Enter the Dragon: Chinese Brands Growth in India

- Things are changing rapidly, adapt or perish

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 India Mobile Phone Market Trends

• Total mobile phone shipments reached close to 243 million units with almost 100M+ smartphones for the first time ever
• However we see smartphone penetration of the total shipments to rise to close to 60% by end of 2016

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© 2016 Counterpoint Source: Market Monitor 2015
 Chinese Brands Growing!

India Drill Down : Local Kings Rule but..

International 46% 45% 43% 40%
Indian 46% 51% 41% 38%
Chinese 8% 4% 16% 22%

Brands on
Growth
Spurt

© 2016 Counterpoint Source: Counterpoint Research – Market Monitor CY 2015

 Chinese Brands Growing Reason 1: Tapping the Online Boom

Popular Online Portals

15%

33%
Brands with Online As Main Channel

2015 Offline Sales

2015 Online Sales

2014 online Sales

Exclusive Online Launches

Total Smartphones sales
through online channels in
CY 2014 were around 15%
and reached 30% during CY
2015.

• Chinese brands have a combined 60% share of the online ecommerce channels

• Online-only brands like Motorola,OnePlus,Honor have adopted aggressive strategies

recently in terms of expanding to offline reach and consumer service centers which will
likely have positive impact on 2016 shipments

• Tier One and other local vendors will go for exclusive online launches for specific SKU’s
going forward.
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© 2016 Counterpoint Source: Q4 2015 Market Monitor
 Chinese Brands Growing Reason 2: Tapping the LTE Phablet Boom

• LTE Shipments grew 1200% in 2015 with Chinese brands capturing almost 40% share where as Indian brands captured just 20% share
• Many brands are moving towards all LTE portfolio even in India. E.g. Apple, Xiaomi, Lenovo, Huawei, Motorola, OnePlus and so forth
• Local brands are now ramping up their LTE portfolio though being late entrants in launching LTE enabled devices in the market.

CY 2015 CDMA CDMA/GSM GSM GSM+CDMA LTE WCDMA

100%

90%

35.03%
80%

70%
71.38%
60%

50%

40%
58.19%
30%

11.15%
20%

10% 17.22%
6.75%
0%
Q1 2015 Q2 2015 Q3 2015 Q4 2015

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© 2016 Counterpoint Source: Market Monitor Q4 2015
 LTE – Leapfrogging from 2G to 4G China Mobile : LTE Leapfrogging

India: Jio, Airtel & Vodafone 4G rollout – Inflection Point

• Will be an inflection point in Indian industry as many

smartphone consumers leapfrog from 2G to 4G network
as they become more mature and advanced smartphone
users

• India is a ‘mobile first’ economy and hence proliferation

of internet will be possible only with 4G LTE to masses

• We forecast LTE demand to cross 100 million units per

year by next year

• We will see higher attach rate for 4G as internet becomes

• It took just 22 months for LTE subs to reach 300 million LTE Subs in more important than other basic amenities
China, compared to 52 months to reach the same milestone for 3G
subscriber base

• We are expecting this to happen in other emerging markets where 3G

did not take off but 4G handsets and subscribers will leapfrog

• 9 out of 10 smartphones shipped in China were LTE capable in 20115

• China Mobile’s aggressive rollout, Chinese brands moving towards all-

LTE portfolio and maturing smartphone users were the key to 4G
adoption faster than 3G adoption
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© 2016 Counterpoint
 Chinese Brands Growing Reason 3: Business Model Approach

A: Hardware Players i.e. selling phones only based on price,

specs and design created value by building better distribution
Channel Expansion and service network in offline channels. This has been a
A Hardware
B traditional approach and accounts to 65% of the market but
quickly being encroached by B,C & D as value prop is shifting

B: Hardware Players i.e. selling phones only based on

price, specs and design created value by selling “direct-
to-consumer” mostly in online channels. This has been an
innovative approach for new brands entering the market
which lacks robust offline distribution n/w. This allows
these brands to sell good-spec h/w at atleast 20% lower
Value Proposition

price than A players.B now accounts to 30% of the market

but is being challenged by vertically integrated ecosystem
Expansion

Offline Online players C and “Hardware as a Distribution” HaaD model

players D where the value prop is shifting

C: Ecosystem Players i.e. selling phones leveraging

Ecosystem
C D
• 2016 onwards we will see more shifts from B to A and vice-versa, classic channel expansion
to gain scale
• 2016 we will also see D getting bigger and players in A & B trying to build an ecosystem
(hardware or software) to move to D
• C will become more formidable as they start scaling leveraging their vertical ecosystem
• D will have to continue to promote their ecosystem to build ecosystem awareness
network effects thanks to a robust and broad ecosystem
ensures higher value proposition, stickiness and lock-in.
These players are vertically integrated and will grow
organically but will capture maximum value. In long term,
these will become more formidable with scale t o
challenge mostly A players. These players will have strong
offline presence with high customer touch points.
D: Ecosystem Players i.e. selling phones leveraging
network effects and expand value proposition compared to
A & B players by going very competitive on price (almost
subsidizing) to build an ecosystem by using HaaD model
either by bundling internet services, content or innovative
software design and so forth. To achieve this, these brands
will have to adopt lower cost online channels which highly
suits their business model. These are disruptive with
partner led or semi-vertically integrated model

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© 2016 Counterpoint Source: Market Monitor Q4 2015
 How Does 2016 Look from Product Perspective?

