manufacturers Selling Devices in India (Shown Alphabetically) ................. 4Table 2. MobileDevice Sales by Channel by Technology, 2009 .................................................... 5Table 3. Forecast of Mobile Device Manufacturing in India, 2005-2014 (Thousands of Units) ...... 10Table 4. MobileDevice Manufacturers' Market Share, 1Q10 ....................................................... 13

LIST OF FIGURES

Figure 1. Smartphone Operating System Share, 1Q10 ................................................................. 3Figure 2. Distribution of Unknown Chinese Branded Devices in the Market ................................... 6Figure 3. Import of Unknown Chinese Branded Devices by Region, 2009 ..................................... 7Figure 4. Import of Unknown Chinese Branded Devices by Quarter, 2009 .................................... 8Figure 5. Dual SIM Device Market Share by Quarter, 2009 ........................................................... 9


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ANALYSIS

1.0 Introduction

In India, 117 million mobile devices were sold to end users in 2009, and the market is expected to

register a compound annual growth rate (CAGR) of 11.9% between 2009 and 2014, to pass 206million in 2014. The Indian cellular market is very dynamic. Not only have new carriers haveentered the market, but many new local mobile device manufacturers have also entered thisalready crowded mobile device market. This intense competition has led to very low call rates anda variety of ultra-low-cost and low-cost devices from multiple manufacturers in the market thatwas earlier dominated by just a few vendors like Nokia, Motorola, Reliance and Vodafone.

Although 3G technology has not been introduced in India yet, 3G device sales are expected toaccount for 16.7% of total sales in 2010, up from 9.2% in 2009. By 2014, 3G devices sales areexpected to account for 69% of total sales. Smartphone sales in India made up 5.2% of totaldevice sales in 1Q10, and we expect this share to increase to 18% in 2014. Figure 1 shows thesmartphone operating system market share in 1Q10.

Figure 1. Smartphone Operating System Share, 1Q10

Source: Gartner (June 2010)

2.0 Competitive Situation and Trends

India, contributing approximately 10% of worldwide sales, is an important market formanufacturers with aspirations to grow their global market share. Due to its sheer size and openmarket (mobile devices being sold independently of cellular connection), it has attracted multiplemobile device manufacturers and supported entry of many local manufacturers. This has led tomore than 50 brands vying for consumer attention in India, which is aside from the many brandsin the black markets (selling without invoices), as shown in Table 1.


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Table 1. Mobile Device Manufacturers Selling Devices in India (Shown Alphabetically)

SerialNo.

Manufacturer SerialNo.



Manufacturer

1 Accord Mobile 16 Hansum 31 Mi-Fone 46 Sony Ericsson

2 Acer 17 HP 32 Motorola 47 Spice

3 Airfone 18 HTC 33 Movil 48 Sunsky

4 Airnet 19 Huawei 34 MTS 49 Tekshiv

5 Ajanta 20 iMate 35 NKTel 50 Usha Lexus

6 Alcatel 21 INQ 36 Nokia 51 Videocon

7 Apple 22 Intex 37 Olive 52 Virgin

8 Asus 23 Karbonn 38 Onida 53 Vodafone

9 Bleu 24 Lava mobile 39 Orpat 54 Wynncon

10 Byond 25 Lemon 40 Rage 55 Zen

11 Fly 26 LG 41 Ray 56 ZTE

12 G'Five 27 Longtel 42 Reliance

13 GeePee 28 Magicon 43 RIM

14 Grapes 29 Maxx mobile 44 Samsung

15 Haier 30 Micromax 45 Simoco


There is fierce competition in all segments, although nearly 85% of sales are in the less-than-$100 price category. This brings forth three key challenges that we believe will play a crucial rolein the success of a manufacturer in the Indian handset market:

Reaching out to consumers remains critical70.4% of mobile devices were soldthrough indirect (retailer) channels in 4Q09, against 72.0% in 4Q07.

Value for money remains a big differentiatorPrice and affordability is the mostimportant factor when buying a mobile device, with 95% of respondents rating it as themost important criterion in Gartner's "User Survey Analysis: Purchasing Criteria forMobile Devices, Worldwide, 2008." Unknown Chinese brands and local manufacturersare beating global brands when it comes to value for money.

Voice-centric market focused at low-end segmentLow-cost devices continue torule the market, growing rapidly from 30% in 2008 to 45% in 2009. The ASP of a mobiledevice is approximately $52, and around 85% of devices sold cost less than $100.

