Lenovo shifts growth focus from volume-led to revenue in smartphones segment

In what seems a change in strategy, Chinese technology manufacturer Lenovo has shifted focus in this country from volume-led to revenue growth in the smartphone segment.

Not without rationale, experts said, although the company has been breathing on the neck of Delhi-based Intex, third largest entity in the segment.

The Indian smartphone market is growing at the fastest pace among the top ones in the world. However, a majority of the smartphones sold here are priced much below the global average of Rs 17,500 ($265). As a result, while the top handset companies in India are fetching large numbers in terms of volume sales, their revenue remains lower than that of their foreign counterparts. Fierce competition among the 170-odd handset brands has kept the top ones in the market in a loop and price rises have been avoided. Experts say a consolidation is expected in the next two to three years, which will see the exit of many brands which fail to sustain, falling prey to aggressive pricing.

Lenovo has been consolidating its position in India since it acquired the Moto brand in 2014 and reshuffled its portfolio under two brands, Lenovo Vibe and Moto, earlier this year. It managed to become third largest in the smartphones category in the December quarter last year, replacing Intex. The firm is now looking to deliver more value-for-money products in the affordable segment. It is also concentrating on providing a better experience to its customers through encasing the surging trend of virtual and augmented reality, said Sudhin Mathur, executive director, mobile business group, Lenovo India.

“At present, we are number three by value and holding the fourth spot by volume sales. If you try and chase all the price segments at one go, you might fail. Our current focus area is the $100-250 (Rs 7,000-17,000) price segment. Once we consolidate our position, we will look beyond,” he said.  

According to Faisal Kawoosa, general manager, telecoms & semitronics, cybermedia research, they're now targeting the replacement market. “The growth in smartphones is now in that market. While first-time buyers are mostly in remote parts of the country, opting for low-end smartphones, firms like Lenovo would prefer to stay away from that,” he said.

Currently, at least 60 per cent of the smartphones sold in the country are in the below-Rs 6,000 price range. However, the average selling price is on the rise.

Customers buying their second or third smart device are pulling up the prices, analysts say. This also helps those with a wide portfolio in the affordable segment, which starts from Rs 8,000. “In the long run, prices will stabilise and the share of entry-level smartphones will come below 50 per cent of the market. This will benefit brands which are not after volume,” a sector executive said.

CONSOLIDATION AT PLAY

• As more replacement buying takes place, average price of smartphones sold will go up
   
• Consolidation is imminent in 2-3 years with exit of players with focus on growth and price cartelisation
   
• Focusing to enhance experience in devices through virtual and augmented reality