The Indian mobile phone landscape has undergone a significant shift in recent years, with users upgrading from feature phones to smartphones. In fact, India is one of the fastest growing smartphone markets in the world today. This transition can be attributed to the large-scale availability of affordable and inexpensive but feature-rich smart devices introduced by local handset players, which are offering serious competition to global majors like Samsung. While Samsung led the Indian handset market in the first quarter of 2015, domestic players occupied the next three spots in the pecking order.

Karbonn Mobiles, a joint venture of the Jaina Group and Bengaluru-based electronics manufacturing firm United Telecom, is one such domestic player that has managed to establish a strong position in the market within six years of its inception. The company, like its local peers, has made it big by offering products at low price points and by focusing on consumers from the low- and middle-income segments. It currently imports 100 per cent of its devices. Since product innovation is minimal in the case of local products, the time to market and the product development cycles are shorter, about four months as compared to those of Samsung and Apple, which vary from nine months to two years.

Over the years, product innovation, coupled with astute supply chain management and flexible local assembly has proved to be a perfect recipe for the company’s success. However, given the growing user appetite for affordable yet feature-rich devices, as well as the government’s impetus to indigenous manufacturing, Karbonn has decided to begin manufacturing products in-house within the next few years. Further, it plans to invest significantly in developing a mobile app ecosystem in the country in order to leverage the opp-ortunities in the smartphone space.

The company plans to invest Rs 2 billion in marketing, product development and brand awareness during 2015-16. It intends to increase its revenue by 25 per cent from Rs 40 billion in 2014-15 to Rs 50 billion during 2015-16. It also has plans to expand its global reach by March 2016. The company is already present in Southeast Asia and Africa, and is now gearing up to expand into the West Asian and Latin American markets.

Make in India

Karbonn has earmarked an investment of Rs 8 billion over the next three years for assembling and manufacturing mobile phones in India. Initially, the company will be looking at making entry-level phones priced in the range of Rs 2,000 to Rs 7,000 per unit. Of the total investment, Rs 4.5 billion has been allocated for setting up a plant in Telangana. Meanwhile, a plant has already been established in Noida. Karbonn has partnered with Water World Technology Company, a mobile phone designer, manufacturer and supplier firm, to set up the facility across 150,000 square feet of area. An initial investment of

Rs 500 million has been made while another Rs 1 billion will be invested at the next stage of development. The facility has the capacity of producing 1.5 million phones per month. The company has also set up a research and development facility and an assembling unit in Bengaluru. Going forward, Karbonn plans to manufacture 70 per cent of its devices in India. Of these, 60 per cent will be feature phones and the rest will be smartphones.

Developing an app ecosystem

The company has decided to invest up to $3 million each in Indian and Chinese start-ups, for them to come up with apps and services that will lend support and differentiation to its emerging portfolio of affordable smartphones. The smartphone market in India is highly cluttered at present, with the presence of several local players offering similar products. As hardware becomes more and more commoditised, service and app differentiation will be the key to retaining customers.

Karbonn recently collaborated with keyboard app SwiftKey to offer its users the ability to type in up to 22 languages including Malayalam, Assamese, Bengali, Bodo, Dogri, Gujarati, Kashmiri, Konkani and Urdu. Since the majority of the company’s customers have limited digital skills and fluency in English, localising the smartphone experience for them will help Karbonn bring in more users.

Combating competition

The entry of Chinese players such as Gionee, Oppo and Xiaomi has posed a serious threat to the company’s business. Since these companies also offer low-cost handsets with high-end features, Karbonn has witnessed an erosion in its customer base. In the quarter ended December 2014, several companies including Xiaomi and Intex ate into Karbonn’s market share, displacing it from its position among the top five phone vendors in India.

The competition is likely to heat up further in the coming years, as the Indian mobile market has started showing early signs of saturation. In a rare instance, smartphone shipments in India dropped 7 per cent in the first quarter of 2015 to 19.5 million units, as per industry reports.

Going forward

At present, Karbonn seems to have its path clearly chalked out, with huge investments lined up for establishing manufacturing facilities, developing an app space for smartphones, and enhancing its branding and marketing exercises. All of this should go a long way in creating better business prospects for the company, improving its position in the Indian handset market, as well as countering the potential threat from its Indian and Chinese counterparts.