2.1 Reaching Out to Consumers Remains Critical

Distributing and selling mobile devices in India poses a big challenge for manufacturers.Manufacturers need to make them available to retailers and distributors, as carriers only distribute

a small proportion of overall device sales. In the market for Global System for MobileCommunications (GSM) devices, the vast majority of sales come through indirect channels, asopposed to market for code-division multiple access (CDMA) devices, where carriers stilldistribute the majority of devices, as shown in Table 2.


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Table 2. Mobile Device Sales by Channel by Technology, 2009

Technology Devices SoldThrough Direct

Channels (%)

Devices SoldThrough Indirect

Channels (%)

Mobile DeviceSales by

Technology (%)

GSM 9 91 76

CDMA 95 5 24CDMA = code-division multiple access; GSM = Global System for MobileCommunications


India's market is spread out over a wide territory and reaching out to consumers in the smalltowns and rural markets is very challenging. It gets further complicated in the rural markets due tolimited funds. With the retailers always dealing in cash, lower sales per retailer and pooraccessibility, managing day-to-day operations is very difficult for small manufacturers with limitedbudgets. Thus, they are leaving these markets to established vendors like Nokia, Samsung, LGand carrier-branded devices. However, in major towns, cities and metropolitan cities there isfierce competition due to the entry of new local players and unknown Chinese branded devicesselling in the market. Established global vendors like Nokia, Samsung and LG have seen theirmarket share decline due to competitive products from these new manufacturers available at theretailers alongside their products.

A typical device manufacturer follows the "water flow distribution model" wherein a national orregional distributor manages a sub-distributor, which further deals with small or city distributors,followed by retailers. The strength of the channel lies in the number of sub-distributors/retailersselling your brand. Nokia has partnered with HCL Infosystems, a long time partner with thestrongest network of distributors and retailers, for its distribution of GSM devices and Brightpointfor CDMA devices and, as such, enjoys coverage of 90% of retailers selling mobile devices.Following in the footsteps of market leader, Nokia, other manufacturers have expanded theircoverage by appointing exclusive distributors to sell their devices. Research In Motion (RIM),which previously was selling through carriers alone, appointed a distributor in 2009, resulting inhigher sales quarter on quarter.

Distribution of unknown Chinese branded devices is limited to cities and carried out by retailersdealing with black market devices only. These devices do not reach a normal retailer that sellsbranded devices because they are sold illegally without paying local taxes and invoices. They areimported by a local device distributor, which sells them directly to the market without any supportfrom the manufacturer on quality, after sales services and warranty. They are normally sold onthe distributor's warranty, which extends to just a week maximum in certain cases. This limits thereach and availability of unknown Chinese branded devices. Figure 2 shows how unknownChinese branded devices are distributed in the market.


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Figure 2. Distribution of Unknown Chinese Branded Devices in the Market


The structure followed by unknown Chinese brands is very lean, removing multiple intermediariesnormally present in the branded market, resulting in high margins for the retailer and incentives tosell devices. Apart from the non-existence of intermediaries, the absence of warranty, after sales

services and marketing expense all help improve cost margins, making it very appealing to endusers and thus giving fierce competition to global branded devices. The northern part of thecountry consumes the highest number of unknown Chinese branded devices, as is evident fromFigure 3.


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Figure 3. Import of Unknown Chinese Branded Devices by Region, 2009

Source: Import Data from EXIM, India

It is clear from Figure 3 that the share of total unknown Chinese branded device sales in thenorthern region has been growing, which is in line with cellular penetration, which is subsequentlylower in that part of the country. Thus, we can assume that these unknown Chinese brandeddevices are being bought by new users joining the cellular market. The share of unknownbranded devices (as a proportion of total device sales) is huge, already representing 12% to 14%of the market, which itself has been growing. Figure 4 shows import data for unknown Chinesebranded devices quarter on quarter.


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Figure 4. Import of Unknown Chinese Branded Devices by Quarter, 2009


Reaching out to consumers in India is not only about being available at a retailer, but alsoincludes branding, promotion, after sales services and warranty. Branding and after sales servicewere the most important factors, after price, to Indian consumers when buying mobile devices.This led to rising sales of Indian brands, even prompting some Chinese brands to enter into themainstream, selling devices through proper retailers. Both unknown Chinese and Indian brandsget their devices manufactured in China, possibly by the same original design manufacturer(ODM). But Indian brands distinguish themselves from unknown Chinese brands by investing inmarketing, their own R&D to understand consumer requirements, after sales services and

warranty. Indian brands like Spice, Micromax, Karbonne and Maxx mobile have allocated asignificant proportion of their revenue to marketing and after sales service efforts, which hasresulted in higher sales for them from 2H09 onward.

