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As the world watches Apple move to refresh the $1,000 iPhone X this month, India, as always, is expected to show very little interest in the Apple’s new offering. Not because it doesn’t like smartphones — it’s the world’s second largest smartphone market — but because iPhones just doesn’t have the kind of market share in India that they have elsewhere.

India’s smartphone market is currently a key battleground for a number of phone makers from China, Taiwan, and South Korea. As the smartphone shipments slow in many parts of the globe, India’s handset market continues to grow. July saw 42 different smartphone models launched in the nation, up from 25 models during the same period last year, research firm Counterpoint told VentureBeat.

Most of the new handsets are from Chinese smartphone makers, many of whom see India as their most important market.

Leading the charge is Xiaomi, which last year ended Samsung’s five-year-streak as the top phone vendor in the nation. The period between April and June of this year was the fourth consecutive quarter for Xiaomi as the top vendor in India, according to IDC. Xiaomi (29.7 percent market share as of Q2) has aggressively undercut the offerings of its rivals by selling inexpensive but high-quality smartphones in India. A spokesperson for the company said that India is currently its most important market.

In the second quarter of this year, four of the top five smartphone makers were Chinese, according to IDC. In addition to Xiaomi, that number includes Oppo (7.6 percent market share), Vivo (12.6 percent), and Transsion (5 percent). Together with other Chinese phone makers such as Lenovo, the group held two-thirds of the local smartphone market in the second quarter, IDC said in a report published last month. Less than three years ago, the aggregate market share of these companies was under 15 percent in India.

Above: Data: IDC

Unlike Xiaomi, which in its early years in India focused on selling phones exclusively online to cut overhead costs, Oppo and Vivo have long used brick and mortar stores that continue to be more popular than online channels for smartphone purchases in the country. Oppo and Vivo have spent extravagantly to flood the market with their phones and incentivize salespeople to promote their handsets.

Transsion, which operates the iTel brand and sells through both online and offline channels, saw its market share grow to five percent in India during Q2, which it attributed to growing sales of its low-priced handsets. The handset maker, which operates three brands in total, is also among the top vendors in several African markets.

Much of the growing fortunes of these companies could be attributed to the level of commitment they have shown in India, according to several analysts interviewed for this story. In addition to expanding their retail presence in the nation, they have made major investments in local manufacturing and assembly, helping to create new jobs for Indians and opportunities for small and medium businesses.

This is in line with the Indian government’s Make in India program, which has encouraged foreign players to produce products locally by offering participating members waivers from several tax duties.

Xiaomi has set up six smartphone manufacturing units across India, for instance. “The brand has a manufacturing capacity of producing two smartphones every second during operational hours,” a Xiaomi spokesperson told VentureBeat, adding that the company has employed more than 10,000 people in India, more than 95 percent of whom are women.

“Currently over 95 percent of Xiaomi smartphones sold in India are made in India, thereby boosting indigenous manufacturing of smartphones and [their] components, which is one of Xiaomi’s priorities. Marking a significant move in its localization strategy, Xiaomi also announced its first SMT (Surface Mount Technology) plant dedicated towards local manufacturing of PCBA (Printed Circuit Board Assembly) units in Sriperumbudur, Tamil Nadu, in partnership with Foxconn,” the spokesperson added.

Above: Xiaomi executive Jai Mani announcing the company’s new Poco sub-brand in India last month.

This partnership allowed Xiaomi to avoid a new import duty on such components introduced this year. Meanwhile, import duties have marred Apple’s prospects in India, where its market presence and relevance remain very small.

The rise of Chinese smartphone makers in India has been spurred by falling data prices in the nation. Disruptive telecom operator Reliance Jio started a mobile data price war in late 2016, making smartphones more appealing than ever for consumers.

What about Indian smartphone makers?

The entrance of Reliance Jio wasn’t good news to everyone. Indian smartphone makers Micromax, Karbonn Mobile, Lava, and others together held about 46 percent of the market in early 2016. That figure has now been decimated, leaving local manufacturers with a single digit share.

In a conversation with VentureBeat last year, Rahul Sharma, cofounder of Micromax, which once ruled the market, admitted that the company had been slow to address the market demands (people increasingly wanted 4G enabled low-cost phones they could use on Jio’s 4G-only network). At the time, Sharma said he was hopeful that Chinese phone makers would soon be out of cash, giving Micromax an opening to fight back.

That opening never came and likely never will, according to the analysts I spoke to. Many of the Chinese companies that are dominating the Indian smartphone market were originally the hardware and design partners of Indian smartphone vendors. They understood the market and then weeded out the middlemen. This allowed them to shorten the turnaround time and sell handsets at much lower prices since they no longer had to split the profits among so many parties, Jayanth Kolla, founder of consulting firm Convergence Catalyst, told VentureBeat.

Why India?

India is an extremely price conscious market, where the per capita GDP is still $1,940, significantly lower than even some of its neighbors like Sri Lanka. But the country’s vast population of more than a billion people has proven crucial to companies that can scale their businesses, said Satish Meena, an analyst with research firm Forrester.

And much of that population has yet to be tapped. Speaking to VentureBeat, IDC analysts Navkendar Singh and Upasana Joshi said, “India will remain the fastest growing large smartphone market for the next few years.” The Chinese smartphone market suffered a 4 percent decline last year, according to IDC, which does not expect much improvements there this year. Global smartphone shipments, too, have suffered decline in the last three quarters.

Forrester’s Meena added that there are a couple more opportunities of growth for phone companies in India: Existing smartphone users in India will soon want to upgrade to newer, improved handsets. And then there’s the feature phone market, which refuses to shrink.

The US government’s increased pressure on some Chinese electronics companies such as Huawei, is giving them additional reason to shift their focus to India.

Huawei launched its P9 handset in the country at Rs 39,999 ($560) last month. And Shenzhen-headquartered smartphone vendor HomTom entered India a few days ago, announcing three new handsets. OnePlus, another Chinese smartphone maker, took Samsung and Apple by storm in the second quarter to become the top premium smartphone vendor in the country. OnePlus assumed 40 percent of the premium smartphone market, which is composed of handsets priced at $400+.

“India has quickly surpassed other regions to become the biggest and the most important market for OnePlus,” OnePlus India General Manager Vikas Agarwal told VentureBeat. Citing data from third-party research firms, Agarwal noted that India accounted for over one-third of OnePlus’ business last year.

OnePlus doesn’t just see India as a market for moving huge amounts of inventory, Agarwal said. “India is focus market for us as a brand. In India, strategy is key and doing the right thing at the right time can take you a long way. I believe that strategy has helped us come this far and we look forward to further exploring the large untapped potential that India has to offer,” he said, adding that the company has used India as a platform for conducting experiments and gaining experience.

India helped the company in “establishing partnerships with brands in other global markets like Amazon (in Germany and the UK) and Disney (in the Nordics and China). Lastly, feedback from our Indian community has played a key role in improving product experience (wallpaper designs, software improvements etc),” he added. OnePlus is charting a roadmap towards making India its home market, he said.

A good performance in India could help Xiaomi, OnePlus, Huawei and other Chinese phone makers do better in other global markets, IDC’s Singh and Joshi said. Those who can sustain and grow their businesses in India prove to the world they can handle large and tough markets, they said.

It is important for vendors with global ambitions to win in India — both because of its size and because of its growth potential, Singh and Joshi said. By winning in two of the world’s biggest markets, China and India, these companies are achieving scale and positioning that will be hard to rival.

Manish Singh is a technology reporter based in New Delhi, India. His work has appeared on CNBC, The Outline, Mashable, and CNET.

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