India’s largest homegrown smartphone brand, Micromax, is currently racing neck and neck with Samsung to become the nation’s numero uno smartphone maker. The company is reportedly in talks with China’s Alibaba, which could invest as much as $1.2 billion, valuing the smartphone maker at $6 billion. Even as it faces immense competition from new Chinese players like Xiaomi and Lenovo among others, Vineet Taneja, who joined Micromax as CEO last year from Samsung, has his priorities set — to improve Micromax from the inside and delight its users with new products and services. I sat down with Taneja last week to talk about the big challenges and how Micromax is changing for the better since he became the CEO last March. Read on for some edited excerpts from the interview.
On commoditization of smartphones: We start with discussing whether the smartphone industry has commoditized. Judging by the number of new players that seem to come up and with most phones looking more or less alike, I feel so and so does one former Apple CEO. But Taneja disagrees. He believes that it is not a specification market, where people buy smartphones purely based on its hardware specifications.
“There is enough evidence in the market that design, materials, looks are more important even in the Rs 5,000-Rs 6,000 market. That’s great news for players like us where we focus on materials and design, which can give us 10-15 percent premium,” he says. “This year the Indian phone industry is pegged at more than Rs 100,000 crores. At this size even 1 percent of the market is very exciting for many,” Taneja explains why we are seeing so many smartphone brands.
On after-sales service: Earlier this month, market research firm Gartner announced Micromax had entered the global top 10 mobile phone vendors list according to shipment volumes. It is a big deal for the Indian brand, which started selling phones just seven years ago. However there is a lot of scope for improvement, especially when it comes to after-sales service. I prod Taneja on the state of customer service, with many users complaining their phones never come back from the service center for the lack of spare parts. Rather than dismissing those claims, it is refreshing that he acknowledges them but he also says that things are improving.
“In the last one year the improvement has been tremendous. Our percentage of calls to service center from the overall installed base has come down by a factor of two. The hardware quality has improved. In absolute numbers, the installed base is growing so there are still quite a number of disgruntled users. Complaints pending for greater than 21 days has come down by a factor of five. But this is not enough either. We need to change the system. And that’s happening,” Taneja tells me.
In a move that could provide Micromax with a strategic advantage over its rivals, the company is set to introduce a new virtual service center to users to ensure their phones are repaired without the user having to set a foot outside their home. The service will begin with the Canvas Knight 2, which was launched last week. It will eventually bring this service to its other smartphones. “There is a huge opportunity in online customer support and virtual service centers. Have a problem? Login online to report. We will come pick it up, deliver it back or replace it,” Taneja says.
On investing in startups: In order to make its products better, Micromax is also looking at investing in startups. It earlier invested in Bangalore-based HealthifyMe but there are more in the pipeline. “We have started investing in small companies – some directly, some indirectly. These are things that we can incorporate into our phones. We will be announcing a couple more soon as we await closure of the deals,” he reveals.
On 4G smartphones: The Canvas Knight 2 is Micromax’s first 4G smartphone. However, the company has an aggressive plan to have a portfolio of 4G smartphones as carriers roll out their 4G networks across the country. “Every month we will launch a 4G smartphone, which will be a refreshed version of our existing Canvas smartphone range. The ramp up of 4G has happened at double the speed compared to 3G, also the smartphone market is much bigger than earlier. The incremental cost for a 4G device would be much lower than what we saw in 3G smartphones. You will have Rs 5,000 4G phones by the end of the year or early next year,” Taneja explains.
On Xiaomi and online-exclusive retail model: We finally talk about the elephant in the room – the emergence of new brands like Xiaomi and their strategy of selling smartphones almost at cost. Taneja remains undeterred.
“There is a business model there based on different business margin but we have been very successful growing our market share. There is a type of buyer who only cares about specs, without caring about support or how long the product lasts. There are different types of buyers. There are others that want good products that last long and have after-sales service support. Had that not been the case, then Xiaomi and others would have 100 percent of the market. Which is why I say, the smartphone market is not really commoditized,” he says.
On unshackling software updates from Google, ODM and chipset provider: Talking about big trends on his watch, Taneja tells me he is closely watching the trend of customization of user experience started by Xiaomi, Yu and others. That and providing quick software updates is what Micromax is looking at. Even though he says Micromax is aggressively providing software updates – more so than other brands – it is still struggling.
“We really have to struggle with the ecosystem of Google, chipset provider and ODM to get software updates for consumers. Most of the time, the chipset provider or the ODM just want to sell you new stuff than providing updates for older products. You need to own that part of the OS to make sure we don’t have to rely on that part of the ecosystem. A UI layer on top that we can control is what we are looking at doing,” he exclaims.
That will be a really big task for Micromax, which started off by selling Chinese phones. But things are changing. The company, which is also a platinum partner for Google for Android, has set up a hardware R&D facility in China and another for software in Bangalore. This is just the beginning of the Micromax story.