2.2 Value for Money Is a Big Differentiator

Value for money is a major criterion for Indian consumers when buying any consumer goods, notjust mobile devices. Consumers spend significant time evaluating alternatives, recommendationsfrom friends/family, brands, after sale services, and resale value adds to product value over andabove measurable feature sets. Devices from local manufacturers like Spice, Micromax,Karbonne mobile and Maxx mobile offer higher perceived and measurable value at a lower price,giving tough competition to global manufacturer, at least in the sub-$100 market. For example,Micromax has qwerty devices that offer access to Facebook and Messenger and a dualsubscriber identity module (SIM), all for under $100, giving them a clear advantage over devices

from Nokia or Samsung. Similarly, there are a variety of devices from other local Indianmanufacturers focusing on the rural market, with devices costing $30 to $60 and having featurestailored to those specific Indian consumers, like local language input, long battery life, high inbuiltmemory, FM radio and speaker phones. There are also varieties of devices from local andChinese manufacturers available with dual SIM and dual technology features starting at $40,which are selling in huge numbers in the country (which has an annual churn ratio of around


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55%). Dual SIM devices are extremely popular and their share is constantly rising, as is clearfrom Figure 5. These localized features, which cater to the needs of local consumers, significantlyincrease the value proposition of Chinese and Indian manufacturers, providing globalmanufacturers with fierce competition.

Figure 5. Dual SIM Device Market Share by Quarter, 2009


Local device manufacturers not only offer more features at lower prices when compared withglobal players like Nokia and Samsung, but they also offer warranties of up to two years and aftersale services, thus competing directly with these global players and enhancing the value

proposition further. Unknown Chinese branded devices selling into the market bring the benefit ofeven more features at further lower prices, though this is at the risk of quality and warranty.These two market players local manufacturers and unknown Chinese brandshave madethe market very competitive in the low and ultra-low segments, and have taken market share fromNokia, LG and Samsung.

The market is competitive in the midrange and high-end segment too, as manufacturers haveexpanded their portfolios and introduced appealing devices in $200 to $300 price range. Here,again, we see value for money as the major criterion for customers in choosing a device. Endusers are choosing devices with features they will use regularly instead of devices with featurethey might not use. RIM's 8520; Nokia's E63, 5130, E51, N73 and 5800; LG's Cookie; andSamsung's Corby all provided optimum features addressing the needs of urban consumers ataffordable prices, leading to increased sales and thus the expansion of this segment.

2.3 Voice-Centric Market Focused at Low-End Segment

The Indian cellular market is highly voice-centric with just 10% of carriers' revenue coming fromdata services. Within that, 85% of revenue comes from Short Message Service, leaving less than2% of overall carriers' revenue coming from data access on mobile devices. Another fact whichseparates India, though not the only one, from other markets is that it is a prepaid market, with


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approximately 95% of existing subscribers on prepay schemes, and 98% of new subscribersjoining cellular networks each month choosing the prepaid option. This all corroborates the factthat the Indian mobile device market is driven by the lowest call rates in the world and dominatedby low-cost devices, which account for 80% of overall sales in India.

The Indian government concluded 3G auctions in June 2010, awarding licenses to nine carriersacross 23 "circles" (India's market is divided into 23 circles), but no single carrier has presence in

all 23 circles. The government had earlier allocated additional 2G licenses to new carriers in2008, leading to 13 carriers competing with each other. This made situation very competitive, withcarriers moving to per-second billing from per-minute billing, and call rates dropping to less than$0.02 cents per second. Subscribers often move from one carrier to another to take advantage oflower call rates, which leads to higher churn and greater demand for dual SIM devices.

Being a voice-driven market and given the unavailability of high-speed networks, competition isplayed out in terms of additional features, such as cameras, multimedia, integrated socialnetworking sites, qwerty, touch and longer battery life. For example, a 2G/2.5G device withqwerty keypad and integrated social networking from a local vendor will be preferred over adevice from an established manufacturer that offers high-end 3G functionality. So, what mattersnow is low price and features, not a high dependency on network speeds.

3.0 The Future of CompetitionThe market in India is growing. Cellular penetration stands at 45% as of 2009, entering into asecond phase of growth, with rising replacement sales, up from 45% in 2009 to 50% of total salesin 2010. Moves to high-speed 3G networks is bringing in more challenges in terms of innovationand keeping up with fast changing consumer demand. Shortening product life cycle times anddeclining sales of voice-centric devices will bring changes to the market during the next fiveyears. We expect the following trends to emerge during this time frame.

