Nov 7, 2017
Chinese mobile chip maker, Spreadtrum, is betting big on the India market. It has a strategy in place to gain a major share in the affordable smartphone segment, which is growing at a fast pace. The company is also set to enter the high-end mobile domain. In a conversation with Shruti Mishra and Abid Hasan of Electronics Bazaar magazine, Spreadtrum India's country head, Neeraj Sharma, talks of the company's plans, its upcoming offerings, and how the success of Reliance Jio 4G feature phones can boost Spreadtrum's revenue.
By Shruti Mishra & Abid Hasan
Recently, Shanghai-based semiconductor company Spreadtrum bagged the mandate to develop 4G-enabled feature phones for Reliance Jio in India. The phones are already in huge demand in the market. Country head of Spreadtrum India, Neeraj Sharma, confirms the news saying, "Jio phones have received wide coverage in the media because of Reliance and not because of Spreadtrum. We are just a technology partner."
Sharma agrees that Qualcomm is the leader in the market for mobile chips. However, by the time 5G comes in, Spreadtrum aims to bridge the technology gap. In order to tap the high-end mobile segment, Sharma's strategy is to offer good products and the latest technology. "We have always offered something more than what others do. That has been our strategy from the very beginning, and we will continue to do this," he says.
When asked to define 'good products' and how they differ from the competition, Sharma says that the company focuses on delivering high-quality tech products at affordable prices.
The Indian smartphones arena
India has remained a battleground for all the chipset companies because of its continuing demand for mobile phones. Spreadtrum entered India as it sensed immense potential in the market. Sharma feels that India still has to see greater adoption of smartphones. "If I talk about the overall penetration of smartphones, it's 20-23 per cent. Even now, 77 per cent of Indian consumers are using feature phones," he says.
For Spreadtrum, India is its No. 1 overseas market, and contributes 30 per cent of the company's global revenues. When asked about the ratio of Spreadtrum's chips in smartphones and feature phones, Sharma confirms that 25 per cent of its chip output is for smartphones and 40 per cent for feature phones.
India is the No.1 overseas market for Spreadtrum and contributes 30 per cent of the company's global revenues
Aftermath of government policies
Even though demonetisation had a negative impact on many companies operating in India, Spreadtrum revised its revenue target for 2017 as the company operates on a January-to-December financial year. Though the company seems poised to bounce back in the fourth quarter, in the first quarter starting in January 2017, Spreadtrum's business did go down by 50 per cent.
On the other hand, GST has not played spoilsport for the company. Though business in July 2017, the month GST was implemented, went down a bit, the company achieved its revenue target for August. Sharma is optimistic about the festive season, and confident that the revenues will keep growing.
Spreadtrum's new focus is on 4G feature phones, which it believes will be the key growth driver. "This year, we got just four months to sell 4G feature phones but in the coming year, we have ample time. So there will be growth for Spreadtrum's 4G feature phones and smartphones in 2017-18," says Sharma.
A leap into the future
In order to constantly cater to upcoming demands, the organisation keeps changing its offerings regularly. So it is now venturing into artificial intelligence and Internet of Things (IoT) solutions. The company has already set up a team in China, and an Indian team is now being put together. "By the end of this year, we are planning to ship a few IoT based products to India," says Sharma.
He adds that Spreadtrum's revenue is growing and that, this year, the firm has upgraded everything from 3G to 4G. "We are growing at a rate of 20-25 per cent annually, and the target for the next year will be the same," he says.
Spreadtrum's key focus is to target phones that are priced below US$ 200, as this category witnesses the maximum uptake. "We have seen that above US$ 200, the market is saturated and is dominated by other players; so making an impact will be difficult," admits Sharma. The camera and the security of the phones are two major focus areas for Spreadtrum this year. The company is planning to execute all these plans very soon.
Riding on Jio's back
Before collaborating with Reliance Jio for its 4G phones, Spreadtrum had also worked with Lava for the same purpose. In the coming months, the company is also working with a few other Indian and foreign brands to come up with 4G feature phones. Currently, these companies are still evaluating which market to target, and which technology to adopt.
Sharma expects a lot from the 'Make in India' initiative, but he feels it's a difficult job for a chipset company to set up manufacturing in India. He says, "You can't just 'make in India' because you need foundries, which require a huge investment. It may take 10 to 20 years before we see foundries in India."
But Spreadtrum is designing phones in India and has also set up a special lab in Noida. This is for companies that want to sign a direct agreement or licence with Spreadtrum, whereby they develop their own design, bring it to the Spreadtrum lab, test it, and have the first level of analysis done at the lab. Sharma calls it 'design in India'. Over the last two years, Spreadtrum has spent around US$ 5 million on setting up this lab.
Apart from the lab, the company has also launched its OTA (over-the-air) testing chamber. This will help in the complete designing of the chipsets. "We have set up this chamber so that when our partners use it, Spreadtrum can train them in building the hardware," adds Sharma.
Spreadtrum doesn't earmark any annual budget for its investments in India. The company decides according to the need of the hour. Apart from the OTA chamber and design lab, the company is looking to set up an audio lab next year, because when companies make their own designs, audio plays a significant role.
The global employee strength of Spreadtrum is around 3000 employees, with 100 employees in India. The company is planning to add 100 more people to its India team this year.
With Jio phones' success, the company is expecting up to 25 per cent growth in revenue in FY18.
Next big bet
Smart meters and iris scanners are the next big bet for Spreadtrum. The company has recently entered the smart meters segment, and the China team is ready with solutions which can directly enter the Indian market.
Regarding the iris scan feature on its phones, Sharma shares that there is not much demand coming from the open market, as the solution is at present offered at a B2B and not a B2C level. He gives an example: "If I put an iris scanner on my phone today, I will take the price of the phone up by a few dollars, but the end consumers don't find this feature relevant because they are not aware of its importance. So if I implement an iris scanner because the competition has done so, it will not benefit the end customer. But if the government makes this feature mandatory in all phones with effect from 2018, the price will go up for everybody." He adds that the iris scanner market has a lot of potential and, technology wise, the company is well prepared.
Spreadtrum is on an expansion mode when it comes to services. Though chipsets, cameras and security will be the company's key focus areas, it is also looking at the larger picture. For IoT, the company is getting ready to fulfil all the requirements of its customers, such as data connectivity and location-based services.
Sharma concludes by saying, "One of the key areas that we will focus on is M2M. Again, this will not be implemented in consumer products but can be used in smart meters, etc. We will also focus on automobile tracking, because that is going to be mandatory for commercial vehicles from next year."
Spreadtrum has a busy year ahead in terms of new launches and executing old commitments. The company will focus on consolidating its market share as well as continuing to be relevant by launching new products regularly.