Recently, Samsung India expanded its mobile manufacturing facility in Noida, Uttar Pradesh, by adding a new unit, thus making it the world’s largest factory for mobile phone production. With this, Samsung will nearly double its mobile manufacturing capacity in Noida from 68 million units a year to 120 million units a year by 2020. The new facility will also help the company take its “Make for the World” initiative in India forward, under which it aims to export mobile handsets produced in India to the overseas markets. Samsung has said that around 30 per cent of the production from the Noida unit will be exported.
The company’s expansion plans for the Indian market follow the significant deterioration in its smartphone market share in other countries, particularly in China where domestic brands such as Xiaomi, Huawei, Oppo and Vivo have become popular owing to affordable pricing and aggressive marketing. These vendors have made inroads into the Indian market as well, severely impacting Samsung’s footprint. As per the International Data Corporation (IDC), Xiaomi became the leading smartphone vendor in the country in the quarter ended March 2018, accounting for 30.3 per cent of the total smartphone sales, followed by Samsung at 25.1 per cent, Oppo at 7.4 per cent and Vivo at 6.7 per cent.
Despite its declining share in the overall smartphone market, Samsung continues to be the leader in the premium segment. According to market research firm GfK, Samsung held a 49.2 per cent market share in the flagship category during the quarter ended March 2018. In March 2018, the company held the majority share of 58 per cent, driven by the sales of the Galaxy S9 phones. Samsung, however, has ceded ground in the feature phone and semi-premium segments to JioPhone and Xiaomi, respectively.
In order to regain its leadership position across all mobile phone segments, Samsung is looking to revamp its strategies on several fronts. A look at the company’s new initiatives and future plans…
Battling it out in the semi-premium smartphone segment
Over the past two to three years, the Rs 10,000-Rs 25,000 price segment has emerged as the biggest battleground for smartphone players. The increased popularity of this segment signifies the fact that India is fast becoming a replacement market, with people upgrading their phones under the Rs 10,000 category to the Rs 10,000-Rs 25,000 price segment. Moreover, innovative payment options in this segment, such as instalment programmes along with cashback and buyback offers, have raised consumer appetite for higher-priced phones. The segment expanded nearly 50 per cent in 2017, overtaking the under-Rs 10,000 segment and is expected to grow further in 2018.
For several years, Samsung did not focus much on this segment. The company defended the high price of its smartphones, saying that more than the price, the Indian consumer looks for value in products. However, the recent decline in its market share and the increasing popularity of brands such as Xiaomi, Vivo and OPPO, which primarily cater to the under-Rs 10,000 segment, have compelled Samsung to redesign its strategy. It has launched four new smartphones in this segment in the past few weeks and a number of new device launches are expected in the coming few months.
Reviving tablet sales
According to IDC, the Indian tablet market recorded a 11 per cent decline in total shipments in 2017 over 2016. Samsung, which was once the market leader in this segment, was dislodged to the third position by Lenovo and iBall during the quarter ended December 2017. During this period, Lenovo accounted for 26.1 per cent of the total Indian tablet market, followed by iBall (18.5 per cent). Samsung recorded a 17 per cent year-on-year decline in its tablet shipments and secured a market share of 16.7 per cent.
While the market registered a negative growth in 2017, Samsung expects tablet sales to revive this year with consumer segment sales picking up, given the availability of cheap data prices and content, and wide 4G long term evolution (LTE) coverage. Taking into account the changing market dynamics, Samsung is planning to drive its tablet sales volume by launching sub-Rs 10,000 4G LTE tablets in India. In order to further drive demand, Samsung has partnered with Reliance Jio Infocomm Limited (RJIL) to offer bundled data and cashback offers to customers buying the Samsung Galaxy Tab A 7.0. The company is likely to come up with several such offers in the near future.
Increased focus on new technologies
Apart from domestic manufacturing, Samsung is expanding its research and development (R&D) activities in the country. By developing new solutions and services for its existing products and leveraging next-generation technologies, the company is looking to strengthen its position in the Indian market.
At present, Samsung has five R&D centres in India – two in Bengaluru and one each in Noida, New Delhi and Pune. The Bengaluru centre specialises in artificial intelligence (AI), machine learning, internet of things (IoT), augmented reality and 4G and 5G networks, while the Noida facility focuses on the development of biometrics solutions, mobile software, multimedia and data security. Meanwhile, the Delhi centre works primarily on research related to high-end televisions and other consumer electronics products as well as the company’s own operating system Tizen.
Samsung has drawn out elaborate plans to develop solutions and products across several technological domains such as AI, machine learning, signal processing, computer vision, mobile security, biometrics, IoT, natural language processing, augmented reality and 5G networks. For this purpose, it is looking to hire skilled professionals from premier technical institutes in the country.
Samsung has also announced a partnership with RJIL to bring 5G technology in India. In February 2018, it extended its collaboration with RJIL to deploy a nationwide cellular IoT network in the country. The first-of-its-kind IoT network in the country will support a variety of consumer and enterprise use cases such as vehicle tracking, smart appliances, smart metering, security and surveillance. Earlier, Samsung had helped RJIL deploy its LTE network across the country.
“By developing new solutions and services for its existing products and leveraging nextgeneration technologies, the company is looking to strengthen its position in the Indian market.”
Strengthening payments offerings
In March 2017, Samsung launched its mobile payments platform “Samsung Pay” in India. The payments portal received an encouraging response and in less than seven months of the launch, India became the third largest market for Samsung Pay after South Korea and Russia. Samsung Pay allows users to digitally store credit and debit cards, digital wallets and Unified Payments Interface identities in their handsets. The customer can then make contactless card payments using magnetic secure transmission technology, which mimics the card swipe at any point of sale terminal. The difference is that instead of passing on card information, the app sends a token that payment companies match with their database and approve the transaction. Samsung has also recently introduced the bill payments feature on Samsung Pay. The new feature will enable users to pay their utility bills seamlessly on a secure and convenient platform.
Future prospects
India continues to remain a key market for Samsung and the company has invested significantly in both manufacturing and R&D. In 2017, Samsung reported revenues of Rs 343 billion from mobile phone sales in India and aims to boost its revenues this year. With a slew of product launches lined up, Samsung expects to increase its overall market share in India by 5 per cent in the near term.
To counter the competition from Chinese vendors like Xiaomi, which has dislodged it from the top spot, Samsung is increasing its focus on the mid-price segment, e-commerce channels, after-sales service and payments offerings. In the long term, the company expects domestic manufacturing and R&D to drive growth. According to industry experts, Samsung’s newly launched manufacturing plant is likely to impact Xiaomi’s sales from brick-and-mortar stores. Samsung already has the largest network of over 150,000 retail outlets and 3,000 customer service points in the country. However, in the e-commerce segment, Xiaomi will continue to lead.
Samsung is taking the right steps to regain its leadership position in the Indian smartphone market. Going forward, the introduction of innovative smartphones and technologies, launch of key models in specific price segments and reduction in the time-to-market are expected to drive Samsung’s growth.