3.1 Local Manufacturing Will Increase

The exemption of import duty of 4% on assembled mobile phones has been extended until March2011, and this will result in higher imports from countries like China. But at the same time, dutieson components, batteries and accessories have been withdrawn, which will promote local

manufacturing. With the maturity of the market and rising volumes, integrated players will have anadvantage over others. This will lead to some local players having monthly sales of 1 million to 2million, allowing them to set up manufacturing facilities along the lines of those of the top fiveglobal manufacturers. The availability of a low-cost, skilled engineering talent pool, along withrising volumes, will make it cost-effective to manufacture rather than import from Chinese orTaiwanese ODMs. Table 3 gives our estimate of mobile phone production in India up to 2014.

Table 3. Forecast of Mobile Device Manufacturing in India, 2005-2014 (Thousands of Units)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Enhanced 2,958 25,539 37,290 54,569 52,826 61,091 66,567 72,739 78,104 78,283

Basic 2,686 4,952 7,845 13,037 14,305 17,154 18,568 20,709 22,018 24,692

Smartphone 95 869 2,225 3,391 4,942 10,102 20,142 30,590 40,251 50,787

Total 5,739 31,360 47,360 70,997 72,073 88,347 105,277 124,038 140,373 153,762

Source: Gartner ("Semiconductor Forecast Worldwide: Forecast Database")

We expect some of the big local Indian manufacturers to expand sales into other emergingmarkets, starting with neighboring markets that have similar market trends to India, thus justifyingtheir investment in local manufacturing set ups. We believe local manufacturers following these


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strategies will be Spice Telecom, Micromax Informatics and Videocon mobile. Not just localplayers, but global players like RIM, too, may set up manufacturing units as its sales volumes risein India (and neighboring countries in Asia/Pacific) to take advantage of a low-cost, highly skilledtalent pool.

3.2 Market Consolidation Will Happen at the Lower End

Survival of local mobile device manufacturers depends to a large extent on their ability tostrengthen their entire value chain and not limit their focus on low-cost, basic devices. As midsizeIndian manufacturers, along the lines of the big global players, roll out their strategy to strengthenthe entire value chain from design, manufacturing and distribution to selling, it will become evenmore challenging for smaller players to survive. Smaller players will need to:

Deliver innovative, feature-rich devices to address replacement sales.

Shrink margins due to higher selling costs.

Set up nationwide distribution channels.

Manage shorter product life cycle.

Respond to changing consumer needs.As a result, we expect a lot of M&A activity, or else many smaller players may just shut theirshops in next five years as they struggle to cope. Major challenges will be distribution and risingcosts, and thus they will be losing their price advantage over established big manufacturers.Mobile device manufacturers having control over the majority of the value chain frommanufacturing and designing to distribution will be able to sustain competitive pressure in future.

3.3 Device ASP Will Remain Under Pressure

The mobile device ASP in India is low compared to other emerging markets. In 2010, the deviceASP is expected to be $52, which will rise to $58.6 by 2014 due to a higher proportion ofsmartphones in the overall mobile device sales. This rise is marginal compared to smartphonesales growing at a CAGR of 45% between 2009 and 2014, reaching 18% of overall sales by

2014. Factors keeping the ASP low in the market are as follows:Rising sales of low-cost devices in absolute numbers as new, low income buyerscoming from Tier 2 and 3 cities join the cellular market. Cellular penetration was just45% in December 2009.

Price will remain a key concern for buyers, and thus devices with optimum and usablefeatures will be preferred over devices with high-end features (such as 5 megapixel or 8megapixel cameras) or features of little use (mobile TV). This will maintain high sales of"lower priced devices" in each category, driving down the overall ASP.

The proportion of replacement sales will rise, but the majority of replacement buyers willcontinue to buy devices in the price range of their current device due to the availability ofdevices with more features at lower prices.

The ASP of individual categories (low cost, basic and premium) will continue to decline.

This will also mean manufacturers will be under constant pressure to introduce devices with morefeatures at a lower price to attract buyers in India. We should also be aware that India will remaina prepaid, cash-driven and a non-carrier-subsidized mobile device market, meaning thataffordable devices for the masses will shape the overall device ASP.


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3.4 Low-Cost 3G Devices to Spur Growth

3G networks being launched by private carriers in 2H10 will add a new competitive dimension tothe Indian cellular industry. Initially, 3G spectrum will be used to improve existing 2G services andInternet penetration by focusing on USB/data cards, but it will also drive sales of 3G devices.Carriers will aggressively seek high-speed-hungry consumers in the metropolitan and major citiesto quickly recover high license fees, thus triggering demand for 3G devices. This demand for 3Gdevices will be lower initially due to expected high-price service plans from carriers, but it will pickup as carrier pricing goes down in later years. Demand will also be affected positively byMediaTek's low-cost 3G solution, helping manufacturers to deliver low-cost 3G devices.

