Intense Competition
Xiaomi shows a remarkable growth in India, which is rapidly growing and the largest smartphone market in the world.
Samsung Electronics is still the unchallenged leader in the market. However, market watchers say that the company should urgently come up with a specialization strategy for Indian consumers who want low end smartphones with high end specs.
India’s Economic Times reported on July 20 that Samsung Electronics has decided to stop supplying its handsets to 200 retailers that became preferred sellers for Xiaomi for its phones in the Indian market.
Xiaomi expects that half of smartphones sold by these retailers will be their products after Samsung Electronics stops supplying stock to the stores.
"This is the first time any brand has stopped supplies to retailers for giving preference to another brand," said the owner of one such cell phone store in Delhi after being cut off by Samsung.
Xiaomi is providing advertisement costs to retail stores in order to increase sales in offline stores in India, carrying out the aggressive sale expansion strategy. Accordingly, Samsung Electronics is also engaging in a counterattack by offering advertisement costs to retail stores and holding negotiations with 200 retailers to turn them into amicable partners again.
The Indian smartphone market is the second largest in the world and expanding rapidly. According to statistics company Statista, China has the largest smartphone market, accounting for 30 percent, followed by the United States with 12 percent. However, India, which takes up 10 percent of the global market, is expected to become the world’s second largest market by the end of next year, surpassing the demand in the U.S.
Samsung Electronics is the number one player in the rapidly growing Indian market. The problem is that Xiaomi is chasing at a fast pace.
According to market research firm Strategy Analytics, Samsung Electronics maintained the number one spot in the Indian smartphone market in the first quarter this year with a 22 percent market share. Xiaomi followed closely with a 14.8 percent market share. Indian market experts predict that Xiaomi’s market share will grow faster and narrow the gap with Samsung Electronics even further in the second quarter.
Xiaomi ranked first in the Chinese market in 2014 and 2015. However, the company dropped to fifth place last year with an 8.38 percent market share, falling behind Huawei, OPPO and Vivo. Xiaomi, which saw its share decrease in the Chinese market, now considers Southeast Asia as a new strategic point and seeks to develop the markets. In particular, smartphones still account for only 20 percent of the India cellphone market and the market has growth potential that the long term evolution (LTE) communications system is about to come into wide use.
Xiaomi recently announced to build its India’s second smartphone manufacturing plant in Sri City in Andhra Pradesh, India. The plant is expected to employ 5,000 workers and produce one smartphone per second when it starts operation. If things come to this stage, Xiaomi will be able to locally produce 95 percent of smartphones that sells in India which will lead to lower prices.
Samsung Electronics has also made a 700 billion won (US$623.89 million) investment in its Indian plant in June to double its monthly smartphone production from the current 5 million to 10 million units. An official from the industry said, “Samsung and Xiaomi have one thing in common. They both drank a bitter cup of defeat in China, the world’s largest market. That’s why Samsung Electronics and Xiaomi have no choice but to battle it out for the leadership in India, which will soon to be the world’s second largest market. It is urgent for Samsung Electronics to come up with the specialization strategy to target the Indian market.”