Micromax Phenomenon: Propaganda or Reality?

The last few years have witnessed emergence of several new companies in the cellphone industry which  witnessed a paradigm shift from feature phones to smartphones. Although it was Apple which triggered the smartphone revolution, the landscape of the industry changed drastically only after the advent of Android due to it being an open platform embraced by several players. The industry has become so volatile that major players who were caught napping (Motorola, Nokia, Blackberry) were being swept away.


This way, Apple & Google (Android) have destroyed some well established players and also become the reason for emergence of new players to fill the gaps. At the international scale, companies like Lenovo, Huawei, Dell, Blu which were unheard of in the cellphone industry had become prominent players within months and in India, home grown brands like Micromax, Karbonn, Lava, Intex, Celkon, Zen and many others are becoming a threat to established brands like Nokia & Sony.


Among the several Indian companies which rose to prominence, one company which stands out is Micromax. This case study is an attempt to understand how these new players have been able to quickly adapt to market conditions, offer products at lower costs, thereby giving even the best brands a run for their money. The reason “Micromax” is used as the primary example in this study is because it is easier to understand the phenomenon by focussing on a particular example and hence the title “Micromax Phenomenon”. The same analysis holds good for other companies like Karbonn, Lava, Celkon, iBall, Intex & Zen as well.



This is a multi-part study which analyzes some of the important aspects of the business model, pricing considerations, marketing, branding, inventory management and other factors which have helped these companies sustain & become phenomenal.

To begin, lets take up this popular, frequently asked question:
“How do companies like Micromax & Karbonn offer smartphones which are similar to Samsung & HTC but at less than half the price?”

One of the most common answers we would get is “They are Chinese junk phones and thats the reason they are cheap”. By “Chinese junk phones”, one is trying to say that they are unreliable, have poor battery, conky and so on. But Micromax & Karbonn have been in market for several years now and are among the top 5 phone companies in India and their reviews are also pretty decent (considering their price). Also, it is a well known fact that even companies like Apple & Nokia manufacture and assemble their phones in China. So, just because something is manufactured in China need not mean it is bad.

Now that brings us back to the original question as to how they are being offered at such low prices?

In order to understand the business model they follow, lets look at Sivakasi (Tamil Nadu) which is popular for it’s firecracker industry. As we know, there is a thriving cottage industry in Sivakasi working throughout the year to produce firecrackers. It is an unorganized sector which involves entities ranging from as small as a single person sitting in a room and preparing only one type of firecracker of inferior quality to something as big as a factory with hundreds of workers churning out several variants of firecrackers of very high quality. Hence, this cottage industry can cater to all price ranges depending on the quality.


These firecracker workers work for agencies which in turn consolidates their products & represent them to the outside world. Anybody who wants to create his own brand of firecrackers can get in touch with these agencies to place a bulk order and upon delivery, pack them into their own branded boxes to sell it in market, thereby making some profit in the process. Reputed brands like “Standard” & “Chavi” go a step further by identifying agencies which produce only high quality firecrackers and also enter into a long term relationship during which the agencies themselves will package them under the “Standard” brand-name & finally deliver it to “Standard” which in turn will do the marketing & sales. Since “Standard” company has contract with agencies producing high quality firecrackers, their offerings also tend to be of superior quality which increases trust factor among customers and hence the company can sell their offerings at a premium.

Now, lets come back to the topic in hand. Just like how a thriving cottage industry of firecrackers exists in Sivakasi, there exists a thriving cottage industry in China which manufactures phones of all qualities. There are tiny sheds which employ as few as 10 workers who assemble cheap parts (off the shelf) into inferior quality phones and there are large factories which employ thousands of workers who solder components and assemble high quality parts into sophisticated phones.


Any entitiy (factory, organization or garage) which assembles parts into a final product (like a phone or a computer) which can in turn be sold to another company (which markets it) is called an “Original Equipment Manufacturer (OEM)” (Just like the agents in Sivakasi who consolidate and package all the firecrackers from several workers spread across the town).

OEMs must not be confused with dedicated centers which follow different approach. Companies like Apple, Sony, Nokia design their phones in their R&D centres and assemble them in China but they have a different approach because they set up their own manufacturing centres (or contract it to reputed centres like Foxconn) and the wokers in such centres are highly specialized in their respective phone models. i.e A worker who assembles iPhone will never work on any other phone during his contract. Since that worker indirectly works for Apple, it becomes Apple’s moral responsibility to ensure that he has good working conditions, stipulated minimum wages etc because they are under constant international media scrutiny.


But the same cannot be said of OEMs even if they produce high quality products. Since the OEMs are basically local companies, they are not answerable to any international body or media and hence, they usually impose extra working hours, extract tremendous labour & pay them less. Having said that, there are OEMs which utilize their workforce well because they work on high quality products which require specialization & sophistication which comes at a cost.

This way, China has several OEMs working on several phone models & churning out millions of devices. In order to strike a chord with customers, these OEMs generally resort to replicating appearance of an already successful device (like the iPhone, Galaxy S or Note series) and sell them at very low costs.

fake iphone

Most of these OEMs have an online presence via wholesale retailers like Alibaba which caters to global market:

Each OEM showcases the phone models it offers, along with pricing, minimum order quantity, it’s supply ability per month and other details. Here is a screenshot from one of the OEMs which has registered with Alibaba for global trade:


Anybody (Individuals or firms or resellers) interested in marketing/selling such phones can get in touch with OEMs or directly place an order in bulk and upon delivery, stick their own labels and sell it under their brand-name. Since the OEMs sell handsets without any label (so that re-sellers can put their own labels), this business model is also referred to as “White Box Handset Market“.

At a high level, Sellers can be of 4 types:

1) Sellers who design & assemble their own phones and do not lend these designs to others. Most of the major companies like Apple, Nokia, Samsung come under this category.

2) Sellers who design & assemble their own phones and also lend these designs to others. Examples being Lenovo, ZTE, Gionee, Asus.

3) Sellers who partner with OEMs. In this case, the seller can request for customizations. Companies like Dell, Panasonic fall under this category.

4) Sellers who just buy from OEMs, put their own labels & resell them. Most of the Indian companies like Micromax, Karbonn, Celkon belong to this category.

Lets look at a few examples of how Indian companies are relying on OEMs to sustain.














As we can see from the above examples, Indian companies like Micromax, Karbonn and others place bulk orders from Chinese OEMs and sell them under their own brands in India. It might come as a surprise to find that even companies which are no way related to cellphone industry, nor have the experience have begun to buy from OEMs and sell them under their own brands. Even a water heater & wet grinder company like Kailash is selling Android phones under it’s brand. Television companies like Videocon & Onida also do not want to miss the race and have introduced several phones under their brand.


This is a multi-part case study and in the subsequent parts we shall find out more about how these phones are being offered at fractional costs compared to established players, and if companies like Micromax are really being innovative and have the potential to compete at global levels or if they are just middle-men trying to make hay while the sun is shining.

Part 2 is uploaded here:

To receive notification of subsequent parts of this study as well as future posts, consider subscribing to this portal by entering your email id (and confirming it from your mailbox)

  • Enter your email id