3.5 Manufacturers' Possible Action Plan

Gartner has identified four key strategies which mobile device manufacturers may consider eitherstand-alone or in combination depending on the challenges they face, their market share andtheir brand position:

Watch carriers' strategies Unlike mature markets, carriers do not control devicesales by subsidy or exclusive deals in India. But they still influence device salessignificantly. Dual SIM device sales were triggered by fierce voice plan competitionamong carriers, similar to the popularity of ultra-low-cost devices driven by aggressiveacquisition in the rural market. While these trends will continue, we believe carriers willcollaborate with manufacturers to offer differentiated value to their customers. This couldmean devices with customized feature sets or with integrated value-added services.

Watch regulator's policiesTelecom regulation is still evolving in India with 3G andbroadband wireless access (BWA) technologies now being introduced. Numberportability is also scheduled to be introduced in 2010, which is likely to affect sales ofdual SIM devices negatively. Similarly, 3G and BWA introduction is likely to spurdemand for 3G and Wi-Fi-enabled devices.

Improving value propositionTheIndian mobile device market is in a high growthphase, and moving up from low-cost devices will require manufacturers to offerupgrades during replacement.

Big global manufacturers may consider focusing on high-volume categories like dualSIM or ultra-low-cost devices, and integrating them with services or content in orderto increase their total value offerings. They could also leverage relations withcomponent providers, ODMs and electronics manufacturing service providers, andexploit intellectual property rights to manage their cost.

Small or local manufacturers should continue to invest in local research,understanding consumer demand by being closer to the market and identifying thetrends earlier (like in past, with "30 days backup" devices or "dual SIM" devices).Explore the possibilities of expanding into other emerging markets, setting up localmanufacturing units to offset transportation costs, using tax benefits and being asolution provider integrating services with devices. For example, offering low-costdevices that provide access to e-mail, social networking sites or instant messaging.

Follow trends in other marketsWe estimate that touch-enabled devices inAsia/Pacific will likely grow at a CAGR of 46.9% between 2009 and 2013, while touch-enabled basic devices are expected to register a CAGR of 33.5% during the sameperiod. Similarly, the sale of worldwide smartphone devices is likely to grow at a CAGRof 31.7% between 2010 and 2014. Sales of 3G devices in China are not high enough tomeet the initial expectation of carriers, due to the unavailability of compelling speed-


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hungry applications, relatively higher priced subscription plans and consumers' comfortwith existing services. Similar to low-cost device solutions, MediaTek is preparing tooffer low-cost 3G and low-cost smartphone solutions, which is likely to further enhancecompetition beyond low-cost basic devices. Consumers the world over give higherpreference to device usability and user interface than hardware features.

4.0 Market PlayersThe Indian mobile device market consists of over 50 mobile device manufacturers selling brandeddevices from local and global manufacturers, along with many Chinese manufacturers sellingunknown brands in the market. Indian device manufacturers can be further divided into twocategories: those who go out to buy off-of-the shelf products from ODM houses and sell themunder their own brand; and those who get devices designed/customized as per their requirementsfrom the ODM houses and finally sell them under their own brand. Chinese manufacturers haveeither set-up offices in India and sell devices directly under their own brand, or else localdistributors import Chinese devices and then sell them into the market directly without anyrebranding, mostly on the black market. Table 4 shows the market share of mobile devicemanufacturers in 1Q10.

Table 4. Mobile Device Manufacturers' Market Share, 1Q10

Manufacturer Sales (K) Market Share

Nokia 12,479.3 39.6%

Samsung 4,237.2 13.4%

G'Five 3,640.3 11.5%

Micromax 2,377.9 7.5%

LG Electronics 1,437.7 4.6%

ZTE Corporation 1,003.1 3.2%

Huawei Technologies 653.2 2.1%

Vodafone 465.7 1.5%

Sony Ericsson 325.2 1.0%Others 4,918.6 15.6%

Total 31,538.2 100.0%


The market has too many players and it will be difficult for this many manufacturers to survive ifthey are focusing only on cost advantages as the market matures. The selling cost rises alongwith consumer expectations for design and innovation when they upgrade from basic devices.Manufacturers investing in design in order to deliver devices customized to Indian consumertastes and distribution and marketing will only survive and grow while the rest will be left out ofthe market. We believe:

The top five manufacturers will continue to hold more than 75% market share during the

next five years.

Out of the tens of Indian brands, only five or six players will survive to 2014, which arebuilding up their entire value chain and differentiating their product on design, qualityand service offering.


