KEY POINTS

  • Local smartphone manufacturers in China and India are becoming highly competitive with Apple and Samsung in the big emerging markets. The major local manufacturers now account for two-fifths of China's smartphone market, and one-fourth of India's. Their share will grow. Xiaomi already sells four of the top 10 best-selling Android devices in China. Any consumer-focused Internet or mobile company active in these countries will need to learn to work with these manufacturers.
  • We've created a category we're calling the "Local 7," made up of the top five Chinese smartphone manufacturers, along with the the top two in India. Combined, these seven manufacturers are now shipping about 65 million smartphones every quarter, more than Apple and coming close to drawing even with Samsung. (See chart, below.)
  • These local manufacturers wield influence in various ways. They run their own successful app stores, mobile operating systems, and mobile services. They also hold the keys to which apps are preloaded on their phones. Finally, they are savvy about playing to specific local needs. They pick the hardware features, like dual SIM slots, which help differentiate local mobile markets.
  • The local manufacturers are not provincial outfits producing knock-offs, as some might be inclined to assume. They have been very innovative in product and strategy. Micromax, for example, has been shrewd in producing devices perfectly adapted to local market conditions, and creating a world-class supply chain. Xiaomi has become an Amazon-style purveyor of hardware that it sells at cost in order to hook consumers on their platform.
  • However, overall, their main competitive tool, for now, remains price. Local manufacturers in China and India match the features of more expensive devices and manage to produce comparable hardware at a fraction of the price. This is helping local wireless carriers wean their customers off feature phones and nudge them into the smartphone economy.
  • These manufacturers will continue to expand overseas, in search of new growth opportunities, especially as the Chinese smartphone market matures. The first wave of expansion has taken them into neighboring countries: Malaysia, Indonesia, Bangladesh, and Vietnam. But we expect Chinese and Indian manufacturers to eventually thrive globally, across Latin America, Asia-Pacific, and Africa.

 

Introduction

BII_Local7BIICombined, [...]