NEW DELHI: With cheaper rival offerings and a falling rupee cutting short their dream run, homegrown handset makers are planning a complete makeover by reducing dependence on design and contract manufacturing in China to hold on to their slipping share in the 30,000-crore cellphone market.
Leading companies like Micromax, Spice, Lava, Zen, Karbonn, Maxx and Olive have begun to set up new research and development wings to design and make their phones in India, create own software for operating systems and mull app stores, breaking away from the practice of buying off-the-shelf designs and getting them manufactured on contract in China.
"Local handset makers would have to change their strategy from simply borrowing low-cost designs and mass producing to innovating and creating locally relevant products," says London-based Analysys Mason's India director Kunal Bajaj. "Indian handset makers had lost market share during Diwali becauseSamsung got better devices in the market and Nokia got back with differentiating handsets. Local companies would have to come up with some core innovation to differentiate."
Sales of domestic players have either remained stagnant in the past year or have gone, data shared by market research agency GfK showed. According to research firm Gartner, Micromax has lost its pole position among Indian handset makers, overtaken byKarbonn Mobiles as the leading Indian brand as of the third quarter this year. International Data Corporation showed a 3% quarter-on-quarter decline in Indian mobile phone shipments during April-June at 42.8 million units.
The fast depreciating Indian currency, too, has compounded the industry's woes, as chief executives project zero margins if the dollar touches the 55 mark. As it is, the likes of Lava and Micromax have been forced to raise prices twice in three months, a development that even could price them out of the market.
"It's a fine linea, companies will have to maintain a tricky balance," Bajaj said. If they continue to under-spend and only copy designs, they may become obsolete since there would be nothing to differentiate them from the clutter. However, they would have to be careful of investing in these overheads since they operate on low margins that run the risk of becoming thinner due to the rising dollar."
Gartner's principal analyst Anshul Gupta says the Indian companies have to innovate. "It is mandatory. If there is no differentiation then they won't be able to survive in a market overrun by brands.
Most companies are banking on internal accruals, amassed during their hey-days, to fund their R&D efforts. They are also considering channeling part of their revenues into in-house research, on the lines of Nokia and Samsung, which invest nearly 10% of their global revenues into R&D.
Indian R&D push
Micromax, the largest Indian-owned brand by sales, which has invested more than $10 million in R&D, is stepping up funding to form a separate division for in-house research to a create a smartphone range "rivalling Nokia and Samsung's", an executive said.
Leading companies like Micromax, Spice, Lava, Zen, Karbonn, Maxx and Olive have begun to set up new research and development wings to design and make their phones in India, create own software for operating systems and mull app stores, breaking away from the practice of buying off-the-shelf designs and getting them manufactured on contract in China.
"Local handset makers would have to change their strategy from simply borrowing low-cost designs and mass producing to innovating and creating locally relevant products," says London-based Analysys Mason's India director Kunal Bajaj. "Indian handset makers had lost market share during Diwali becauseSamsung got better devices in the market and Nokia got back with differentiating handsets. Local companies would have to come up with some core innovation to differentiate."
Sales of domestic players have either remained stagnant in the past year or have gone, data shared by market research agency GfK showed. According to research firm Gartner, Micromax has lost its pole position among Indian handset makers, overtaken byKarbonn Mobiles as the leading Indian brand as of the third quarter this year. International Data Corporation showed a 3% quarter-on-quarter decline in Indian mobile phone shipments during April-June at 42.8 million units.
The fast depreciating Indian currency, too, has compounded the industry's woes, as chief executives project zero margins if the dollar touches the 55 mark. As it is, the likes of Lava and Micromax have been forced to raise prices twice in three months, a development that even could price them out of the market.
"It's a fine linea, companies will have to maintain a tricky balance," Bajaj said. If they continue to under-spend and only copy designs, they may become obsolete since there would be nothing to differentiate them from the clutter. However, they would have to be careful of investing in these overheads since they operate on low margins that run the risk of becoming thinner due to the rising dollar."
Gartner's principal analyst Anshul Gupta says the Indian companies have to innovate. "It is mandatory. If there is no differentiation then they won't be able to survive in a market overrun by brands.
Most companies are banking on internal accruals, amassed during their hey-days, to fund their R&D efforts. They are also considering channeling part of their revenues into in-house research, on the lines of Nokia and Samsung, which invest nearly 10% of their global revenues into R&D.
Indian R&D push
Micromax, the largest Indian-owned brand by sales, which has invested more than $10 million in R&D, is stepping up funding to form a separate division for in-house research to a create a smartphone range "rivalling Nokia and Samsung's", an executive said.
