Indian phone brands may not be able to fill the void that Chinese budget phone ban may create

• The Indian government is reportedly considering banning Chinese smartphone makers from the budget segment.
• According to a report, the government will restrict Chinese companies from the sub-₹12,000 segment.
• This move is aimed at giving a boost to domestic smartphone makers in the country.

Chinese smartphone makers dominate the Indian budget smartphone market and account for around 80% of the market share. A recent report suggested that the Indian government is considering banning Chinese smartphone makers from the sub-₹12,000 ($150) segment. This is reportedly aimed at giving a boost to domestic smartphone makers.

However, experts are sceptical about how this will benefit domestic smartphone makers like Micromax and Lava.

Domestic companies may not be able meet the demand

Experts have said domestic manufacturers such as Micromax and Lava will not be able to benefit from a ban on Chinese smartphone makers in the budget segment, especially in the short term.

“As things stand today, they won't benefit too much. They do not have the scale or product portfolio to attract this set of consumers. However, in the medium term, if they decide to reinvest in rebuilding their businesses and scale up, they can surely do well here,” said Navkendar Singh, Associate Vice President of Devices Research, IDC India, South Asia & ANZ.

Tarun Pathak, Research Director at Counterpoint Research, said that a ban is unlikely, and even if it occurs, it will have an adverse impact on the smartphone industry.

“I think an outright ban is unlikely, but overall, restricting certain players based on segment might lead to an unstable ecosystem. First, the sub-₹12,000 segment is roughly a $5 billion category, and only two or three local players currently can't take it overnight,” said Tarun Pathak, Research Director, Counterpoint Research.

Every four out of five budget phones are Chinese

The Chinese smartphone makers have a huge market share in the budget segment. Companies like Xiaomi, Vivo and Realme account for nearly 80% of the market share in the budget segment.

A ban will not impact the availability of devices; it will also impact the availability of 5G-ready smartphones in the budget segment, as per experts.

“Chinese players have a 75-80% share in the sub $150 segment that contributes to 31% of the overall smartphone market, and since we are at a cusp of tech transition, this move can also slow down the diffusion of 5G into lower price points (sub-₹12K),” Pathak added.

Impact on consumers

The competition among Chinese smartphone makers has made it possible for consumers to get devices with features such as a high-refresh rate display, large battery and decent design at an affordable price.

Banning these companies will not only take away options from Indian consumers but also reduce competition in the segment and may result in reduced features. This may also force consumers to spend more money to purchase Chinese smartphones that are available at a higher price point.

In addition, there may be a shortage of smartphones in the budget segment as domestic players will need some time to ramp up production.

Suggestions by the industry

According to a report by Economic Times, industry executives have worked on a list of suggestions to restrict Chinese smartphone makers from the budget smartphone segment that will be sent to the government in the first week of September.

The suggestions include mandatory joint ventures with local companies for production, creating a trusted sources list for procurement of materials and partnerships with companies like Google, Microsoft and Meta to create an Indian mobile operating system.

The suggestions also recommend the government leverage the Bureau of Indian Standards and other regulatory bodies to restrict Chinese smartphone companies from the budget segment and push for exports from domestic companies.
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