By Hari Om Rai
Chinese companies rule the Indian mobile phone market with more than 90% share. Why despite being one of the largest mobile phone markets in the world, Indian companies are lagging in the competition? While India aims to become the world’s No. 1 mobile manufacturing hub by the year 2028, what would require to build iconic companies in the country that will be able to rule the global market?
The rise and rise of Chinese companies
In the year 2007, the mobile phones market share of Huawei, BBK group, and Xiaomi (which was not even established at that time), together was about 3%, which rose to become 10% in the year 2012. Today these companies hold about 90% market share in China and more than 50% market share in the world. Therefore, we need to understand that the market share is just an outcome of the competitive skills developed over a long period of time.
It is time to build iconic companies from India over the next two decades.
Competitive skills in a hardware business comprise of the cumulation of skills into R&D and design, creation of a competitive ecosystem of manufacturing of parts and components along the manufacturing of the final product.
Chinese companies’ market share increased to capture more than 90% of mobile phone market.
In order to understand why the market share of the Chinese companies rose to capture more than 90% and how Indian companies can create a similar difference, it is pertinent to zoom out and see things from a larger perspective.
Nothing happens by chance – Process of creating iconic companies
The only difference between a successful and a failed nation is the knowledge, technology, and skills of its workforce. Successful nations created large global firms for acquiring competitive skills and economies of scale for economic dominance. The state played a key role, with policy interventions providing protection, subsidies, and a supply of credit to domestic firms during their learning phase.
The ecosystem of the top 500 firms alone creates $30 trillion, which accounts for 38% of the global GDP.
Nations are rich only if they have large and successful domestic companies. The ecosystem of the top 500 firms alone creates $30 trillion, which accounts for 38% of the global GDP. Of these 500 companies; 9 are from Taiwan and create 66% of Taiwan’s GDP; 28 are from France and account for 60% of the French GDP; 16 are from South Korea and account for 51% of the Korean GDP; 32 are from Germany and account for 50% of the German GDP; 111 are from China and account for 50% of the Chinese GDP; 126 are from the USA and account for 43% of the US GDP; while only 7 are from India, and merely make up to 13% of the Indian GDP.
Each and every successful nation followed the same principle to progress from poverty to wealth.
For about 5,000 years prior to British colonisation, India accounted for around 25% of the world’s GDP.
I feel it is important to share tangible numbers that clearly point out our strategic and policy-related mistakes. For about 5,000 years prior to British colonisation, India accounted for around 25% of the world’s GDP. Post-independence, this number went down to 3.9%. More painfully, however, we have fallen further since then and today our GDP is a mere 3.2% of the World’s GDP.
Today our GDP is a mere 3.2% of the World’s GDP.
During our development phase, we erroneously copied the principles of developed economies and opened our market prematurely in the year 1991. In the Boom years of the 1990s failure to generate indigenous manufacturer’s technological capacity was hidden by the arrival of high levels of foreign direct investment but the country remained fundamentally weak. The credit in the economy started to divert towards unproductive consumer lending and speculation in housing / financial markets, etc., and the credit started to slip out of the government’s control.
Due to these structural issues, our economy has been struggling on several accounts with the record level of unemployment and unprecedented stress in many sectors.
India aims to become the world’s No. 1 mobile manufacturing hub by the year 2028.
The most opportune moment
Having said all this, it is also the most opportune moment in history which is knocking at our doors. Today there are new geopolitical contexts and the world is looking at an alternative manufacturing destination. The rise and rise of China making it less suitable for manufacturing going forward. It is time for India to present itself as the next global factory of the world.
R&D and design is the key for creating a competitive ecosystem of components and parts in the mobile manufacturing industry.
In the telecom sector, the government has been working on strategic initiatives to unlock the true potential of India and Indians in the long term with a vision to become the world’s No. 1 mobile manufacturing hub by 2028. First time in the history of independent India, domestic Champion schemes like PLI are in place and it is just the beginning of this direction.
This has been the historic budget making a mark of the beginning of a new India. It is an all-encompassing forward-looking holistic budget envisioned with a completely new paradigm. The government has given a clarion call to the industry with the announcement of creating global champions from India and backing this strategy with a new Development Finance Institution.
R&D and design is the key for creating a competitive ecosystem of components and parts. The government is already looking into this dimension and plans to create a national centre for excellence in mobile design and I am sure that it would create immense value for India in time to come.
About 40-50% of the global value chain of smartphones has been acquired in China by Chinese companies.
What more is needed
Further, we must understand that such steps are just the beginning of the nation’s progress, and a lot more need to be done by the government and industry together to build globally competitive firms from India.
One important element is to understand that about 40-50% of the global value chain of smartphones has been acquired in China by Chinese companies. It has been acquired through deep hard-work and practice of decades, which cannot be replaced instantly. When China was getting built, each developed country before China established their shops in China to build China. Today Chinese entrepreneurs have a great chance to create alternate shops in a democracy like India. But we need to treat the Chinese companies with skills coming to India, equally and fairly.
India is at 17% of Chinese per capita income.
The softer skills and attitude are even more important for growth. In the words of Einstein, no problem can be solved with the same level of consciousness that created it. India has everything needed to become iconic and great but our vision and actions must transform. We should stop looking for precedence in policymaking. We need to be humble & nimble and be ready to change with new learnings and build India with a completely new paradigm.
As this ecosystem is getting built, on the industry side, we need to acquire holistic skills in R&D and design, supply chain and manufacturing with a culture of excellence. Extreme leadership and rigour shall be needed to compete with the best of the best in the world. We are at 17% of Chinese per capita income. The moment we will acquire skills by creating a large-scale competitive manufacturing and design ecosystem, we would be the most competitive in the world.
It is time to build iconic companies from India over the next two decades, let’s dream and dream big.
Also Read: 5G technology in the Indian concept
(Hari Om Rai is Co-chair, ICT & Mobile Manufacturing and Chairman & Founder Lava International Ltd.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)