India's home-grown mobile phone giant is looking east. Micromax Informatics has successfully seen off Chinese rivals on its home turf, which is now being hailed as the world's most important smartphone market. But to realise its lofty ambition to be a top five global handset maker by 2020 the Gurgaon-based company will also need to sell in China. That's exactly what Micromax plans to do, Co-Founder Vikas Jain revealed during an on-stage conversation with Reuters Breakingviews at the RISE conference in Hong Kong.
India's smartphone market is rapidly catching up with its larger neighbour. Shipments grew 135 per cent in the two years until December, five times the rate of growth in China, according to data from IDC. Micromax, which churns out over 30 new handset models a year and also makes tablets and televisions, has been losing market share at home. Yet despite a surge of imports from Chinese brands like Huawei, Lenovo and Xiaomi, it remains number two in India behind South Korea's Samsung.
Micromax, which operates under the slogan “Nuts: Guts: Glory", has already successfully ventured overseas. It has become a top three player in Russia, helped by rising demand for affordable phones in the wake of the country's economic crisis. It also sells handsets in Eastern Europe and countries like Nepal and Bangladesh. Yet, any manufacturer hoping to penetrate the global top five must be present in China, which still accounts for 31 per cent of global volumes.
Venturing into the People's Republic will be a much more ambitious endeavour. For a start, the Chinese market is now saturated; customers mostly buy new handsets to replace old ones. It's also not clear what advantage Micromax will have over local rivals or the likes of Apple and Samsung, which dominate the top end of the market.
One thing that is clear is that Micromax will need lots of new capital. Chinese e-commerce giant Alibaba came close to paying $1.2 billion for a 20 per cent stake last year but the deal fell apart. The Indian company’s chairman left shortly afterwards. Micromax's four founders have since returned to run the day-to-day business. Fresh funding could come through a strategic partner or a local stock market listing, Micromax says. But raising cash might be the easiest part of breaking into China.
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)