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In Focus
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Huawei’s Smartphone Play
The $20-billion Chinese Company is a Leading Operator in The Telecom Equipment market in India, but it is for The First time making a Big Consumer push for Grabbing a share in The Handset Business.
Issue Date - 21/07/2011
Noticed that unmistakable trend in the handset market? Not only have smartphones become the most coveted and sought-after category in the handset business, many new players are also joining the fray. Also, customers are now spoilt for choice as they have more and varied options to choose from, which is leading to greater experimentation with new brands. As a result, top smartphone vendors such as Nokia, Samsung and LG now have a tough fight on their hands fending off competition from upstarts and new players in the game. Is it any surprise then that heavyweight telecom players like Nokia, Samsung and LG have collectively lost market share in the first quarter of 2011, while the share of lesser known players have climbed to 46.3% from 38.5% in the same period. According to technology research firm Gartner, Nokia’s market share in India fell to 25.1% in Q1 of 2011 from 30.6% in the corresponding quarter last year. Similarly, Samsung’s market share fell to 16.1% from 18% and LG’s to 5.6% from 7.6% in the same period. However, Research in Motion (RIM), maker of the BlackBerry phones managed to maintain its market share while Apple’s iPhones have been flying off the shelves. No prizes for guessing that both RIM and Apple are riding the crest of market success on the back of their smartphones sales.

Driving the demand for smartphones in India and the world has been the launch of 3G services and high speed data services. Worldwide, 427 million handsets were sold in the first quarter of the 2011 and out of that smartphones accounted for 23.6%, according to Gartner. While the industry grew by a bracing 19% YoY, the smart-phones segment grew by 85%. In India, the handset market is expected to touch 170 million units by the end of the year, as per various studies. Of that, smartphones are expected to corner more than 30% share. Analysts say that smartphones will continue to dominate the market and it’s the mid-tier market, which will lead to the mass adoption and growth of the smart-phones segment. In fact, the share of smartphones in the handset business would have been even higher but for the fact that many manufacturers who had announced a number of high-profile devices during the first quarter of 2011 could not ship their products until the second quarter of 2011. “We believe some consumers delayed their purchase to wait for these models,” says Roberta Cozza, Principal Research Analyst at Gartner.

The launch of some high-performance devices in the Indian market and also a change in the strategy by some telecom players have not gone unnoticed in the second quarter of 2011. Recently, Nokia launched its touch and type interface high-end device E-7 in the market. Similarly, HTC released its power-packed HTC Sensation for the high-end Indian customer looking for high performance phones. Research in Motion has slashed the price of its low-end BlackBerry Curve smartphone models to facilitate their mass adoption. The models are now available under Rs.10,000 price range.

One player that has the money and the muscle to bring about a marked shift in the consumer behaviour in the handset market in India is the Chinese telecom equipment giant Huawei. The $20 billion company has had a strong presence in the India for over a decade. But it is now salivating for a taste of the pie in the smart-phone segment in India’s lucrative market with the launch of three Android OS based smartphones in the sub Rs.15,000 price range. To stay abreast of the competition, the phones come pre-loaded with social applications, including Facebook, Twitter, YouTube and Google mobile suite, and also supports WiFi connectivity and a download speed of 7.2mbps. Till now, Huawei, with a market share of 1.6 % globally in the handset business has been supplying telecom equipment and data cards to all major telecom service providers in India. It clocked $150 million in revenue from India operations last year, despite a lull of six months due to security concerns over Chinese companies.

For Huawei, smartphones is the first business in which the company will be selling products directly to the customer. Though the company has had a presence in India’s telecom equipment market over past decade, its handsets are largely unknown to customers as the selling strategy has been to bundle the handsets with the services. As such, the first challenge Huawei will be up against is to establish itself as a reputable handset brand and set up its distributor network from the ground up. But that is easier said than done, even for companies with deep pockets like Huawei. “At last count, there were over 250 handset brands in the Indian market. Barring a few, most others don’t have any manufacturing infrastructure on the ground and are sourcing goods from a handful of vendors, with very little or no product differential. Also they can’t invest in marketing as the scale of the operation doesn’t support this,” says Arshit Pathak, MD, G’five, a Chinese handset company and one of the top five handset brands in India.


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