In an industrial area outside the Indian capital of New Delhi, there is a factory with 400 workers and an area of about 3,000 square meters. In the past, it mainly produced electronic products such as mobile phones, headsets, and chargers. There were six production lines and three packing lines in the factory, and they remained silent for two months until work was resumed in mid-May. In normal days, these assembly lines can assemble up to 10,000 mobile phones a day.
original title:[深度]The Chinese mobile phone “unknown army” in India: It must be a loss this year, but it’s no surprise
Reporter: Wu Yangyu
Among them, about 80% are OEMs for local Indian mobile phone manufacturers, such as Lava and Micromax, focusing on low- and medium-end smartphones priced between 400 yuan and 500 yuan; the rest are private brands, all with “unbranded” functions of up to 100 yuan machine.
“It must be a loss this year.” Sister Chen from Guangdong is one of its Chinese bosses. In terms of foundry alone, the factory basically has orders for 500,000 to 600,000 units every month, and this year’s figures are “cut in half.”
Sister Chen, who has seen opportunities in the Indian mobile phone market since 2007, has gone through the two stages of introducing mobile phones into the Indian market from domestic factories and building a local factory in India to assemble mobile phones. The 13 years she has been in the industry is also the epitome of the story of a Chinese mobile phone merchant in India.
It’s just that the outside world is generally more familiar with the second half of the story. Domestic brands such as Gionee, Huawei, Xiaomi, and OV have successively entered the Indian market and established their positions in the Indian market after the big waves.
At the beginning of 2020, the new crown epidemic broke out. India has adopted a blockade order since March, and has repeatedly tightened and extended it. At the end of June, in the context of Sino-Indian border friction, the Indian government issued a ban on Chinese apps, and the signal was intuitively transmitted to Citizens; There are also a series of policies that have shown that India seems to no longer be the place where gold was rushed.
2020 two major hurdles
In late April this year, the turning point of the epidemic in India has not yet appeared, but in order to boost the economy as soon as possible, the Indian government had to gradually liberalize agriculture, manufacturing, and engineering construction during the blockade.
According to reports, in mid-May, several Chinese-funded companies said that the resumption rate was around 20%, and the local competent authority stated from the perspective of epidemic prevention that the production capacity was restored to 33% at most.
But this restriction is obviously difficult to abide by. According to the policy, Chen’s factory resumed work in mid-May. In the past four months, about 50% of the workers have been on duty, and the overall production capacity has recovered to 70%-80%. The Jiemian News reporter learned from another person close to the mobile phone industry that the level of resumption of work he knew was also about two-thirds.
“They (India) are actually very poorly controlled, but we still depend on the economy to survive.” Sister Chen explained, “Most of the workers are hourly workers. If you don’t do temporary workers, you won’t have income. Without income, you can’t support your family. .”
In addition, similar to the situation during the severe period of the domestic epidemic, the logistics level in India has also fallen sharply. “This year’s logistics operation is very difficult. It used to arrive in two days for a shipment, but now it may take 20 days.”
Chinese businessmen engaged in the mobile phone industry in India have experienced two major nodes this year: one is the epidemic and the other is a ban. The two have affected them from different dimensions. The impact of the epidemic is broader, long-term and fundamental, including but not limited to production capacity and logistics. Although the impact of the ban is not direct, the political factors behind it are more uncertain.
On June 29, the Indian government announced the ban on 59 mobile apps from China, including TikTok, WeChat, QQ, and Sina Weibo, and subsequently issued similar bans twice. So far, the Indian government has banned 224 Chinese apps.
In Chen Jie’s view, whether it is a feature phone or a smart phone, the mass removal of App has no direct impact on its production and sales, but it has an indirect impact on its business transactions.
During the lockdown period, Sister Chen’s customers “none of them can get by”, all communications were transferred from offline to online, and the ban on social apps such as WeChat forced them to use email only, greatly improving communication cost. According to her, the time period for determining a sample has doubled from 5 days to 10 days.
Of course, procrastination only reduces the efficiency of communication, and the root of the problem is the trust barrier that online communication itself brings to practitioners in the electronics industry. “They can’t see the machine, and we can’t send out the prototype. Many things are viewed through video and email, so they are not particularly confident in the product.” Chen said, the customer would think, “Did you give me The product you said?”
Old customers will continue to give trust, but customers with unstable relationships will abandon them out of caution. Sister Chen estimated that this group of people accounted for 30-40%. In the past month, the foundry business had stable orders for 500,000 to 600,000 units, and this year it has “halved directly.”
However, Sister Chen knows in her heart that the problem is not all on the customer, and the shortage of goods caused by the factory capacity and supply chain cannot keep up is the “original sin”.
According to The Paper, starting from June 22nd, the port of Chennai, India, will stop the customs clearance of all goods from China and implement 100% inspection on all goods from China. Since July 1st, customs clearance of the goods stranded in China has been carried out successively.
