Supply chain
Voices from India: How can Taiwan best tap the booming India handset market
Colley Hwang, Taipei; Adam Hwang, DIGITIMES

There will be an estimated 250 million handsets sold in the India market in 2014, 35% of which will be smartphones, an increase from the 23% in 2013. However, with a population of 1.2 billion and an underdeveloped infrastructure in India has resulted in a complicated system for marketing handsets and offering after-sale service. To collect direct information on the India market, Digitimes interviewed four India-based handset-marketing companies in Chennai and New Delhi and invited India-based enterprises and Taiwan-based MediaTek and Delta Electronics to attend two India-Taiwan business symposiums.

Maintenance service provider TVS-E

Located in Chennai with 1,250 employees around India, TVS-E sells POS devices and printers and provides repair and maintenance services for handsets. According to TVS-E president K E Ranganathan, the largest difficulties for foreign enterprises to tap the India handset market are complicated and regionally varied market characteristics, consumers' high sensitiveness to price and the common use of SIM cards.

Due to insufficient manpower, Taiwan-based companies are expected to be unable to independently operate business in India and it would be preferable if they could cooperate with local partners. It is difficult for Taiwanese to understand the logic of consumers of India and therefore base decisions on the common understanding of price. For example, TVS-E still sells dot matrix printers which are ponderous and low in printing speed but with are low priced to meet demand for printing large volumes of government documents at low cost.

Taiwan-based IC distributor WPG Holdings

WPG has 11 marketing bases and 110 employees in India. President Rajeev Bajpai for WPG India agrees with TVS-E's opinion that the average sales price for a handset is lower than US$70 in the India market because consumers are very sensitive to price.

Without customs duties, imported handsets are more competitive than locally made models in the India market. India-based vendors import more than 12 million handsets a year, including three million units by Micromax and two million units by Karboon.

In Bajpai's point of view, Micromax, Karboon and other vendors with economic operational scale should find innovative solutions or expand product lines to create differentiation for India-based handset vendors, The current market situation is now an optimal time for operational transformation. Many India-based handset vendors have attempted to tap overseas markets but have not substantially succeeded and this is mainly because they do not have roadmaps for future products to create differentiation.

HCL transforming operation from PC sale to after-sales service

HCL Group, an early established PC company in India, has two subsidiaries, HCL Hightech and HCL Infosystem. HCL Hightech is an outsourced developer of software, like Infosys and Tata, with annual revenues of US$6.5 billion, while HCL Infosystem is responsible for marketing and after-sales maintenance and recorded 2013 revenues of US$1.6 billion consisting of 59% from distribution of products, 34% from retail sale of hardware, 6% from system services and 1% from training services.

HCL was renamed from HCL-HP which was a joint venture with Hewlett-Packard (HP). In view of an unsatisfactory sales performance, HCL phased out its PC vendor agent business in 2013 and transformed its operations to providing after-sale services with partners including China-based Lenovo.

HCL initially focused on after-sale services for Nokia when Nokia entered the India market. According to HCL's handset sale senior vice president Sutikahan Naithanl, Nokia initially profited well and reached a market share of nearly 90% but later its market share declined due to an inability to meet market demand. HCL then began cooperating with other international handset vendors (except for Apple), with Samsung Electronics being its key partner.

With a handset market share of over 35% in India, Samsung has obtained a preferential customs tariff for importing SKD (semi-knock-down) handsets from Vietnam for assembly in India, with a monthly assembly of 4-5 million handsets currently, HCL noted. Taiwan-based vendors can also tap the India market through seeking cooperation with India-based makers.

Consumer electronics retail channel Redington

It is still difficult to develop online trading in India especially because regulations vary among states, according to Redington president E H Kasturi Rangan. Therefore, Redingon with 56 offices around India to access consumers has a lot of room to grow, Rangan said.

Redington has close business relation with Taiwan-based retail channel distributor Synnex Technology International, which holds a 22% stake in the company. Redington was listed on the India stock market in 2007 and generated revenues of US$4.2 billion for fiscal year 2013-2014, with slightly over 50% of the revenues coming from the India market - the remaining came from Africa, Turkey and other markets. Thus, cooperation with Redington is helpful for tapping markets in the Middle East and South Asia.

President Kuo Gan-tsong for MediaTek India

India is absolutely a market worth tapping but business operation there should be on a long-term basis. When MediaTek came to the India market it was difficult to establish business relations with local enterprises. Therefore, MediaTek began by offering technical support and even assigned engineers to support local enterprises' R&D. The fast growth in the India handset market in recent two years has afforded MediaTek large room for business development there.

In the future, Taiwan-based components makers can consider establishing cooperative technical support centers in India to win recognition from local industries. While interaction between Taiwan's and India's industries is increasing, it is better for Taiwan and India to reach an agreement to protect investment and set up an insurance mechanism to secure component trade.

Peripheral maker Zebronics

Zebronics produces audio devices and mice in India and is planning to broaden its product mix. The company has 750 employees in total and over 100 business operation bases and posts gross margins of 15%.

In the India market, consumers like to ask for price cuts and are sensitive to prices. In addition, highest interest rates of over 12% render it difficult to operate businesses in India.

HP India is highly interested in the 100 New Smart Cities project but is worried about insufficient support from the local supply chain, the company indicated. Therefore, HP India hopes to cooperate with Taiwan-based makers to compete for orders related to smart cities.

Conclusion: India government and industries tout investment from Taiwan

The India market is not only India's 1.21 billion population but also includes neighboring Pakistan, Bangladesh, Sri Lanka and even Indian descendants living in eastern Africa, southern Africa and Caribbean islands.

Except for Samsung Electronics and Apple, other top 10 smartphone vendors in the China market in the second quarter of 2014 were China-based ones. As the China smartphone market is approaching saturation, leading China-based vendors are also expected to tap the India market.

In the India market, will more than 20 India-based handset vendors compete or cooperate with China-based smartphone vendors? The India government and industries have touted Taiwan-based makers' investment in India to boost development of India's handset industry. How do Taiwan-based makers view the potential market that they have not paid attention to previously? As China-based smartphone vendors have been making foray into the India market, there will be optimal time of only 1-2 years left for Taiwan-based makers to tap the market.

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