Shanghai, China -- Watch out, Mr. Lee. With growth in India's cellular market paralleling China's heady early days, it looks like Mr. Basavaraj just might oust you as the darling of big-time handset makers Nokia Corp. and Motorola Inc. But India's boom is already proving to be as different as Beijing is from Bengaluru. And that's probably a good thing for multinational chip and cell designers.
The buzz these days is that India is the "new China" of the cellular world. All the big multinationals have piled onto the subcontinent, chasing trendsetters in Mumbai as well as first-time buyers in remote villages. "They are the key drivers for the marketplace," said David Taylor, India-based director of strategic operations in Motorola Corp.'s High Growth Markets unit.
Expansion in India now rivals China, the world's largest cellular market. At least 5 million to 6 million Indians are signing up each month and about 7 million in a hot month. China? Only 4 million to 5 million. Overall, China still trumps India for subscribers, at more than 480 million. India is on fire, though. Subscribers nearly doubled last year, to 149.5 million, and should hit 484 million by 2011, according to market researcher iSuppli Corp.
India is adding fuel to an already hot global trend. Since 2002, handset sales in developing countries have jumped threefold, compared with 62 percent in developed countries, according to Strategy Analytics Inc. It forecasts that 65 percent of handsets sold this year will be bought in emerging markets.
Yet the rapid ascension of India shows that not all emerging markets are alike. Beijing and Bombay may both be supersized cities in gigantic markets, but there are probably more differences than similarities in the way these places are growing, especially in the supply chain.
China has a relatively large chip industry, targeting local growth in communications; India does not. China has more than 75 companies making handsets; India has only a few. China develops globally competitive telecom gear; India does not. The list goes on.
This is a relief to multinationals, although they may not publicly admit it. As things stand, global chip and handset makers won't see a new crop of margin-destroying competitors rise as quickly in India as they did in China.
"Wireless didn't really explode until 2004, so the Indian market is relatively young," said Jagdish Rebello, iSuppli Corp.'s principal analyst for wireless communications and India research. "For the next few years, the market will rely on the big brand names, like Nokia, LG and Samsung."
Indian IC strategy
In chips, India will stick with its current modus operandi--stay behind the scenes and strike deals with market leaders. There could be a "rogue" company out there that has a design for a baseband chip, Rebello said, but he thinks most of them will try to sell small pieces of the design to big multinational corporations.
Because the wireless industry is maturing, some observers believe it will be more difficult for small chip design companies to emerge in India and effectively compete, especially if there's a dearth of local handset vendors. Even in China, apart from MediaTek Inc., there hasn't been a significant challenge to global players, though many are trying, said Bill Krenik, chief technology officer of the wireless terminals unit at Texas Instruments Inc.
