Shrinking market share across the globe is forcing Chinese smartphone makers to dampen exports from India. And this comes amidst intensifying pressure from New Delhi to tweak their structure to include more Indians at top managerial and distribution levels, localise components, and drive exports from the country is increasingly challenging sustained growth, industry executives and analysts said.
The executives ET spoke to said favourable regions, such as North America and Europe, where the likes of Apple and Samsung (which make up the bulk of smartphone exports from India) export to, are a no-go for Chinese brands.
This makes India a crucial market for Chinese players, which cumulatively hold about 74% of the volume market share, according to Counterpoint Research.
On the other hand, the combined market share of Chinese brands has remained either flat or declining across key markets like Europe (35%), North America (12%), and Japan (8%), where Apple and Samsung have grown thanks to the premiumisation trend which has accompanied a lengthening of replacement cycles, the research firm said.
“The Chinese brands are thriving only in India. Even in China, there is pressure after Huawei has taken over the market. They don’t have any presence in the US market,” a top-level mobile phone industry executive told ET. “They are being pushed out of Europe too after being sued by Nokia over royalties, while Japan does not favour any Chinese products. So, what markets do they have left when their survival in China itself is a bigger question at this point?”Notably, in the areas where the major Chinese brands already enjoy large market shares, such as South East Asia (69%), they already have manufacturing units. Even in far-off regions like Latin America (52%), they have assembly units to produce smartphones, while Vietnam is increasingly becoming an export hub to serve the Western markets, market trackers said.”What is the objective to set up manufacturing units outside China? Either you shift some capacity from China, or if it is incremental, then it needs to have an incremental market which must be substituted from the supply that is coming from China. But with demand dwindling globally, the incremental market is not there,” said Navkendar Singh, associate vice president, IDC. To be sure, the Chinese brands, on their part, have publicly said they are keen on starting exports, with some even looking at neighbouring markets to start the journey.
Vivo, for instance, started exports to Thailand and Malaysia, and will be expanding to Saudi Arabia and Bhutan this fiscal, with a target to export a million units in 2023. Xiaomi too has contracted Dixon Technologies to start local manufacturing, with an aim to export mobile phones from India.
But geopolitics now play a big part in the ongoing shift of manufacturing out of China, especially for American brands like Apple. But for the Chinese brands themselves, it will be difficult to keep both sides happy and substitute supply from China with other regions, he added. “Given the importance of the Indian market, they should ideally be doubling down on complying with all the demands of the (Indian) government, but how will they do it without making the Chinese government unhappy?,” the executive quoted earlier added.
With the production-linked incentive scheme for smartphones in place, cost disabilities have been removed for the likes of Apple and Samsung who accounted for $9.5 billion of the $11.2 billion worth of exports made in FY23.
“The average cost of assembling a product is around 2.5% of the product cost, while the PLI scheme is giving around 5-6% incentive to make in India. It is a no brainer for the likes of Apple and Samsung to ramp up manufacturing in India,” the executive said. However, the same arithmetic does not work for the Chinese brands as they have been effectively out of the PLI scheme, and instead, asked to tie up with Indian manufacturers under the scheme, said experts.