Sister Chen’s factory focuses on assembly work. Except for screens and chips, most of which are imported from Taiwan and South Korea, the rest of the components are from the Pearl River Delta region of the mainland. In the case that the efficiency of international logistics has been greatly reduced, the above policies have also slowed down the replenishment of other raw materials, and the factory’s order acceptance and delivery capabilities have been affected. After customs clearance, materials have gradually arrived at the factory, and production capacity and logistics are still unable to cooperate. .
“Frankly speaking, there are still many factors caused by us, mainly due to the lack of screens.” Chen said, “The second is that the purchasing power of India is still in a conservative state. Money will not be spent casually now.”
How to fight “Unknown Army”?
According to reports, after the Sino-Indian border friction occurred in mid-June, India has started to boycott Chinese products.
Although it seems that this craze has not continued to heat up, out of concerns about the unclear political situation in India, Sister Chen has begun to consider gradually shutting down the business line of her own “unbranded” mobile phones.
India implements federal administrative divisions, with 28 states, 6 federal territories and 1 national capital jurisdiction. In terms of her own brands, Sister Chen has one or two agents in each state. Big cities like New Delhi, Mumbai, Chennai and other large cities will find an agent separately. These agents have cooperated for more than ten years. There is no billing period, and cash spot transactions are implemented.
Agents usually go to shopping malls in each city that specialize in wholesale mobile phones and accessories, or similar to domestic third- and fourth-tier cities or even lower-tier villages, where small markets will also have their own brand-name mobile phone stores.
Because the sales are all 100 yuan function machines, Chen’s audience is generally low consumption groups, such as farmers, temporary workers, or students, housewives, etc.
“In the past, when the shipment volume was the highest in a month, there were 700,800,000 units. This year, there are not many, and there are 10,000 units in a month.” Sister Chen said that this year the agents told her that these goods were not so good. .
In this regard, Sister Chen’s choice is “conservative”, instead of mass production, she will continue to stock up. “The state of the entire market is actually very unclear, and we will soon return to this market, because we have some channels, so we still intend to wait and see.”
She believes that mobile phones are indeed still being sold normally, “(but) in the later period it will (locally in India) take other repressive measures against our goods, including domestic brands, which is not at present to say.”
In fact, in addition to non-brand mobile phones, domestic brands such as Xiaomi, OPPO, and vivo also have their own problems in India.
According to data released by market research company Canalys, due to the impact of the epidemic, smartphone shipments in India in the second quarter fell by 48% year-on-year, the largest drop in the past decade. In the second quarter, India’s smartphone shipments were 17.3 million units, far lower than the 33.5 million units in the previous quarter and the 33 million units in the first quarter of 2019.
The mandatory measures taken by the Indian government on mobile phone sales are the main reason for the sharp drop in sales. From March to late May of this year, the Indian government classified smartphones as non-essential/non-essential goods. The sale of mobile phones and other goods was prohibited on offline stores and e-commerce platforms such as Amazon and Flipkart.
Affected by this, Xiaomi, vivo, Samsung, OPPO, and Realme are the top five manufacturers in the Indian smartphone market, and their Q2 shipments fell by 48%, 36%, 60%, 27%, and 35% respectively.
Yang Shucheng, secretary-general of the China-funded Mobile Phone Enterprises Association (CMA) in India, analyzed the interface news and said that there are many reasons for the current problems of Chinese factories and Chinese companies in India. Firstly, if an employee develops an infection, the company must take vigorous preventive measures and treat the employee; secondly, before the Indian government has issued relevant preferential policies, the cost of rent and water and electricity will not be reduced; secondly, due to policy restrictions, technology Business trips with managers are a problem; in addition, logistics has not only decreased in efficiency, but also increased costs by one or two times.
Although the crisis faced by domestic brands is more severe, unlike other brand-name mobile phones, these brands can still strive for stable sales through online channels.
According to reports from various Indian media on the overseas website, OnePlus 8 Pro was sold out within a few minutes after it was launched on the Indian version of Amazon on June 18. And Xiaomi, which is good at driving offline and ranking first in the Indian smartphone market, its mid-term financial report shows that the average daily activation number of Xiaomi series phones in India in July has rebounded to 72% of the pre-epidemic level.
Such a story can hardly happen to Chen’s brand. There are a series of thresholds for mobile phones to be launched on Amazon and other electronic products, and multiple certificates are required. One of the more troublesome is that each product must be certified by The Bureau of Indian Standards (BIS).
In fact, due to the strong entry of domestic brands such as Xiaomi and OV, the profit of the Chen sister factory has been decreasing every year since 2017. “They have both publicity and service, and the price is not much different from ours. People must choose them.”
But she still said, “To be honest, I am actually quite proud of them.”
“In the beginning, our domestic brands were very beautiful there. Later, local Indian brands suppressed us miserably. Later, OPPO, vivo, plus brands such as Xiaomi and OnePlus, had high exposure and high sales. In such a market, it opened its own way and defeated those local brands.”
“I think the Chinese are still very good.” She said.
Does India still have a chance?
When she went to India to do the mobile phone business in 2007, Sister Chen still purchased from Henggang, Shenzhen—all of which were fake brand phones—and then sold the goods to India.
Practitioners recalled that at that time, the Indian market was not yet dominated by domestic brands. It was at a time when copycats were popular with Shenzhen companies.
