Will India Emerge as a Mobile R&D Hub?

Article By : Sufia Tippu

When mobile phone manufacturing picks up an accelerated momentum in India, impactful R&D cannot be left lagging behind. Slowly and silently, India is emerging as a research hub for mobile phones in India.

Bengaluru: When mobile phone manufacturing picks up an accelerated momentum in India, impactful R&D cannot be left lagging behind. Slowly and silently, India is emerging as a research hub for mobile phones in India.

The move is a natural evolution of how the world sees India as a business destination, especially in telecommunication, hardware and manufacturing. Multinationals are realising that the potential of India to grow into a global R&D centre is enormous. With the proliferation of mobile manufacturing with almost every mobile phone manufacturer drawing up ambitious plans for local manufacturing, a greater focus on R&D to create differentiating features is but a logical corollary.

While automobiles, consumer electronics, tech companies and chemical giants (Ford Motors, Mercedes-Benz, LG , direct-selling major Amway, German auto parts maker Robert Bosch, German chemical giant BASF, to name just a few) eagerly vying to broaden their footprint in the country, it is the mobile segment that is making huge strides in the R&D space.

Foreign Mobile Cavalry

Naturally heading the pack is the South Korean behemoth, Samsung. Of Samsung’s total 32 R&D centres across the world, three are in India: Bengaluru, Noida and Delhi. The Indian R&D centres develop solutions for global products while simultaneously creating India specific innovations for the local market, where the company has been present since 1995.

Just at the beginning of 2018, Samsung decided to increase its hiring focus at these R&D centres. It said it would be hiring 1,000 engineers from top institutes such as the Indian Institutes of Technology ((IITs) and National Institutes of Technology (NITs) for its three facilities in India. Roughly around 300 would be from IITs, it was reported in an earlier news report.

"Samsung is extremely bullish on R&D in India. We have been here for over 23 years. The three R&D centres in India work on several cutting edge technologies," Samsung’s global SVP and MD of Samsung Research Institute Dipesh Shah had said in the report. Much of the new hiring was for new age domains such as artificial intelligence (AI), Internet of Things (IoT), machine learning, biometrics, natural language processing, augmented reality and networks including 5G.

When one speaks about Samsung, Apple cannot be far behind.

Though it’s more than ten years that Apple started selling iPhones here, the company is still struggling to make a mark in the world's second-largest smartphone market.

According to data from research firm Counterpoint, while Samsung and Xiaomi accounted for the majority of smartphone sales in India in the third quarter of 2018, garnering 22 percent and 27 percent of the smartphone market, respectively, Apple, on the other hand, made up only about one per cent of India's smartphone market share, trailing behind Chinese phone makers Vivo and Oppo.

But despite this poor show, Apple looks at the bigger picture and had set up two development centers – in Hyderabad and Bengaluru. While the Hyderabad center works on Apple Maps in partnership with RMSI, an Indian map data products company, the Bengaluru development center focuses primarily on iOS app design and development to improve the software and enable app developers to create unique iOS apps. While inaugurating the Bengaluru facility about two years ago, Apple CEO Tim Cook had said, “With the opening of this new facility in Bengaluru, we are giving developers access to tools which will help them create innovative apps for customers around the world.”

South Korea’s LG, on the other hand is tenaciously holding onto to the mobile hope. In 2015, it had announced a $140 million investment for R&D and marketing in India but today, three years later, its entire mobile strategy seems to have changed. Raking up losses of nearly $2 billion in three years, LG Electronics CEO Cho Sung-jin said at the CES 2018 in Las Vegas, that it was ready to cut losses and stop the bleeding. At a press conference at CES, he had said that “we will unveil new smartphones when it is needed. But we will not launch it just because other rivals do.”

Next month, it will unwrap its latest flagship smartphone, an evolution of the current G6, with a new user interface on the eve of the Mobile World Congress (MWC) in Spain. The company is hoping that this would be a success unlike its predecessor. LG G6 was launched last year at MWC which had come with a slower and inferior processor compared to its competitors, priced high and naturally did poorly in sales in face of aggressive competition.

So, the million-dollar question is: Will LG go the Sony way or make a powerful come-back? Only time will tell.

But this doesn’t mean that all R&D at LG has come to a standstill in India. LG Soft India, the innovation wing of LG Electronics in Bangalore, is LG Electronics’ largest R&D centre outside Korea and focuses on niche technology areas such as mobile application development, digital video broadcast and biometrics software. It will continue to support LG Electronics with its cutting-edge R&D and enhance LG’s portfolio of connected home appliances in India with IoT-enabled features suited for Indian and global consumption.

Chinese Mobile Brigade

China’s smartphone makers have garnered almost half of the Indian market, led by Xiaomi, Lenovo, Oppo and Vivo.

“The China market is saturated, so now Xiaomi is turning its attention to India,” said Xiaohan Tay, a senior market analyst at IDC, in an earlier report.

The late-comer Chinese smartphone maker Xiaomi, which is giving Samsung and Apple a run for their money, recently opened an R&D center in Bengaluru — first such facility outside China — to customise products to suit local demand and to work on IoT devices and , MIUI software features.

