Recently we purchased the Micromax A60 Android-based phone for our lab at Ravience. Its a damn good phone for its price; a review is due for another post. Not long ago Micromax wouldn’t have made it to the shortlist when buying a handset for me. And here I am being a happy user of the A60. How did we get it here from nowhere in just 3 years?

First some background about the enabler – Mediatek.

The emergence of Mediatek, the first sizeable Asian chip company, spawned an ecosystem of device assemblers, some of whom have beaten all multinational brands in sales except Nokia and Samsung.

And nearly all of those chipsets, which are the heart of a phone, went to unbranded or ‘white label’ Chinese manufacturers.
The success of Mediatek’s offering was simplicity itself. Unlike other chip makers, who expected their clients to have a large research & design team to put together phones, Mediatek aimed at small manufacturers who don’t have such luxuries.

And, unlike rivals, it offered the blueprint for a near-complete phone and tools to easily tweak or customise the basic design. It also provided its own software to run the phone, again with tweaking options.

“Of course, we owe a lot of our success to Mediatek,” says Vikas Jain, business director of Micromax, the most successful of the new breed of ‘Mediatek’ phone makers.

“There used to be a time when you would have had to get your chipsets from Infineon or Qualcomm. Now we have Mediatek and a large part of their success is because of the ease with which their basic designs can be altered. They give you about 60% of the design and you add another 40% of features, opening up the possibility of innovation at your level,” Jain says.

Today, there are anywhere between 20 and 50 Mediatek-based mobile brands in India…
Within the desi bunch are two groups — the ones that have a hand in designing the phone and those who purchase handsets manufactured by Chinese companies in bulk.

“It is mainly the distributors of big brands like Nokia and Samsung who are launching their own brands. They believe that they own a certain part of the distribution channel and if they create their own brand, they can push it downwards,” Micromax’s Jain said.

To its credit, Spice Mobiles saw the opportunity for desi mobile phone brands before others did. But Micromax overtook Spice as the market leader among Indian brands. TA Associates acquired a stake (less than 20 percent) in Micromax for $45 million, valuing it upwards of $225 million.

Originally a distribution company, Micromax was engaged in reselling computer hardware and accessories since 2000. It also manufactured phones for Airtel’s public call offices (PCOs).

Micromax launched its first mobile handset in April 2008. It was helped by the Indian government’s decision to bar illegally-imported Chinese phones that lacked an identifying IMEI number. A zero-import duty on cell phones has helped the industry proliferate.

Some facts and figures about Micromax.

• Its first handset was the Micromax X1 boasting a month long battery life
• Sells more than a million handsets a month with a market share of around 10%
• Posted revenues of Rs 1,600 crore and a net profit of Rs 150 crore in 2009-10
• Has a presence in more than 500 districts through 34 “super-distributors”, 450 distributors and 70,000 retailers
• Retailer gets 5-10% on Indian brands compared to 2-3% on MNC brands
• Follows a cash-carry distrbution model unlike competitors who offer a 60-day credit line.

Micromax gives value-for-money, what we desis call Sasta-Sundar-Tikau phones. Although the Tikau part is questionable. Lets look at the three killer features available at low price which I think helped it garner market share.

• Long battery life
• Dual SIMs
• QWERTY

Some other key features worth mentioning are:

• Support for 1/2 GB memory cards
• Colour phones with decent screen-size to watch videos
• Loud speakers
• Cordless FM phones
• Bluetooth

Here’s an interesting reality of the economics of this business. Indian brands are cheaper but not the cheapest.

Almost none of the desi brands play in the entry-level segment because their starting prices are around 50% higher than the Rs 1,100 Nokia and LG sell at.

“We are not even present in the sub-$30 phone market, as our cheapest phone is Rs.1,400.” That segment is dominated by Nokia with a market share of close to 80 percent.

Surprisingly, the average selling price of a Micromax set is only around Rs 300 lower than a Nokia, so cramming more features has certainly worked.

Spice Mobiles has an average selling price of Rs 2,034 per handset and purchase cost of Rs 1,484. Marketing and other expenses cost Rs 513, and Spice is left with a pretax profit of Rs 232 per handset.

Source material for this post is mainly taken from this well-researched DNA article as well this Forbes piece. This case study on Micromax has tidbits on their distribution and operational model for those interested.

Lastly, its time they worked on branding. Their logo is awfully uncool.