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The article under consideration, “India’s Booming Smartphone Market” by Sean Mclain (2015), provides information concerning the development of the smartphone market in India while pointing out the tendencies that are bound to cause the increase in the product demand in the region.
Description of the Article
The article describes the increasing attention that phone manufacturers currently pay to India; the causes of this phenomenon are explained. Mclain (2015) points out that several Chinese companies (Xiaomi Corp., Lenovo Group Ltd., Huawei Technologies Co., Gionee Communication Equipment Co., Xiaomi) have decided to explore the smartphone market of India as they intend to manufacture and sell their products in the region. The main reasons that encourage this decision include the slowing Chinese economy and the growing demand for smartphones in the Indian market. Apart from that, the author emphasizes the importance of tax system changes that make manufacturing in India more profitable. Phone manufacturers from other countries also consider paying specific attention to the Indian market. For instance, the Taiwanese company Foxconn intends to set up factories in India. At the same time, the American company Apple plans to make its smartphones more affordable for Indian customers. The reason for this strategy, as the author explains, lies in the fact that it is the inexpensive handsets that are in high demand in India.
Analysis of the Article
The market described in the article is an example of the relationship between demand, supply, and price (Mankiw, 2014). In general, the Indian market has been rapidly assimilating modern communication technologies like mobile phones, the Internet, and smartphones. Even though there is still much room for improvement, for example, in the infrastructure, the market is developing very fast, which means that the demand in the region is expected to keep increasing (Mclain, 2015; Singh, 2008; Lee & Lee, 2014). The rise of demand reflected by the increase in supply is followed by the continuous decrease in price (Mankiw, 2014).
In the region, this tendency is especially prominent. Mostly cheaper models gain popularity in the Indian market, and the prices are expected to drop further (Lee & Lee, 2014; Mclain, 2015). This feature may reduce the appeal of the market, which is currently dominated by Samsung, especially for smaller companies (Mclain, 2015). Still, there is no doubt that the increasing demand will be met, as even giants like Apple are ready to participate in the competition in the market. The principle of the market economy being regulated by its natural laws is therefore illustrated in this situation along with the principle of trade making everyone “better off” through the encouragement of competition.
Apart from that, mobile telephony is a technology that serves to increase the economic performance of separate individuals and the country in general (Singh, 2008). This is why the increasing demand for smartphones in India appears to manifest positive dynamics. In this light, the changes in the tax system that facilitate manufacturing electronics in the region seem to be a reasonable improvement. Since taxing does constrict manufacturers and diminishes the market’s appeal, reducing its deadweight loss is a major step forward (Mankiw, 2014). As one can point out, in this case, the principle of the government has the potential of improving the situation in the market is being illustrated.
Conclusions
The article by Mclain (2015) describes the Indian market in its transitional state as the demand, supply, and prices keep changing in search of the equilibrium. India, being one of the most populated countries, is shown as a promising market for phone manufacturers. Other elements (the tax system changes or the economic situation in other countries) are also demonstrated as the factors that define the supply in the market. The trends are described as beneficial for the economy of India along with the consumers and the potential and current suppliers.
References
Lee, S., & Lee, S. (2014). Early diffusion of smartphones in OECD and BRICS countries. Telematics And Informatics, 31(3), 345-355. Web.
Mankiw, N. (2014). Principles of microeconomics (7th ed.). Stamford, CT: Cengage Learning.
Mclain, S. (2015). India’s Booming Smartphone Market. The Wall Street Journal. Web.
Singh, S. (2008). The diffusion of mobile phones in India. Telecommunications Policy, 32(9-10), 642-651. Web.
Appendix A
India’s Booming Smartphone Market
By SEAN MCLAIN
Xiaomi Corp., which announced Monday that its some of its phones are now being assembled at a factory in India, isn’t the only Chinese smartphone maker with its eye on the subcontinent.
With the Chinese economy slowing and demand for smartphones picking up in India, Chinese handset makers including Lenovo Group Ltd., Huawei Technologies Co. and Gionee Communication Equipment Co. are looking to produce and sell more phones in the world’s second-most-populous nation.
But Indian consumers prefer cheaper phones than their Chinese counterparts. Roughly half of smartphones sold in India for the three months ended in June cost less than $100. In China, these low-end smartphones accounted for about 20% of the market over the same period, according to research company International Data Corp. IDC predicts the average selling price of Indian smartphones will fall to $102 in 2018 from $135 in 2014. The $100 Galaxy J1 and other inexpensive handsets drove sales for Indian smartphone market-leader Samsung Electronics Co., helping to increase its share of sales to 23% of the smartphones sold during the quarter ended June 30. In other markets, including China, sales are driven by its flagship Galaxy S6 and Galaxy S6 Edge, which sell for around $600 and $700, respectively, in the U.S.
Smartphone penetration is growing rapidly. While Internet penetration levels in India resemble China’s numbers from six years ago, smartphone penetration is only four years behind, according to a Credit Suisse report. The skyrocketing growth has even caught the attention of Apple Inc., which recently started offering financing to make its iPhones more accessible to Indians.
That might be bad news for smartphone manufacturers who operate on already razor-thin margins, but it’s potentially good news for Indian consumers and the Indian economy.
It also helps explain why contract manufacturing giant Foxconn says it intends to invest billions of dollars setting up factories in India, and why Xiaomi recently announced its first made-in-India smartphone, the $107 Redmi 2 Prime. Changes to tax rules now make it cheaper to manufacture electronics in India. It also shortens the supply chain, meaning phone-makers can get their products to consumers faster and reduce inventory costs.
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