How Realme cracked the tough Indian market

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Last year, when a global chip shortage forced many smartphone makers to delay launches, young Chinese brand Realme took a gamble in India. Since processors from global giants such as Qualcomm Inc. are in short supply, Realme has decided to buy them from a relatively unknown manufacturer in Shanghai so that it can continue to produce new handset models.

The move paid off, boosting sales of the four-year-old newcomer and helping it reach the No. 3 position in the rapidly growing market with around 600 million smartphone users. Only Samsung Electronics Co. and Xiaomi Corp. sold more devices in India in the last quarter, with Realme closing in.

Realme, a tightly held company, has emerged as a force in the lucrative but treacherous Indian market, where even global brands like Apple Inc. have struggled with regulatory hurdles. And in recent months, Prime Minister Narendra Modi’s administration has stepped up scrutiny of Chinese companies as the two nuclear-armed nations clash politically.

Still, Realme has so far escaped the government crackdown unscathed. All smartphones sold in India are manufactured in the country, which boosts local employment. And Realme is helping India bring new users online with its Android smartphones that can cost under $100, a fraction of what iPhones and more expensive Samsung models offer.

“What I want to do is make the Indian market more affordable,” Realme’s Indian boss Madhav Sheth said in an interview at a cafe next to the company’s local headquarters on the outskirts of New Delhi. . Realme follows all Indian legal requirements and believes in cooperating with authorities, he said.

Realme’s relatively smooth navigation stands in stark contrast to the hurdles its bigger rivals have faced. Apple has had to struggle with the government for years just to open retail stores in the country and has also had a protracted standoff with authorities over a state-designed spam detection app that accesses email logs. user calls. This year the government cracked down on market leader Xiaomi with an anti-money laundering agency moving to confiscate more than $700 million from the Chinese company, baffling India’s entire fledgling electronics industry. .

“Investing in India remains slightly risky for foreign companies as policies tend to change without sufficient warning,” said Shumita Deveshwar, senior director at investment strategy consultancy TS Lombard. “India has also encouraged local businesses to grow, and sometimes India’s policies make the country an uncertain battleground, especially for foreign investors.”

Realme has taken advantage of challenges from rivals by expanding its distribution to over 40,000 stores and introducing aggressively priced devices such as the Realme 8 5G at 13,999 rupees ($180) from last year, the device cheapest fifth-generation wireless at the time. Such tactics have helped it eat away at market share from Xiaomi and Samsung in India, said Tarun Pathak of tech researcher Counterpoint.

Realme controlled 16% of India’s smartphone market by shipment volumes in the first quarter of this year, up from 11% a year earlier. It trails only Samsung’s 20% and Xiaomi’s 23%, and was the only player to grow by double digits last year as rivals shrank, according to Counterpoint.

“Realme has held back the growth of Xiaomi and Samsung,” Pathak said. Representatives for Samsung and Xiaomi did not respond to requests for comment.

Encouraged by its earnings, Realme this month unveiled its first global flagship store in Modi’s home state of Gujarat. The 13,000 square foot space in the city of Ahmedabad is part of Realme’s plan to become more of a premium player in India. The company is also eyeing India as a step towards global expansion and has recently entered European markets.

But Realme, with ties to more established brand Oppo, needs to tread carefully in India where Chinese companies have had to bear the fallout from a 2020 border showdown between the countries. New Delhi has since banned more than 200 Chinese apps and tax authorities have raided smartphone readers including Xiaomi and Oppo.

“India has a complex relationship with China and there is bound to be some level of government control over China-based companies,” said Amitendu Palit, a senior fellow at the Institute of South Asian Studies. National University of Singapore. “If there is a thaw in the frosty relationship between New Delhi and Beijing, we are likely to see some return to normality in business, but if the relationship continues to deteriorate, we could see it spill over into business. “

At the same time, India has been trying to boost local businesses. In 2020, the government announced a nearly $7 billion plan to give financial incentives to increase local production and export of smartphones. A key part of this plan was to create “local champions” or smartphone giants that can not only meet the needs of domestic customers, but compete with the best in the world.

Yet local smartphone players like Lava and Micromax have failed to capitalize on these incentives, with Realme and other foreign brands gaining more customers due to a perceived quality advantage. Realme stands out by combining low prices with high-end features, said Vijay Shankar Kriplani, a Mumbai-based marketing professional.

“Better battery life and a lower price led me to switch to a Realme smartphone two months ago,” said Kriplani, 39, who previously used a Samsung device.

Realme, which like its rivals uses the glitz and glamor of Indian cricket and Bollywood to sell its smartphones, doesn’t want its success to be limited to mobiles alone. Its India expansion strategy includes plans for local assembly of tablets and laptops starting this month. The company will also invest 100 million rupees to manufacture wireless headphones, open a design studio and double its network of single-brand stores to 600 in two years, Sheth said. These measures should help Realme increase sales by 50% over two years, he said.

Still, with intensifying macroeconomic challenges and bigger rivals to contend with, Realme will struggle to sustain its high level of growth, said Rushabh Doshi of technology consultancy Canalys.

“Realme has done well in India so far, but needs to prepare for the testing times ahead due to rising inflation, longer phone replacement cycles and the threat of a global recession,” Doshi said. “Deep-pocketed players like Samsung have other companies to fuel their smartphone unit growth in this environment, but smaller companies like Realme will likely have to tighten their purse strings and that will likely be their biggest challenge.”

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