CELLPHONES: Meizu, Qihoo Join Smartphone March to India

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Bottom line: Qihoo and Meizu are likely to struggle with their new smartphone campaigns in India, where intensifying competition will also undermine domestic rivals like Xiaomi and Huawei that have recently entered the market.

Qihoo unveils new Qiku smartphones

Qihoo (NYSE: QIHU) and Meizu have announced they are taking their smartphones to India, becoming the latest Chinese brands to export to the fast-growing but increasingly competitive market. India is actually the second stop on Qihoo’s smartphone roadmap, which will begin in its home China market with the launch of the first 2 models of its new Qiku smartphone brand. Meizu has become a major second-tier player in its home China market over the last few years, and formally announced its own move into India this week as it looks to move overseas.

The pair will join several of China’s top smartphone makers in the increasingly crowded India market, which shares many qualities with China. Xiaomi launched in India last year and the market quickly became its second largest globally, while Huawei’s Honor brand has also scored rapid progress in the market. But Qihoo’s biggest competitor in India could be Coolpad (HKEx: 2369), which is already a big player in the market but will also produce Qihoo’s new smartphones through a joint venture formed by the pair last year.

If all this sounds just a bit crowded and confusing, it’s because the Chinese manufacturers are rapidly exporting their chaotic brand of competition to nearby India. That means they are almost certain to spark similar price wars there to the ones they’ve begun at home, especially since most players now entering the market either have big cash piles or are backed by major cash-rich benefactors.

Let’s begin with Qihoo, which announced its plans to enter the smartphone space late last year when it formed a joint venture with Coolpad. Now Qihoo has formally unveiled its first 2 Qiku models from the venture, including an entry-level and higher-end model. (company announcement; Chinese article) Qihoo said it will launch the models in China next month and in India in October. It said it will also launch in Indonesia by year-end, and has plans to go to Brazil, Russia and Turkey.

The announcement didn’t charge up Qihoo stock, which tumbled 8 percent in the latest trading session. This kind of volatility has been quite common in US-listed Chinese stocks these days. But in this case Qihoo probably spooked investors with its plans to launch an unknown brand in 2 of the world’s most crowded and competitive markets. Qihoo’s products are generally well designed and distinctive, but even I would worry this new launch will be very costly and the chances of failure are high.

Meizu’s India Roadmap

Meantime, Meizu has formally unveiled its own roadmap to India at a media event this week. (Chinese article) Meizu actually told me about its India plan back in March (previous post), so I was slightly surprised to see the move has taken so long to actually materialize. The company has formally announced it will enter India with its mid-range MX5 model priced at the equivalent of about $300.

Meizu has a major financial backer for this foray via e-commerce leader Alibaba (NYSE: BABA), which earlier this year invested $600 million in the smartphone maker. Alibaba has been making its own big moves into India e-commerce lately. One of its investments, the locally popular e-commerce site Snapdeal, will be one of Meizu’s major outlets for this new push into the country. Meizu told me in March it hopes to sell 700,000 smartphones in India in its first year, indicating it plans to be relatively aggressive.

Both Qihoo and Meizu enjoy relatively solid reputations, and Qihoo in particular is known for solid designs that could help to distinguish its products from the crowd. But both China and now India are becoming so saturated with Chinese brands these days that I really don’t have huge expectations for either company in these 2 major new campaigns.

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