India is the new China when it comes to smartphones

Last Modified: Thu, Jan 21 2016. 09 37 AM IST

India is becoming profoundly important both for smartphone makers like Apple and Samsung and for Web titans like Amazon, Facebook and Netflix

New York: In the global fight for our pockets and purses, India is the new China.

The incredible growth run for smartphones in China, the world's biggest market, is over. Sales of new smartphones in China are barely budging, and fierce competition is driving down prices. Sure, some of the smartphone stall is because of economic hiccups in China, but the country is also tapped out of first-time smartphone buyers. The double whammy has propelled the world's biggest tech companies to set their sights on India for the next smartphone land rush.

Smartphone sales remain relatively small in India, but the opportunity is huge. India has nearly the same size population as China, but fewer than one in five people in the country use the Internet. Smartphone unit sales in India rose 44% in the second quarter of 2015 from a year earlier, while the sales increase was just 2% in China, according to research firm IDC. By next year, smartphone sales in India will overtake those in North America, if IDC's forecast holds.

Expect to hear a lot about the Indian smartphone market in coming years. The country is becoming profoundly important both for smartphone makers like Apple and Samsung and for Web titans like Amazon, Facebook and Netflix, which are hoping to capitalize on an expected boom in mobile Internet use in the world's second-biggest country.

The latest sign is Apple's request for government permission to open its own retail stores in the country for the first time. Apple has laid the groundwork for iPhone sales in India for several years by striking deals with independent stores to carry the phones. The company has said iPhone sales are growing fast there, but fast is relative. Apple's sales have barely registered on the country's smartphone sales rankings, with roughly 2% market share.

Market share for Samsung, leading smartphone seller in India - 24%

Given the splash Apple made in China once it started selling products there after years of standing by, it's easy to see why India is worth watching for people anxious about the iPhone growth engine running out of steam. Apple doesn't disclose its sales in the country, but CEO Tim Cook said iPhone sales in the June quarter nearly doubled from those in the period a year earlier. Cook said in October that he was "really impressed" with the company's progress in India and in Vietnam.

While India is an alluring smartphone opportunity, it also isn't an easy market to crack. Apple's competitors have a head start there. Samsung has been the biggest seller of smartphones in India, with 24% market share in third quarter, followed by local mobile phone giant Micromax, according to IDC. Those two companies—along with India's long tail of local mobile phone manufacturers—sell smartphones running Google's Android software or domestic versions of it.

Chinese smartphone vendors Lenovo, Xiaomi and Huawei have also started to make waves selling smartphones with fast cellular Web connections for less than $200. To give itself a leg up locally, Samsung has expanded its manufacturing facilities in India, and Lenovo and Xiaomi recently started making or assembling phones in India with partners. The idea is to get phones to people faster and to please Indian officials who have sought to bolster local manufacturing. Some of the Chinese smartphone companies have also found success selling their phones online, including through limited time "flash sales" that have been hugely popular in China.

Just as the smartphone boom in China minted fortunes for winners like Apple, Xiaomi and Tencent, India's smartphone transformation is going to create a huge new market for some companies, and kill others. A few years ago, nearly every mobile phone sold in India was from Nokia. Mobile tastes turned on a dime in India, and Nokia's best market went poof. So did the company. The fallout of the new Indian smartphone land rush will be just as unpredictable. Bloomberg

First Published: Thu, Jan 21 2016. 08 48 AM IST

Source: India is the new China when it comes to smartphones