• India is a huge scale and high growth market but is also highly competitive and price-sensitive

• However, the overall scale and smartphone demand is skewed towards sub US$150 price bands

• While the bulk of the Indian consumers are price-conscious but consumers are getting savvy and aspire for optimal hardware configurations and
designs but at affordable price-points

• At the same time there is also a significant size of rich urban savvy consumers which can be targeted with ‘affordable super-premium’ configurations

• Brands looking to target the bottom of the pyramid in sub US$150 segment effectively in India needs to bring optimum spec configuration
especially with these key specs in near future:

 Phablet (5” & HD/FHD + OLED Display)

 DUAL SIM / DUAL LTE Connectivity (Multiple bands support)
 16GB / 32 GB ROM & 1GB/3GB RAM configurations
 13MP+/5MP+ front and rear camera configurations
 Fingerprint Sensor

• In sub US$150 segment, competition will be intense with Chinese & Indian OEMs as Samsung is already losing ground.

• So slimmer attractive metallic designs with higher quality performance storage, connectivity and bigger displays bringing “affordable premium” to
masses will be the key

• OEMs looking to target mid- to premium price bands, will need to attract consumers with SKUs starting with 32GB / 64GB configurations as in those
segments integrating advanced higher pixel cameras and sharper displays will drive need for higher embedded storage out-of-the-box for optimum
user-experience.

• Analyzing the best sellers at price band level is the key to build an optimal configuration at a viable cost and translating to an affordable price-point

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© 2016 Counterpoint
Company Introduction

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 Company Overview

Mission  To help client companies make better decisions

 Asia-based but globally focused

Strategy  A global team of analysts with offices in the US, China, UK, HK, India,
Argentina and South Korea
 Founded by senior industry experts with established reputations and
industry-wide networks in major markets worldwide
 Experienced in using industry intelligence as members of corporate strategy
and planning teams for major technology companies and in creating
insightful analysis as long-time industry analysts
 Based on proprietary analysis-techniques utilizing both top-down and
bottom-up analysis to assure accuracy

 Connected devices, digital consumer goods, software & applications and

Business other adjacent topics
Focus  Tailored as well as syndicated research reports
 Seminars and workshops for companies and institutions
 Consulting and customized project work on the above topics

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 Why Counterpoint?

We’ve been in your shoes. Long careers in industry roles have taught us that regular research providers
have lots of information but rarely answer the particular operational issues that you have to deal with. We
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 Our Asset – Analyst Experience

• Superior to industry peers, with unmatched experience, knowledge & background, direct from industry, with
an average of eight years of experience.
• We have 11 analysts dedicated to connected device research and consulting.
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“Why would you ask about your business to someone whose never had the experience you have?”

Counterpoint’s Research Directors

Peter Richardson Neil Shah Tom Kang

Research Director, Research Director, Research Director,
Tech Strategies Devices & Ecosystems Connected Electronics
“25 years in the “11 years in the “14 years in the
industry, 15 years industry, 3 years with industry, 8+ years with
with Nokia, NEC, Philips Consumer LG Electronics and LG
Panasonic. 9 years Electronics. 3+ years Infocom. 4 years with
with Gartner and on with Strategy Strategy Analytics”
Wall Street ” Analytics & more”

Jeff Fieldhack James Yan

Research Director, Research Director,
Smart Devices Smart Devices
“18 years in the industry, 10 “12 years in the industry, 3
years with Nokia & Microsoft years with Telling and 9 years
6 years with Gartner and on with IDC & TNS (JV)
Wall Street ”
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 Fast Facts on Counterpoint Database

• We track the market in detail every month for your planning needs

3,000+
Every Month
models

500+
Brands

39+
Countries

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• Conducting direct surveys with
consumers, CIO departments,
relevant industry stakeholders.
• Interviews with executives
responsible of ICT expenditure
and IT product development
and distribution.
• Interviews and calls with
industry experts to get an
overview and validate
hypothesis as well as fill in
white spaces.
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validate assumptions and
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Proprietary Models
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trends and potential
opportunities.
• Analytical modeling using top-
down approach from our
insights
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to create the total picture and
explain future trends in the
market.
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 Monthly Data Collection From Channels

We gather data from 40 countries (including the US and China) which adds up to 85% of the industry. We try to get data from all levels
of distribution.

OEMs

Mobile National/Regional/Local
Operators Distributors

Operator Mobile Consumer Others (Mass OEM

Direct Dedicated Electronics Merchants, Branded /
Stores Retail Stores Retail) Franchises

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 Rigorous Methodology = Depth & Accuracy

We implement our top-down/bottom-up techniques to provide fast, reliable and consistent research, data
and facts.

Corporate-level
Top-Down Survey + Secondary

 Information

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Expert  Direction
f(x) Proprietary Models
Knowledge
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 Solutions

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Unrivalled depth which is completely different from other secondary research firms. For example:

“Samsung sold 74.1 million smartphones in Q4 2014 and the model level breakout is…. Where, How & Why”

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 Contact Information
Neil Shah
Research Director
Mobile: +91 9930218469
@neiltwitz

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