Exclusive: Why Honor's Plan To Re-Enter India's Smartphone Market Makes A Lot More Sense In 2023

Honor, the Chinese smartphone brand, is making headlines again with its strategic decision to re-enter the bustling Indian market. After a hiatus, during which the brand faced challenges like a limited marketing budget and a crowded market space, Honor is now poised to make a significant comeback.

The brand’s previous approach, which was heavily reliant on partnerships, didn’t quite resonate in a market dominated by aggressive marketing and diverse product portfolios from its competitors. But 2023 seems to be the year of change.

What went wrong for Honor the first time before its exit in 2019?

Under Huawei’s umbrella, Honor heavily focused on trying to sell smartphones through deals with telecom companies by providing bundled offers, notes IDC India’s Vice President and lead tech industry analyst, Navkendar Singh. That strategy did very little for the brand at the time.

However, that wasn’t the only problem. Aggressive marketing and product strategies from other Chinese competitors made it tough for Honor to secure a position in the rapidly growing smartphone market, notes Singh.

“It makes some sense to make an entry now when mid-premium and premium segments are the only ones growing, mass segments with cutthroat competition are struggling for growth. The competition is less intense than 2 years back. Honor can possibly find some space in the mid-premium segment with its designs and innovations if priced right,” remarks Singh.

Prabhu Ram, Head of the Industry Intelligence Group at CyberMedia Research, emphasises the allure of the premium smartphone segment in India. “Honor has enjoyed brand equity amongst consumers for its innovation,” Ram notes. “For Honor’s re-entry to be impactful, local manufacturing is pivotal. The success of the PLI Scheme makes India an attractive hub for smartphone production.” That brings us to the next critical point.

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Why does it make sense for Honor to push for local manufacturing?

The Production-Linked Incentive (PLI) scheme for smartphone manufacturing in India was launched in 2020 with a budget of ₹40,000 crores over five years. The scheme aims to boost the production of mobile phones and related components in India and to create jobs in the electronics manufacturing sector.

The scheme offers incentives of 4% to 6% of the incremental sales value for a period of five years to companies that meet certain production and investment targets. Giants Apple and Samsung seem to have taken a big liking to this scheme so far, with the former trying to expand its original equipment manufacturing base in the country further.

IDC India’s Navkendar Singh tells Benzinga India that the PLI scheme might indeed motivate companies to leverage government incentives for manufacturing and exporting from a vast nation like India.

Additionally, the immense and largely untapped potential of the Indian market stands out to Singh as Honor’s primary reason.

“There is no other market of this size. India has 620 million smartphone users, that's less than 50% smartphone penetration. Millions of people are supposed to migrate from feature phones to smartphones in the next decade or so. This presents an unmatched domestic market opportunity to Honor,” he adds.

Meanwhile, CyberMedia Research’s Prabhu Ram emphasizes that local manufacturing is crucial for Honor’s triumphant return. It speeds up their entry into the market, builds a robust local footprint, and serves the dynamic domestic audience. The success of the PLI Scheme also enhances India’s appeal, encouraging smartphone companies to manufacture their devices here.

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