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Of the tens of Indian brands selling low-cost devices, only five or six manufacturers willbe able to achieve monthly sales of over 1 million.

Some little known Chinese manufacturers will emerge as strong players havingestablished infrastructure to distribute devices and a brand to trust.

5.0 Competitive Profiles

5.1 Nokia

Company profile:

The biggest mobile device manufacturer, having approximately 45% market share and controlling83% of the smartphone market. India is a focus market for Nokia. It has manufacturing facilities toproduce low-cost devices for India as well as to export to other emerging markets.

Value proposition:

Addresses entire spectrum of devices from low-cost to smartphone.

Most reliable, trusted and quality manufacturer and No. 1 mobile device brand in India.

Strongest distribution network covering entire geography.

Key target segment:

Nokia has divided its target users into 13 consumer segments, from "Simplicity Seekers"to "Technology Leaders."

Key partners:

Nokia has HCL Infosystems as its key distributor and Airtel as key carrier.

Key strengths:

Strongest distribution channel.

No. 1 mobile device brand in India.

Widest portfolio providing upgrade opportunity during replacement, thus maintainingbrand loyalty.

Ability to manage low input costs due to better deals from suppliers and high volumesbringing in advantages of economies of scale.

Key business drivers:

Highly skilled engineering staff bring in new devices regularly and keep portfolio fresh.

Having established stronger relationship with its channel partners, Nokia devices areavailable at 90% of retailers selling mobile devices.

Partnered with carriers to distribute devices in the remote rural markets.

Key challenges:

Low-cost basic devices are under attack from low-cost Chinese manufacturers as wellas new Indian brands.


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Lower demand for high-end N series and smartphone devices due to higher availabilityof alternative devices from other established global manufacturers than in the past.

Key initiatives:

Protect its dominance in the market for low-cost devices by introducing tailor-madedevices to compete with Chinese manufacturers. Devices with dual SIM or dual

technology are extremely popular in the low-cost segment, which is dominated by Indianand Chinese vendors. Qwerty- and social networking-focused low to midrange devicesare in demand and again dominated by Indian and South Korean brands.

Bridge the gap to more midrange, feature-rich enhanced and smartphone devicesfocusing on qwerty, social networking and touch user interface.

5.2 Samsung

Company profile:

Second largest mobile device manufacturer, having 13.4% market share as of 1Q10. Samsunghas manufacturing facilities in India, too, focusing on low-cost devices and allowing it to takeadvantage of low-cost labor and high volumes. Samsung also leverages its strong brand position

in the consumer durable items market.Value proposition:

Wide portfolio of devices, from low-cost to smartphones.

Manufacturer of quality devices having won consumer trust and increased brandrecognition.

Value for money low-cost devices focusing on rural markets and midrange, feature-richdevices competing directly with high-end smartphones.

Key target segment:

All users, with a strong focus on the high-growth rural market, which it targets with low-

cost devices, and urban markets, in which it offers aggressively priced midrangedevices.

Key partners:

UTL, Telemart, SSK and Link as distribution partners and major GSM and CDMAcarriers.

Key strengths:

High quality, value for money devices with more features at lower prices.

Increasing consumer trust leading to higher brand recognition.


Key provider of high-quality, innovative CDMA devices.

Most innovative, feature-rich devices based on the latest technologies are offered atlower prices, making it appealing to consumers.

Rising strength in distribution having expanded its key distributors.


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Key challenges:

Its low-cost devices face stiff competition from Chinese and Indian manufacturers.

Lack of smartphone and enterprise-focused devices.

Key initiatives:

Introduce customized low-cost devices to improve its value position and increasecompetitiveness with local and Chinese manufacturers.

Bring midrange, attractive and technology-rich smartphone devices to the market forconsumers.

Leverage strong brand recall to focus on the enterprise segment, which is the highestuser of smartphone devices in India.

5.3 LG

Company profile:

Having been in the Indian market for more than a decade selling consumer durable items along

with mobile devices, it has deeper inroads into the consumer markets beyond just devices. Itsmobile unit has established offices and manufacturing facilities in India to focus on local as wellas neighboring emerging markets.

Value proposition:

Wide portfolio of devices covering low-end to high-end devices, including both GSM andCDMA.

Quality devices with strong after sales services and warranty coverage.

Value for money, technologically advanced devices.

Key target segment:

CDMA as well GSM markets offering midrange, technologically advanced devicestargeted at the young, urban market.

Key partners:

It has Brightstar as its key distributor and major CDMA service providers for its CDMAdevices.

Key strengths:

Technologically advanced devices focusing on touch user interface at affordable prices.

Quality products with high brand recall among consumers.


