“At a time, when the Indian guys were mainly targeting the entry-level smartphone market, the Chinese companies targeted the price points between Rs 10,000 and Rs 25,000 which were growing the fastest,” says Tarun Pathak, senior analyst at Counterpoint Research.

Between 2014 and 2016 the Chinese companies went after users who were buying their second and third smartphones. “Now that the consumers were experienced, those using Indian phones moved on to the Chinese brands,” says Meena.

This hit Indian companies twice over. Firstly, because the entry-level market didn’t grow as fast as they had expected, so their new customer base didn’t expand much. And secondly, because their existing consumers upgraded to the Chinese models.

“OPPO, Vivo and Gionee grabbed market share from existing [Indian] guys, who were catering to the mid- and low-end market. And when the Indian players gradually started moving up the value chain targeting the top 30-50 million users, there, OnePlus and Xiaomi came and hit them,” says Kolla. “While the biggest losers have been the Indian companies, Samsung has also been hit to some extent.”

When partners turn competitors

Briefly, the playbook followed by Indian mobile phone makers, which rose to fame during the last five-six years was this: import devices from China after cannily sensing the mobile phone opportunity in the country. Iterate rapidly and offer dozens of phone models with features that customers wanted, at prices much cheaper than those of Samsung, LG, Sony and HTC.

Powered by entry-level smartphones priced as low as Rs 2,000-3,000 and channel margins as high as 18-20% (as compared to the 8-10% offered by global brands), explains Kolla, Indian brands came to be seen as giant killers.

In the second quarter of 2014, Micromax briefly trumped Samsung to become the largest smartphone company in India. Otherwise, it stayed a clear number two. Meanwhile, Intex, Lava and Karbonn also climbed up to join the top five league.

But the ground was beginning to shift underneath their feet.

While the Indian mobile companies had spent good money on their distribution networks and branding initiatives, they underestimated the ambition of their Chinese ODM (original design manufacturers or the component makers) partners.

“OPPO and Gionee had been the ODM partners for Micromax, Karbonn, Lava, Spice, etc., based in Shenzhen and China,” says Kolla. “So even before they entered the Indian market, they had a fairly good grasp of the product features and price ranges that would and wouldn’t work. It was our guys who educated them for a good two years, from 2012 to 2014.”

The Chinese firms also had an innovation edge, unlike the Indian companies, which failed to invest in R&D and depended entirely on the Chinese for product innovation. “Indian brands were the traders, who saw the opportunity in India and launched their own smartphone brands by importing Chinese phones and distributing them. Being manufacturers, China’s economy grew manifold.

They had the cost advantage, thus they started to innovate and research,” says OnePlus’ Agarwal. “Today, much of the new innovation is coming from China—the battery innovation, the camera and a lot of those features. They were somehow able to build a business model in which they reached economies of scale. All of which gave them differentiated advantage.”

The final straw came at the turn of 2014, when the Chinese market was slowing down and the Indian smartphone market had begun to pick up. The Chinese entered India and took away the cost advantage that the Indian smartphone companies enjoyed.

Selfies and Bollywood

In an earlier interview last October, Will Yang, Brand Manager for OPPO India, said that the company had spent almost three months doing research on the Indian consumer behaviour just before it arrived in the country.

“For instance, our research showed that Chinese or Southeast Asian people like a little bit of red colour on their cheeks and lips. But Indian consumers are much more focused on their hair or skin, they like it clean,” said Yang. “That is why we focus so much on the camera and selfie features here. If we didn’t do this research, I don’t think this product would get this good feedback from the market.”