India's Micromax, once a rising star, struggles

A year ago, Micromax vaulted past Samsung Electronics Co Ltd to become India's leading smartphone brand. Today, its market share has nearly halved, several top executives have resigned, and the company is looking for growth outside India.

In Micromax's slide to second place is a tale of the promise and peril of India's booming but hyper-competitive smartphone industry.

India is the world's fastest-growing smartphone market. Shipments of smartphones jumped 29 percent to 103 million units last year.

Rapid growth has helped nurture a crop of local brands, led by Micromax, that outsourced production to Chinese manufacturers. Now, as Samsung rolls out more affordable phones, the same Chinese factories are entering the Indian market with their own brands, depressing prices and forcing Indian mobile makers to rethink their strategies.

"What the Indian brands did to the global brands two years ago, Chinese phone makers are doing the same to Indian brands now, and over the next year we see tremendous competition for Micromax and other Indian smartphone makers," said Tarun Pathak, analyst at Counterpoint Research in New Delhi.

Micromax, which was founded in New Delhi by four partners in 2000 but only began selling mobile phones in 2008, built its market share by working with Chinese manufacturers such as Coolpad, Gionee and Oppo to offer affordable phones quickly. In 2015, it launched more than 40 new models.

In 2014, the founders brought in outside managers to lead the company at a time when Micromax was challenging Samsung to become the largest mobile phone maker in India. But tensions arose soon after between founders and the newly hired executives, six former executives told Reuters. These conflicts undermined Micromax's attempts to raise funds for expansion, say former executives. Last May, Alibaba walked away from a mooted $1.2 billion purchase of a 20 percent stake, citing a lack of clarity on growth plans, according to one executive involved in the discussion. Micromax co-founder Vikas Jain said to Reuters this week that the company and Alibaba disagreed on a future roadmap.