The company claims that India is so strategically important that it is the only market outside China, where it has built all types of set-ups – R&D centre, service centres, production lines and warehouses.

According to a report in Financial Times, Xiaomi will prioritise India over its home market and invest $1bn in the country’s start-ups as it looks to accelerate growth outside of its highly competitive home market. Lei Jun, Xiaomi’s co-founder and chief executive, said the company wanted to create an ecosystem of mobile apps for use on its smartphones — a strategy pioneered by Apple, whose more expensive iPhones are barely present in the Indian market.

It plans to bring more component makers to India and is exploring possibilities in different states in India to set up factories. It is also investing in domestic start-ups to increase its local sourcing.

“India is becoming a bigger priority compared to China when it comes to R&D to make India-focused products, and supply and stock for product lines,” Xiaomi said. For example, the company will supply components for its fast-selling Redmi phones to India first in case of shortages according to the report.

Then comes the triad of Vivo, Oppo and OnePlus. Although these brands are more popular and come across as independent companies, very few in India are aware that they all belong to the Chinese multinational, BBK Electronics. Each brand caters to a different segment of customers – Vivo for entry-level, Oppo for mid-range and Oneplus for high end smartphones buyer.

Incidentally, all the three brands are independently investing for their R&D efforts in India but the bottom-line is all revenue finally goes to the BBK Electronics

OnePlus, the leader in India’s premium smartphone segment, has said it wants the new facility to become its biggest in the world in the next three years. It aims to use the R&D facility to drive innovation in India for its global products.

Oppo, among the top five phones in India, recently launched its R&D centre in Hyderabad and is aiming to make it the company’s largest outside China. It was set up as part of Oppo’s global R&D strategy in which it is investing $1.4 billion to work on 5G, artificial intelligence and Internet of Things.

And Vivo, which has been gaining a market share in India, has not only set up a manufacturing facility in India but plans to further invest $100 million in India, a part from the $40 million invested so far. It is also in talks with components manufacturers to set up plants in India.

An early entrant, Chinese company Gionee, which started operations in India in 2013, is not only expanding its India footprint by setting up 550 exclusive service centres to ensure a better after sales just smartphones, but is also planning to bring in a significant amount of R&D be it through hardware suppliers or design houses to India.

Lenovo, on the other hand had been lying low, waiting and watching the market dynamics for almost a year but in October last year, it was back in the field with the launch of two affordable smartphones – the Lenovo K9 and Lenovo A5.

“Over the past year, we have taken time to assess the robust India market to understand the changing dynamics of the Indian. Our research says Indian consumers want a seamless processor, great camera and sleek design among other things and our range of smartphones is designed to cater to the real need of the evolving Indian consumer,” said Edward Chang, vice president, Lenovo, during the launch of K9 and A5 phones.
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Telecom players such as Huawei and ZTE too have been launching mobile phones since the past few years and Huawei’s R&D centre in Bengaluru has emerged as the largest among all overseas R&D centres of the company. The Bengaluru R&D facility is now a key platform, component and solutions development and delivery centre for global markets, and has end-to-end ownership of all software platforms, components and products being developed at the centre.

A similar drive is also coming other Chinese handset makers such as Comio, Transsion, Infinix and Alibaba-backed Meizu ( though right now, Meizu is struggling to keep up with the searing competition.

Interestingly, the one common thread running among Chinese manufacturers is that all the handsets are 4G-enabled which local Indian manufacturers were lacking. And, the timing just seemed right – when Reliance Jio forced telecom players to adopt 4G connectivity and voice-over LTE (VoLTE) calling, Chinese phones were already 4-G enabled.

What has accentuated the R&D trend

There are number of reasons as to why this had gradually happened over the past few years.

Industry watchers say the evolution to R&D stage is an extension of these firms' already expanding local manufacturing capability. "It showcases their commitment to India as a growth market and their continued intent on investing in, developing and leveraging made-in-India innovations", says Prabhu Ram, head of industry intelligence group (IIG) at CyberMedia Research.

Re-iterating this, Tarun Pathak, associate director at Counterpoint Research, adds that products aligned to local needs will win in the long run as the market consolidates, said. “Local R&D will help the brand to predict and be on top of the trends faster than the competitors,” he said.

Second, the NDA government is keen on allowing instant approval to companies to undertake fifth-generation (5G) based R&D activities and field trials. Telecom secretary Aruna Sundararajan said "We are putting special dispensation for 5G field trials and R&D for immediate approval, and that demonstrates India is not lagging behind."

Since Indian local manufacturers were not geared for the 5G onslaught, the multinationals swooped in with better features, 5G capability and attractive pricing and most important of all, deep pockets.

Moreover, India-bound R&D investment, which is subject to few restrictions, also has the advantage that such projects proceed very quickly and hurdles in land acquisition and infrastructure are easily resolved.

Also driving the trend is India's two-decade-old advantage in cost of employment as well as the large talent-pool availability. The move will benefit the economy by opening up employment opportunities for the Indian youth. OnePlus has already started hiring from IIT Delhi & Mumbai.

“These centres would act as the fulcrum to tap Indian R&D talent, as well as Indian ingenuity in coming up with new innovations,” CyberMedia Research’s Ram added.