How will India's ban on inexpensive Chinese smartphones play out?

Both, the Chinese smartphone manufacturers and Indian consumers, are dependent on each other.
How will India's ban on inexpensive Chinese smartphones play out?
Photo: Rafael Marchante (Reuters)
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India wants no Chinese contenders in the lower-end segment of its smartphone market. It plans to bar them from selling handsets priced under 12,000 rupees ($150), Bloomberg reported yesterday (Aug. 8).

However, it is unclear yet if this will be done officially or unofficially.

The government hopes that, with lesser competition, domestic brands like Micromax, Lava, Karbonn, and others, can be revived, the report suggested. Its plan also coincides with the likely launch of a 5G phone (priced Rs9,000-Rs12,000) by Jio, owned by India’s richest man Mukesh Ambani.

Will this ultimately help Indian brands, though?

Boosting domestic smartphone brands

Indian phone makers, which tasted success a decade ago, lost their footing once the Chinese stepped in.

“Homegrown companies such as Lava and MicroMax comprised just under half of India’s smartphone sales before new entrants from the neighboring country disrupted the market with cheap and feature-rich devices,” Bloomberg reported.

Lesser competition, therefore, may help but the brands’ offerings will be decider.

In the mid 2010s, Indian companies focused on trading itself and not on technology and innovation. Neither did they work on design or cameras or he coming 4G wave.

Have they evolved for the better by now? Are they ready for 5G? These are the factors that will matter.

Stifling Chinese smartphone makers

Given that India is the world’s second-largest smartphone market after China, it has been a key market for Chinese phone makers themselves.

Xiaomi, for instance, accounts for 25% of sales in India’s sub-$150 smartphone market. Around two-thirds of its phones sold in India fall under this price band.

If India pushes through this new policy against Chinese companies, Xiaomi’s shipments may fall by 11-14% a year, or 20-25 million units, with sales decreasing by 4-5%, a Bloomberg Intelligence analysis has found.

The Indian consumer loses

New Delhi’s crackdown, be it via a sales ban or through heightened financial scrutiny, is unlikely to go down well for India’s smartphone industry.

For one, the variety in the market would decline and consumers will have to settle for lower specs or higher prices—or both. Nationalism and jingoism aside, Indians have been lapping up Chinese handsets. Barring south Korea’s Samsung, all of India’s top five smartphone five brands are Chinese.

Besides, a ban could affect the wider economy, too. For instance, all Realme handsets sold in India are built in the country, employing hundreds. Oppo, Vivo, and Xiaomi have also set up factories here.

An abrupt exit on their part, even if only from a specific segment, will leave a hole that none is equipped to fill yet.