​Indian phone makers grow wings, swoop into foreign territories

It was only a matter of time before the new kings of the domestic smartphone scene in India ventured onto other shores to pad their coffers. Yet, it may have been more than just global ambition that got them there.

Indians may have become used to seeing home-grown brands thrive in overseas markets in the past decade or so. Mahindra and Tata trucks are sold all over Africa and Latin America; Apollo's tyres outfit Europe's best cars; and Jaguar and Land Rover, once icons of British manufacturing, are now produced by the Tatas but are still selling like gangbusters.

Yet, the image of Indians triumphantly hawking home-grown phones abroad doesn't seem so believable, and there's a reason for it. We may have churned out legions of world-class engineers, software companies, and tech entrepreneurs, but for a variety of reasons -- the irrational inverted duty structure is an oft-cited one -- electronics manufacturing has been a dismal failure in the last few decades. And so, Indians have been hardwired into thinking that when it comes to the realm of televisions, computers, and phones, it is foolish to think that we could compete with the Chinese or the Koreans.

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Spice's Android One version for Indonesia

And yet, we have (at home, at least), and with more aplomb than you would have imagined possible. The companies that are the kings of the local smartphone landscape are none other than domestic outfits such as Micromax, Karbonn, and Lava (who have all contributed to Samsung's declining market share). And yet, none of this has relied on actually making phones domestically. Instead, almost all of these phones are made in China, imported into the country, and then sold under the local brand. Therefore, the game here is more about branding, positioning, and market segmentation rather than product development and manufacturing.

Now, it seems that these Indian phone makers have taken the game overseas to their neighbours, especially with Google's Android One. As you may recall, a little over four months ago, Google began an experiment to standardize smartphones by partnering with domestic Indian phone makers to bring out the Android One that had more or less the same specifications.

Google's motives were obvious: Put more smartphones in more hands in the developing world, especially in places like India where smartphone penetration rates are still extremely low -- around 30 percent. More people using Android phones and Google's search engine in addition to other products such as Maps simply means more cash in Google's coffers.

The partners that Google identified, local brands such as Micromax, Spice, and Karbonn, which were responsible for coming out with these $100 phones, are the same ones that are sniffing out an opportunity in their own neighbourhood. Just recently, Spice launched its phone under the brand name Nexian Journey One in Indonesia, Sri Lanka, and Nepal. Soon, the company will export the same Android One platform with incremental specifications at different price points under Rs 8,000 ($125) to other shores such as Bangladesh, Myanmar, and Singapore. Of course, local leviathan Micromax has already established a foothold in Sri Lanka and Bangladesh with its Canvas A1, while Karbonn is in the process of plotting its overseas foray.

Could there be another reason for this overseas foray, though? Since the launch of the Android One in September, Micromax has flogged more than 400,000 of them, while Spice and Karbonn apparently sold over 230,000 of the Ones. These numbers are apparently far more anemic than what was necessary to make the "One" the great success that Google hoped it was going to be.

Some attribute this to the fact that the initial launch of the phones by local manufacturers Micromax, Spice, and Karbonn were restricted to online sales, thus alienating traditional retailers, which is where over 85 percent of India buys its phones. Once online sales petered out, these retailers were then roped in. However, by then, they had been alienated. Much lower profit margins from these $100 phones (4 percent versus the more standard 10 percent) didn't help, either. Another reason offered for lacklustre sales was ferocious competition provided by Xiaomi, Motorola, Asus, and other foreign players.

Therefore, this foreign foray by domestic players with robust marketing budgets who now need to start looking at low-hanging fruit to diversify their business model could be exactly what the doctor ordered.