MUMBAI – South Korea's smartphone maker Samsung Electronics has extended local sourcing to software in India to regain the leading position of the growing Chinese market over its Chinese low-cost competitor Xiaomi.
Samsung has recently partnered with Indian software developer Indus OS to enable the Galaxy Apps Store to support various local languages.
The phone manufacturer, which opened the world's largest mobile factory on the outskirts of New Delhi in July, plans to nearly double the number of smartphones manufactured in India from 68 million by 2020 to 120 million a year. up offers an edge over competitors like Xiaomi and Vivo, who do not need to implement apps in local languages yet.
The production expansion aims to "meet the rapidly growing demand in the Indian smartphone market and increase exports to the overseas markets," Samsung said.
With more than 1 billion people, India offers smartphone makers the opportunity to expand beyond the slowdown in markets such as the US and China. But they must go further than the urban areas of India.
The simplified Indus operating system allows rural users of Samsung Galaxy phones to download apps without signing in with an email address many of them do not have, The software supports 12 languages besides english.
"With a rapid number of users from smaller cities and cities, we anticipate tremendous growth in demand for the economy app business," said Sanjay Razdan, senior director of Samsung India.
Rakesh Deshmukh, co-founder of Indus OS, told a local newspaper that Samsung wants to create more Indian services and products and that the new partnership fits the strategy of the South Korean company. For Indus, the merger means access to 30% of the market base in India.
Indus OS was available on some phones from Indian manufacturers such as Micromax, Karbonn and Intex. However, as Chinese brands displaced these once dominant manufacturers, the software startup needed to look for other partners to support its operating system.
Companies such as Xiaomi, Oppo, Vivo and Apple are already assembling mobile phones in India, but still have to make large investments in the production of important parts such as display panels and batteries. Most parts for their phones are still imported from China.
The Indian operation of smartphone manufacturers is shifting from simple assembly to higher value processes, says Tarun Pathak, Associate Director at Counterpoint Research. "Although we lag far behind China in mobile phone manufacturing, value added in India increased from 17.6% to 17% in 2018," he said.
Pathak adds that Samsung is weighing India's export potential, especially after it reduced its activities in China last year. The company is also looking at ways to reduce production costs to compete with Xiaomi.
According to the research firm IDC Xiaomi 2018 had a share of 28.9% in the Indian smartphone market. This left 22.4% for Samsung and 10% for Vivo. Samsung, which dominated the Indian market for several years, lost its lead over Xiaomi about a year ago.
In February, Samsung launched a new line of budget smartphones called the Galaxy M Series. With prices ranging from Rs 10,000 ($ 145) to Rs. 20,000, the phones are positioned as competitors to Xiaomi devices. Market observers say this shows Samsung is taking pricing seriously to regain market share.
Meanwhile, India is trying to increase local production by charging import duties on parts such as phone chargers, headphones and batteries.
Xiaomi uses the Taiwan-based Foxconn unit in southern India to assemble its phones into a total of six facilities. The Chinese company has also tried to persuade its suppliers to move to India.
Even Apple has quietly expanded its procurement in India in the last two years to compete with the South Korean and Chinese rivals in the fast-growing market.
Although Apple still relies on more than 90% of its annual supply to manufacturing partners in China, it has five outlets supplying iPhones and components in India two years ago.
Analysts say India's supply base is still evolving and it will take some time for companies to consider relying on Indian manufacturers rather than local subsidiaries of global manufacturers.
Nikkei employee Kim Jaewon in Seoul contributed to this story.