Key provider of high quality, innovative CDMA devices focusing on both first time buyersfrom rural markets as well as midrange devices for replacement buyers.

Expanding distribution network and channel strength by investing in marketing.

Key challenges:


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CDMA sales under attack due to the increasing influence of big Chinese manufacturersand their ever stronger relations with carriers.

Managing market share in the ever rising and high-volume, low-cost segment as well asthe high-growth smartphone segment.

Key initiatives:

Increase investment in distribution and marketing.

Expanding portfolio to offer attractive low-cost devices as well as high-end smartphonedevices.

5.4 ZTE

Company profile:

A Chinese manufacturer with deep rooted relations with carriers due to its infrastructure businessin both the GSM and CDMA segments. ZTE sells devices through carriers alone and it hasstrategic relations with Vodafone as an ODM manufacturer to supply low-cost devices suited toemerging markets. ZTE does not have manufacturing units in India, instead importing devicesfrom China which are tailored to meet carriers' requirements. All warranties and after salesservices are offered in partnership with carriers, and the company does not have its owndistribution channel, though it is believed to be preparing itself to introduce branded devices intothe market through its own channel in 2010.

Value proposition:

A preferred ODM manufacturer for carriers with low-cost devices and value for moneydevices tailored to suit a carrier's requirements.

Key target segment:

Low-cost CDMA and GSM devices as per carriers' requirements.

Key partners:

GSM and CDMA carriers (Reliance Communications, Tata Teleservices and Vodafone).

Key strengths:

Quickly customizing devices to suit carrier requirements.

Access to low-cost manufacturing facilities in China, and thus able to deliver extremelylow-cost devices suited to consumers in the rural market.


Strong relations with carriers due to its telecom infrastructure business.

Key challenges:

Ability to differentiate its product from other low-cost Chinese and Taiwanese ODMs andOEMs.

Key initiatives:

Invest in handset R&D to bring in differentiated products in terms of features, hardwaredesign and style, thus enhancing its value proposition.


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Invest in marketing along with carriers to position its brand in the consumer's mind.

5.5 Research In Motion (RIM)

Company profile:

A smartphone manufacturer having relations with nine major carriers covering both CDMA and

GSM networks. Initially a purely enterprise-focused and carrier-driven manufacturer, it has slowlychanged its strategy completely. The company is now catering to retail consumer sales throughits own distribution channel, set up in 2009, and some midrange consumer-focused devices likethe Pearl and Curve 8520. RIM has worked with carriers to offer more affordable BlackBerrymessaging plans starting at $7 per month, down from $25 per month, including pay-as-you-goplans for prepaid users. The company does not have manufacturing units in India, though it isexploring possibilities to set up a unit to take advantage of the low-cost, skilled labor there.

Value proposition:

High quality, messaging-focused devices over a secured network providing a high-valueproposition to enterprise consumers.

Key target segment:

Enterprise segment and young urban consumers focused on messaging and socialnetworking.

Key partners:

Key GSM and CDMA carriers and Redington for distribution.

Key strengths:

Its secure messaging solution with quality devices.

A mobile device brand considered a status symbol in India.


Enterprise-focused messaging solutions in partnership with carriers.

Key challenges:

Making deeper inroads into the consumer segment.

Key initiatives:

Offer more midrange devices like the curve 8520 to appeal to young consumers and,down the line, enterprise workers (other than CXOs). Offer customized devices havingdual SIM capability, touch user interface and candy bar form factor to target largerconsumer segments beyond just those interested in messaging and qwerty.

Invest further in distribution to expand its reach beyond current geographies.

5.6 HTC

Company profile:

HTC India entered the Indian market in 2007 with the launch of HTC touch in collaboration withAirtel. It was a niche player initially, focusing on high-end users, but has shifted its strategy to


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include midrange users as well. Now it has devices starting from $200, primarily withtouchscreens. HTC's device portfolio consists of both CDMA and GSM devices the focusbeing GSM.

Value proposition:

Feature rich, technologically advanced smartphone devices (based on Windows mobile,

Android and Brew MP) offering an easy to use and enhanced user experience.

Key target segment:

Young consumers in urban market.

Key partners:

Major GSM and CDMA carriers along with Jaina for marketing and Brightpoint asdistributor.

Key strengths:

Among the first to market with the latest Windows Mobile, Android and Brew MPdevices.

Innovative touch-enabled device due to strong engineering capabilities.


Growing brand recall and a distribution channel that is moving beyond Tier 1 to Tier 2and Tier 3 cities.

Key challenges:

To strengthen its midtier portfolio in order to compete with enhanced and midrangesmartphone devices from other global manufacturers.

