Business

Oppo: Local production for more profit and better reputation

Oppo

Oppo is one of the highest sold smartphone brands in India. It is a Chinese smartphone manufacturer, which falls under the BBK electronics along with Vivo and OnePlus. They are the 4th most popular smartphone brand in India with around 10% market share and have smartphones in the entry-level and mid-range segments. Cost reduction is one of the prime objectives of any company in order to earn more profits and Oppo is trying for the same.

Their primary aim is to sell as much as they can and increase profits because their profit margin is low compared to premium brands such as Apple and Samsung. The brand is competing in segments where the profit margin is extremely low in order to retain customers. To achieve the target they need to cut down on costs, which will result in lower prices of their smartphones.

The brand is in talks with smartphone equipment makers in India to manufacture important parts for the smartphones that are to be sold in India. The company has been performing well in the last few quarters and that shows in its market share that has grown up to 10%. The increasing demand of the brand in the Indian market compels them to look for local manufacturing options inside India.

The Indian government has issued incentives regarding local productions under the ‘Make in India’ initiative. Smartphone manufacturers are taking full advantage of the initiative by setting up manufacturing hubs in India. This creates numerous jobs in the country and also helps the company is reducing manufacturing and transportation costs. Samsung has their largest factory built in India. Apple and Xiaomi are also manufacturing most of their products sold in India in India.

Oppo is collaborating with e-commerce websites such as Flipkart, Amazon and Paytm Mall to sell its products on these platforms. These platforms have a huge user base and the reach that Oppo will get from these websites is immense and hence, more sales.

Last year, they ventured into the premium segment with their FindX model. Their move into the premium segment reflects upon their will to increase their profit margin and gain some of the market shares in the premium segment as well. Currently OnePlus, Apple and Samsung are the leaders of the premium segment in India.

Oppo is setting up a Greenfield Electronic Manufacturing Cluster (EMC) to increase their low-cost production in the country as well generate huge employment opportunities as per a UNI report. The EMC is being set up by TEGNA, which according to an ET Telecom report, is an SPV of Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA), Oppo and other companies such as Foxlink, Waffer and Mitac.

The Electronics Cluster is coming up in Greater Noida. It comes under the electronics policy initiatives of the UP government. The current UP government is trying to attract local as well as foreign players to the state for making huge investments and putting up manufacturing units. This EMC will get around INR 3500 crores ($492 million) of investment over the period of 5 to 10 years.

The EMC plans to produce around 2,00,000 products daily so that it helps the company reach its target of the Make in India. The plant will also generate numerous employment opportunities in the state. The state of Uttar Pradesh plays an important role in the manufacturing industry in India as many of the large manufacturing plants are coming up in the state especially in Noida. Companies such as Oppo, Vivo and Samsung have invested huge amounts of money and infrastructure into the state as it is emerging as the new destination for electronics majors from around the world.

If we closely analyse the investments and the current situation, we can see that Oppo is doing this for a couple of reasons. The first reason is reducing the cost of production and getting incentives from the Indian government. However, the second motive is to generate employment, which will not only create goodwill among the people but also tone down the negative reactions to the Chinese companies in India. It is seen that the Indian media is often opposing the Chinese companies in India. If the Chinese companies start generating jobs for the millions of educated but jobless youths in India instead of just making money, then the public perception will also change drastically.

-Soumya De

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