Global chipmakers battle each other in Indian smartphone market

India is the latest battleground for global chipmakers such as Qualcomm, MediaTek and lesser known Spreadtrum, who are falling over each other to grab larger shares of India's chipset market that is expected to reach $1.2 billion, or about Rs 7,822 crore, this year, up from around $850 million in 2014.

India has become key to every chipmaker's hopes for sustained growth at a time when worldwide smartphone sales recorded the slowest growth rate since 2013 in the second quarter of 2015, as per Gartner. Sales in China — the biggest country for smartphone sales representing 30% of total sales — fell for the first time year over year, recording a 4% decline.

"India is one of the fastest growing markets globally, thanks to the huge scale it offers, low smartphone penetration rates, rising middle class incomes and the introduction of 3G and 4G technologies. It is the next battleground for chipset vendors after China and the USA," Sravan Kundojjala, associate director at research and consulting services provider Strategy Analytics, told ET. "Competition is definitely increasing," he said.

Taiwanese chipmaker MediaTek leads the Indian market by volumes with 35%-40% share in the quarter ended March 2015, as per Strategy Analytics data, followed by US giant Qualcomm and Chinese rival Spreadtrum with 25%-30% market share each.

In terms of revenues, MediaTek and Qualcomm split the top position with 30%-35% share each, followed by Spreadtrum that has 15%-20% revenue share.

"Competition will only get fiercer as handset makers and consumers demands for product differentiation rise," Finbarr Moynihan, general manager of corporate sales international at MediaTek, told ET.

The company will increasingly look at providing 4G chipsets at competitive prices on the back of which it plans to expand market share in India. It will also substantially increase investments into R&D manpower over the next couple of years, to better its competitive edge.

It's Chinese rival Spreadtrum, which claims to have become the No. 1 provider of 3G chipsets in India, also aims to progress into 4G chipsets, thus raising the stakes.

Qualcomm is backing on its local device testing and engineering teams which will offer improved speed to market, reduced costs and enhanced enduser experience to handset OEMs, operators and developers. It would also beef up its presence in all chipset segments to remain competitive.

The next round of battle is going to be in the 4G/LTE technology, the market for which is expected to flourish over the next couple of years with Reliance Jio and existing mobile operators such as Airtel and Vodafone expected to offer superfast data services at highly competitive rates and smartphone makers set to launch tens of 4G-enabled handsets across different price bands.

"The growth in LTE will be from next year and we want to be the leading player in LTE by 2016, repeat our success story of 2G and 3G in LTE," said Neeraj Sharma, head of India operations at Spreadtrum, to ET.

The Chinese chipmaker, in which computer processor giant Intel took a 20% equity stake last year, seems to hold an edge in perhaps the most important factor in the Indian market — pricing. It has been selling processors to Indian and multinational handset makers at lower prices than its peers. India, which made up 4% of the $21-billion global chipset market in 2014, is a highly price sensitive market.

"Sub-$150 smartphones dominate the Indian market and it's important for chipset companies to target lower priced devices with premium class specifications," said Kundojjala of Strategy Analytics.

Qualcomm is increasing focus on processors targeting entry level and mid-range smartphones after its global revenue dropped 14% to $5.8 billion in the quarter ended June. The US chipmaker has announced plans to lay off 15% of its overall workforce.

Qualcomm has launched Snapdragon 616, 412 and 212 processors for affordable smartphones. A company spokesperson claimed it's driving the adoption of 3G and 4G smartphones by pushing high-end features to affordable handsets without compromising on performance.

"For example, we have now brought LTE and Carrier Aggregation support, which will help operators leverage their fragmented spectrum assets, to even the lowest Snapdragon 200 tier," the spokesperson said. MediaTek's Moynihan said the firm plans to more than double headcount in Bengaluru R&D centre to 500 in the next few years as it looks to expand its 4G/LTE portfolio and market share in the country.

MediaTek, Qualcomm and Spreadtrum dominate the mobile chipset. In market shares, they are followed by smartphone makers Samsung and Apple.

(Image credits: Indiatimes)