'Desi' mobile phone brands worry MNCs

Bangalore: Kunal Ahuja, CEO of Spice Mobiles is worried because there is a 'desi' mobile brand popping up almost every other day, with names such as Lava, Karbonn, Pagaria, Intex, Olive, and, of course, Videocon, reports Sreejiraj Eluvangal from DNA. "Anybody and everybody is launching a mobile phone brand. This is not a short-term game, a lot of them are not going to survive tomorrow," Ahuja warns.

Each of them is fighting Spice's price-points with a phalanx of offerings. Not surprisingly, margins are receding fast. Spice Mobiles, which is a listed company, has an average selling price of 2,034 per handset and purchase cost of Rs 1,484. Marketing and other expenses cost Rs 513, and Spice is left with a pretax profit of Rs 232 per handset. Today, these brands account for a fifth of India's mobile handsets market, with Micromax and Spice alone totting up some 12-14 percent spoils.

It all began due to a revolution in the Taiwanese mobile market some years back. The emergence of Mediatek, the first sizeable Asian chip company, spawned an ecosystem of device assemblers, some of whom have beaten all multinational brands in sales except Nokia and Samsung.

Mediatek started out a decade ago supplying chips for TVs and other appliances, but shifted attention to the mobile market five years ago. However, it was 2009, which saw the company really hit an inflection point when it sold 300 million core chipsets for handsets - or around 22 percent of the global market. And nearly all of those chipsets, which are the heart of a phone, went to unbranded or 'white label' Chinese manufacturers.
Mediatek aimed at small manufacturers who don't have such luxuries. And, unlike rivals, it offered the blueprint for a near-complete phone and tools to easily tweak or customise the basic design. It also provided its own software to run the phone, again with tweaking options.

"Of course, we owe a lot of our success to Mediatek," says Vikas Jain, Business Director of Micromax, the most successful of the new breed of 'Mediatek' phone makers. Jain's two-year-old Micromax has become the No. 3 brand in India, pushing back global giants LG, Sony Ericsson and Motorola. The company hit 1 million unit sales in January this year, cornering nearly 10 percent of the market.

"There used to be a time when you would have had to get your chipsets from Infineon or Qualcomm. Now we have Mediatek and a large part of their success is because of the ease with which their basic designs can be altered. They give you about 60 percent of the design and you add another 40 percent of features, opening up the possibility of innovation at your level," Jain says.

Today, there are anywhere between 20 and 50 Mediatek-based mobile brands in India, nearly all of them less than 18 months old. Within the desi bunch are two groups - the ones that have a hand in designing the phone and those who purchase handsets manufactured by Chinese companies in bulk.