Key initiatives:

Invest in marketing and distribution channels to continue expanding its reach.

Introduce more devices in the range of $150 to $250 to appeal to larger consumersegments.

5.7 Micromax

Company profile:

Local Indian mobile device manufacturer which started business in 2008 having set up offices in23 cities, with its headquarters in Gurgaon. In less than two years it has grown to become the No.4 manufacturer by sales to end user in 1Q10. It relies on local research and development skills,while manufacturing is dependent on Chinese and Taiwanese ODMs. The company started withlow-cost mobile devices targeted at rural markets with a standby time of 30 days. It was quite a

success in creating high brand recall. Since then it has forayed into the urban market, launchinghigh-end devices from $100 to $200, which is expected to increase its ASP from the current levelof $45. It has set up competitive distribution channels selling devices from more than 55,000retailers, and has invested $20 million in brand building initiatives. The company is preparing toexpand into the Middle East and Africa, Latin America and other emerging markets inAsia/Pacific. It is also working to roll out its own application portal accessible from all Micromaxdevices.


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Value proposition:

Low-cost, feature-rich devices targeted at niche Indian consumer segments (forexample, devices with dual SIM or long battery life or access to social networking andqwerty keyboards.

Key target segment:

Price-conscious consumers in the rural and urban market.

Key partners:

Major GSM carriers for selling low-cost devices in the remote rural markets.

Key strengths:

Well researched mobile devices with clear target segments requirement.

Well known and respected Indian brand.


Strong sales of low-cost devices.Key challenges:

It needs to continue investing in R&D to deliver unique customized devices to grow itssales in the face of growing competition.

Key initiatives:

Continue investing in marketing and channel to expand its reach.

Enhance its value proposition beyond low-cost or messaging-focused qwerty devices byintroducing more feature-rich enhanced devices. Also, have tight integration with popularlocal social networking sites, e-mail, instant messaging, gaming or applications to suit tolocal tastes.

5.8 G'Five

Company profile:

G'Five is a Chinese manufacturer headquartered in Hong Kong with operations in Asia/Pacfic, theMiddle East and Africa and Latin America. It first started with Dubai and expanded into India,which later became a key market, contributing sales of more than 80% by volume. Its operationsin Latin America and Africa were in the initial stages at the start of 2010, but G'Five is investing inthese markets to gain market share. The company has engineering capabilities that enable it toquickly launch models with trendy designs popular in the market, having relatively lower featuresat low cost, thus enhancing its value proposition significantly.

Value proposition:

Lookalike devices of popular high-end models from global manufacturers with usableand optimum feature sets at extremely low cost.

Key target segment:

Low-cost mobile device buyers.


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Key partners:

All manufacturing facilities are based in China and there are no nationwide distributor orcarrier relationships in India so far.

Key strengths:

Ability to deliver superior quality devices among unknown Chinese brands selling in themarket.

Variety of devices with portfolio having more than 75 devices.


Low-cost devices selling in an unorganized market.

Key challenges:

To grow beyond the black market by setting up a nationwide distribution channel.

Key initiatives:

Set up distribution channel to move beyond the black market (without invoices).Invest in brand and after sales services to win consumer confidence.

Invest in consumer studies to understand local consumer requirements to deliverrelevant devices.

Grow its portfolio from low-cost devices to high-end devices to retain its customer duringupgrades.

6.0 References and Methodology

To produce this Competitive Landscape, we collected and collated news about the Indian marketfrom our database, then validated our conclusions through consultation with individualmanufacturers, their earnings announcements, and interviews with distributors and resellers. We

combined our findings with insights gained at industry and Gartner events, findings from our ownuser surveys, and customer inquiries and discussions with representatives from every part of themobile device value chain.

RECOMMENDED READING

"Market Insight: China and India 3G Market Update, 2010"

"Semiconductor Forecast Worldwide: Forecast Database"

"Market Share: Mobile Devices and Smartphones by Region and Country, 1Q10"

"Forecast: Mobile Devices, Worldwide, 2003-2014, 1Q10 Update"

"Market Trends: Mobile Phone Distribution, India, 2007""Dataquest Insight: Mobile Device Manufacturers Must Rethink Strategies for Emerging Markets"

"Marketing Essentials: How Consumer Technology Sellers Can Use Competitive Intelligence toBreak Into Emerging Markets"

"Marketing Essentials: How to Gather and Process Consumer Insight in Emerging Markets"


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This document is published in the following Market Insights:

Mobile Communications WorldwideMobile Devices WorldwideTelecom and Internet Markets Asia/Pacific

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Competitive Landscape Mobile 201064

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