Part 2: Micromax Phenomenon: Propaganda or Reality?

In part 1, we learnt about the business model used by Indian phone companies due to which they are able to offer smartphones at relatively lower costs compared to Apple & Samsung:
http://guruprasad.net/posts/micromax-phenomenon-propaganda-or-reality/

To summarize it in a single line: “Indian companies buy phones assembled by Chinese OEMs, put their own brand labels and resell them in India”.

Now comes the next natural question: How do the Chinese OEMs (like Lenovo, Gionee, ZTE, Tinno & others) manage to offer their smartphones for such low prices?

In order to explore the answer for this question, we have to understand the business model used by the Chinese OEMs and the anatomy of a smartphone. Let us step back a little and look at a different industry now: The automobile industry.

A car typically consists of the following major parts:
1) Engine: The central unit of the automobile.
2) Chassis: The skeletal system over which the engine and other major components like gear system, fuel tank etc are placed
3) Dashboard: To display readings like speedo, rpm, temperature etc
3) Body/Shell: To package the whole system, provide appearance & protection.

automobile
A car company might either design all the above major components themselves and assemble them or they can buy them from other companies. For example, although Suzuki (parent company of Maruti Suzuki) designs & manufactures engines under the “Suzuki” brand, there are cases where Maruti buys engines from other companies like Fiat for some of it’s high end models. Although Tata has all the expertise to design shells for it’s own cars, there are instances where the company had tied up with Italian companies to design the body/shell of Tata cars.

Such a business model of sourcing components & services from different companies have been the norm in almost all of the industries.

Lets use the above example and compare it with computing industry for analogy.
The major components of a computer are:
1) Processor: Similar to the car engine, this is the central unit which will process all the operations of the computer
2) Motherboard: Similar to a car chassis, this is like a skeletal system which houses the processor and other major components like GPU, ALU, Sound & Video chips and more.
3) Display: Similar to the dashboard, this shows the output/results
4) Memory: To store persistent data (Hard Disk) and volatile data (RAM)
5) Body/Shell: To package the whole system and provide appearance.

computer_cpu

Even in the computing industry, all the above parts can either be manufactured by the same company but usually they are sourced from different companies. Processors are bought from Intel or AMD. Motherboards from Intel or Asus. Display from Samsung or LG and Body/Shell from design houses.

Integration companies like Dell just buy all these companies, assemble and sell them under the reputed “Dell” brand.

Keeping the above model in mind, lets now find out the major components of a smartphone. Since a smartphone is basically a mini computer (for all practical purposes), the above computing concepts apply to smartphone industry as well, albeit few changes.

A typical smartphone comprises of the following major parts:
1) Chipset: This is slightly complicated because this is a combination of the processor & motherboard of the computer. Also called SoC (System on Chip), it is basically a sophisticated computing system with several processors including CPU, GPU, ALU, Modem, Communication processors like GSM, 3G, GPS, WiFi, Bluetooth etc completely integrated into a single chipset.
2) Display: Usually a flat touch based screen
3) Storage: RAM for volatile memory, Internal/External memory card for persistent data
4) Body/Shell: To package the whole system and provide appearance.

samsung_smartphone_anatomy
The following diagram summarizes the above explained correlation of parts from different industries.
car_pc_phone
As we see from the above description & diagrams, the parts of a smartphone, although complicated in design, are like modular components which can easily be picked as off-the-shelf components by anybody even with minimal expertise & assemble them into a phone. Apart from the above mentioned parts, there are other parts as well like battery, charging circuit, sensor units (accelerometer, temperature sensor etc)
Now that we have got a good idea of the major components of a smartphone and their roles & responsibilities in the phone, let us briefly look into each component and the companies which offer them.
 
Chipset: 
Since this is the most complicated component of the smartphone and requires fabrication of the SoC (System on Chip), it is offered only by reputed companies which have the finance, semiconductor fabrication plants & muscle power to compete in this segment.
fabrication
Just like how automobile engine companies sell their engines under a series of brandnames (like UniJet Turbo Diesel engines by Fiat), similarly, tech companies sell chipsets under a series of brand names which are usually highlighted by phone salesmen.
For example, Samsung offers chipsets under the “Exynos” series, while Qualcomm offers its chipsets under the “Snapdragon” series, Intel offers its chipsets under “Atom” series, MediaTek offers its chipsets under “MT” series & Nvidia offers its chipsets under the “Tegra” series.
snapdragon
qualcomm_snapdragon
Display:
The industry is flooded with manufacturers ranging from as small as a 10 member teams to as large as 10,000  member teams producing displays (with touchscreen) of all shapes, sizes & resolutions. Some of the major players producing smartphone displays include Samsung, LG & Sharp, who market it under different brand families like Retina display, Super AMOLED, IPS displays,  with resolutions like qHD, HD, Full HD etc which are highlighted in specifications & ads.
amoled Storage:
The internal memory of smartphones are usually “Flash Memory” and Samsung is the dominant player in this category, followed by Toshiba, Sandisk & others. Since manufacturing flash memory requires fabrication plants, there are only few companies offering it.
 
Battery:
There are a plethora of companies and even a thriving cottage industry in China producing batteries of all possible qualities. Some of the best quality batteries are manufactured by Dynapack, Samsung & Sony.
battery
This is a multi-part case study and in the next part we shall go more in-depth into each component and find out how Chinese OEMs have been cleverly choosing specifications & components for their smartphones (which in turn are bought by companies like Micromax in bulk & sold in India under their brand-name) to provide great value-for-money to the customer with very little compromise in user experience & quality.
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