Lava raising Rs 193 cr from Beijing-backed firm to battle Chinese makers

Lava, a multinational mobile handset maker based in Noida, will raise $30 million from a firm backed by a Chinese state-owned technology major, the Economic times reported. The Rs 193 crore-funding is meant to boost manufacturing and set up a local mobile-handset design center,

The company has received an approval from its Board to offer 500,000 compulsory convertible preference shares (CCCPs), each with a face value of Rs 100 to Hong Kong-based Unic Memory Technology. 

Unic Memory Technology is a subsidiary of the Chinese-state owned technology major Tsinghua group. This is the first instance of an Indian mobile phone manufacturer raising money from a Chinese firm.

As reported earlier in Business Standard, according to Lava's Chief Marketing Officer (CMO) Sunil Raina, the company, perhaps the only one from India to design and manufacture mobile phones in China, invested in an R&D centre in Shenzhen quite early on in its journey to ensure it does not disappear from the scene in a few years but "establishes itself as one of the leading global players in the technology space".

On an average, Lava develops about eight smartphones and three feature phones per year at its China facility.

Indian smartphone makers are facing intense heat from Chinese smartphone makers viz. Xiaomi, Oppo, OnePlus, Vivo et al. 

Chinese players have been rapidly increasing their market share in the Indian market, with local players Micromax Informatics, Lava International and Karbonn Mobiles losing their place among the top-five mobile brands to Xiaomi, Vivo and Oppo. In the first quarter of 2017, the market share of Chinese mobile phone manufacturers was about 51 per cent.

State Indian smartphone market

Research firm IDC said 13 million smartphones were billed to e-tailers with 35 per cent annual growth in the September quarter, as reported by Business Standard.

According to the IDC report, Chinese smartphone maker Xiaomi boosted its sales by 300 per cent to capture 23.5 per cent of the market share, while OnePlus has doubled its market share in the premium category to 28 per cent.

Smartphone shipments in India reached a record high of 39 million units in the July-September quarter.India is said to be the second biggest smartphone market in the world after China.

What Indian Companies are doing

Indian smartphone makers are re-orienting their strategy in the face of stiff challenge from Chinese firms, an IANS report stated. 

Lava's share of the smartphone market dropped from 5 per cent in the September, 2016 quarter to 2 per cent within a year. Similarly, Karbonn mobiles' market share too declined.

For example, Lava has trimmed its portfolio from 16 handsets to just five now, all in the sub-Rs 10,000 category.

Reliance Jio's announcement of launching a 4G-feature phone is being considered to be an innovative way of tackling the Chinese . 

According to an India Today report, Indian manufacturers believe that making the phones localised is crucial to get feature phone users into the smartphones fold. The report quotes an IDC analyst as saying that Indian companies should target the sub-Rs 5,000 category since Chinese manufacturers are focusing on the Rs 5,000-10,000 slot.

Airtel has partnered with Hyderabad-based Celkon to offer a smartphone priced at Rs 1,349, while Vodafone India and Micromax launched a 4G smartphone for Rs 999.