Acer lost India’s smartphone battle. This is how it plans to win the war.

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At a time when the shipment of PCs is trailing that of smartphones, Taiwan-based Acer has taken a rather unusual route in India – the fastest growing market in the world.

The company put its ailing mobile phone business on hold in December, and has decided to focus on hardware for new technology such as VR and IoT instead, a top executive told Tech in Asia. The PC-maker wants to introduce its VR headsets, wearables, and gaming hardware in India by 2018-19.

Acer, which derives over 90 percent of its revenue from PC sales, introduced a modest portfolio of mobile phones back in 2010. But it didn’t quite take off. In 2015, the company came back, launching two smartphones in India – the Liquid 630s and the Liquid 530 – at US$160 and US$100 respectively.

Acer is adamant on transforming good old PCs.

But fierce competition from phone manufacturers such as Xiaomi, Lenovo, Oppo, and Vivo stalled Acer’s progress in the country.

In 2016, India created a record of sorts with 109.1 million shipments of smartphones, higher than 102.7 million in 2015, according to IDC. In this flourishing market, Acer could manage to sell just 30,000 phones in the entire year. In comparison, Xiaomi sold over a million of its Redmi smartphones by the end of 2016. The phone was launched in August.

Acer has already invested about US$18 million in setting up two assembly lines in India, which were to target both the PC and smartphone market.

Acer’s intentions of breaking through the country’s smartphone market were amply clear, so why did the company fail to do so?

See: Thanks to smartphones, AR’s beating VR hands down

Problems

To start, Acer found it difficult to compete in a market where consumers are willing to compromise on quality of features over price. “We can either have quality or low cost. We don’t want to offer just affordability,” says Chandrahas Panigrahi, senior director of Acer’s consumer business.

To date, however, Acer has operated in the sub US$150 category. While competitors have been able to balance low pricing with good features, Acer has been unable to do so, says Tarun Pathak, analyst at Counterpoint Research.

Chandrahas, however, disagrees. “We have never been affordable. We have tried to keep the prices low, but only if there is room to do so,” he says.

Acer smartphones are currently sold on ecommerce platforms such as Flipkart and Amazon, while the company continues to expand its offline experience stores for PCs and laptops. The company did try to push phone sales offline, but the move backfired: “offline has margins attached to it for distributors, which impacts the turnover,” Tarun points out.

Banking on innovation

Obstacles ahead