India smartphone shipments fell 0.9 percent to 40.4 million in Q3 2018 against 40.8 million in Q3 2017, a Canalys report said.
Xiaomi, Samsung, Vivo, Oppo and Micromax are the top 5 smartphone makers in India during the third quarter of 2018. Micromax is a surprise entry into the top 5 club due to its deal with a state government.
“The rising value of the US dollar is the number one concern for smartphone vendors,” said Canalys Research Manager Rushabh Doshi.
The US dollar has increased from an average or INR68 in July to INR74 in October 2018, marking 5-10 percent increase in the cost of components typically bought in US dollars. The drop in value of Chinese yuan and Indian rupee continue against the dollar directly affects material costs.
Chinese vendors, who operate on razor-thin margins, will face challenging growth in India due to price hike. Larger smartphone vendors will persist by hedging against currency fluctuations. Smaller phone vendors will struggle to maintain a price-competitive strategy, Canalys said.
The price of crude oil, which has risen by more than 25 percent from $68 per barrel in August 2018 to $86 per barrel in October 2018 — is also affecting the Indian smartphone market.
“As vendors consider a much-needed correction in market prices, they will need to contend with rising oil prices in India, which are likely to stoke inflation, effectively shrinking the average consumer’s expendable income,” said Doshi.
The Indian government is also close to fully implementing its Phased Manufacturing Program (PMP) forcing smartphone makers to pay more for certain smartphone components.
Chinese vendors may benefit from the forced investment into India’s local manufacturing of phones.
“With wages constantly rising in China, India’s falling rupee and lower manpower costs will allow vendors to sustain their competitive pricing models. The high capital investment is likely to pay back quickly,” Canalys Analyst TuanAnh Nguyen said.
Xiaomi shipped more than 12 million smartphones in Q3 2018, growing by 30 percent plus year on year, and took pole position for the fourth quarter in a row.
Samsung, which came very close to Xiaomi in Q2, shipped 9.3 million smartphones in Q3, taking 23 percent of the India smartphone market.
Vivo and Oppo came third and fourth respectively, with shipments of 4.5 million and 3.6 million.
While Vivo grew annually, shipments of Oppo’s self-branded smartphones fell by 24 percent. The overall decline of the vendor eased to 2 percent, partly due to a strong performance by its secondary brand RealMe, which shipped almost 800,000 units.
Micromax shipped 2.6 million in Q3. The Indian phone vendor shipped five times as many smartphones this quarter as last quarter, making it the best performance by the Indian vendor in recent years.
A government order from Chhattisgarh state assisted Micromax’s re-entry into Indian phone market. Micromax and Reliance Jio would provide smartphones and telecom connectivity for a fixed price of INR2,510 or $34 to 5 million women and college students.
“The Micromax deal is due to a well-known market force – patriotism,” said Nguyen. “The rise of Huawei, Oppo, Vivo and Xiaomi, and the flagging popularity of Apple in China is a prime example.”
Micromax is not likely to displace Xiaomi, Oppo and Vivo in India in the near future. But its return marks a shift in the strategies of local vendors.