But this situation was quickly reversed. In December 2008, it was reported that the Indian government had notified its customs department for security reasons, requiring all imported mobile phones to declare IMEI numbers.
The IMEI number is the unique device number used to identify the mobile phone in the GSM network. When the mobile phone is stolen, the operator can prohibit the normal use of the mobile phone based on the IMEI number. Each mobile phone corresponds to an IMEI number, but copycat mobile phones basically do not have an IMEI number, or a large number of them use the same IMEI number. This was regarded by Pankaj Mohindroo, then President of the Indian Telephone Association (ICA), as “making it very difficult to track cell phones.”
Although the reasons are entirely valid and valid, in many people’s eyes, miscellaneous mobile phones have encroached on a large number of market shares of regular mobile phone manufacturers. This move also “swept away” the best-known Chinese miscellaneous mobile phones, causing them to go downhill since 2009. Local Indian mobile phone brands are gradually emerging.
Later, the domestic regular army represented by Gionee entered the Indian market, followed by Lenovo, OPPO, vivo, and Xiaomi. According to data from Counterpoint Research, a market research organization, the market share of Chinese mobile phone brands in India reached 18% in 2015, a huge increase from 4% a few years ago; while the market share of local Indian brands increased from 48% in the previous year. % Dropped to 43% in 2015.
Halfway through September 2014, the Modi government of India proposed the “Make in India” plan and began to use various measures to transfer manufacturing to India. One of the most important is the increase in tariffs related to mobile devices. Take mobile phone accessories such as power banks and data cables as examples. If there are factories in India, the tariff is 1%. If not, the tariff rate is 29.441%.
According to China Economic Weekly, Gionee, vivo, Lenovo, Huawei, and Xiaomi subsequently announced huge plans to build factories in India and implemented them one by one. In fact, Chen’s factory was also invested and established around this node.
After that, the growth of Chinese brands in India became even more uncontrollable. In just one year from 2015 to 2016, among the four major domestic “cow” domestic mobile phone manufacturers in India (the English initials of the four companies are MILK), both Karbonn and Intex have become weaker in the smartphone market. , Only Micromax and Lava are struggling. Counterpoint data shows that the combined market share of the four major Indian local brands in the smartphone market (excluding feature phones) this year was only 3%.
The one-sided situation continues uninterrupted. As of the second quarter of this year, Canalys data shows that Chinese brand smartphones have nearly 80% market share in India. Among the top four sales rankings, Chinese brands accounted for three seats, namely Xiaomi, vivo and OPPO, which ranked first, second and fourth.
However, under the influence of the epidemic and politics, the next journey of Chinese capital and Chinese companies in India will temporarily be a question mark.
According to IT Times, on April 1 this year, the “Production-Linked Incentive Program (PLI Program) for India’s Large-scale Electronics Manufacturing Industry” drafted by the Ministry of Electronics and Information Technology of India was released. India will spend more than 400 billion rupees in the next five years. Encourage the development of electronics manufacturing including smart phones.
As of the end of the application period for the program on July 31, the approved foreign companies include Samsung Electronics, two factories under Foxconn, Wistron, and Pegatron. Xiaomi, OPPO, and vivo, which have established factories in India, have not been shortlisted. In the series of export applications of mobile phone manufacturers approved by the Indian government on September 7, there were no Chinese mobile phone brands.
On April 17 this year, the Ministry of Commerce and Industry of India suddenly revised Article 3.3.1 of the FDI policy in order to prevent assets from being acquired by speculative bargain hunting during the epidemic, and to remove all investments directly or indirectly from India’s land neighbors from the previous The “automatic approval path” applicable to some industries has been changed to “government approval path”.
The revised regulations will affect Chinese companies, companies that are actually controlled by Chinese overseas, and Chinese investors such as Chinese capital, directly restricting the flow of Chinese funds into India.
In fact, Indian local brands may also be looking for opportunities to regain lost land in the smartphone market.
In July of this year, India’s largest telecom operator Jio announced that it has teamed up with Google to develop entry-level smartphones. Reported that the smartphone will be compatible with 4G and 5G at the same time, and run Google’s Android operating system.
Canalys analyst Rushabh Doshi said: “Historically, Reliance (Jio’s group) will seize the business of other brands at lower prices, posing a threat to the low-end smartphone market.”
Sister Chen, who experienced all the foregoing, also heard the news from India in the first half of the year. Regarding the joint announcement of Jio and Google, she said that on the one hand, all the components of this mobile phone may eventually have to be imported from China, on the other hand, its play style cannot keep up with Chinese brands. “This kind of thing will happen once every few years, and we are not surprised.”
Because of the epidemic, Sister Chen, who used to fly to India nearly 20 times a year, may not be able to personally understand this market in the past year or two. However, she said that after several turbulences, the team has gradually gained experience in surviving headwinds, and therefore remains confident in the Indian market.
“We have made money in India, and we know how to deal with it.” Sister Chen said, “Maybe we can’t use as much money to hit (the market) like a big company, but we are flexible in making adjustments, and the profits are our own. “