In 2023, Indian company Noise will become the world's third-largest smartwatch manufacturer. Apple and Samsung are at the top of the list. But what's remarkable is that other decades-old companies on this list have been overtaken by Noise, which launched only seven years ago. What's even more remarkable is that at the time, it was a completely bootstrapped company.
Today, Noise is the market leader in its segment in India and manufactures technology products from India for the world. Growing up in the tier-two town of Bikaner in Rajasthan, how did two cousin brothers build one of the world's largest hardware companies? What are some of the lessons they have learnt from past failures like Micromax and other companies?
Noise didn't start out as a smart-wearable company as we know it today. It started as a phone company. One of the co-founders, Gaurav Khatri, was a tech buff at a young age. When Apple released its first iPhone in 2007, Gaurav asked his cousin brother Amit to buy it. Amit, who was working in Hong Kong at the time, was 10 years older than Gaurav. It was his first smartphone.
Next, he started looking for the cover for his iPhone and found one on eBay. But it was not available in India. He again turned to Amit to get it from Hong Kong. When it was finally received, friends appreciated it very much. This is how Gaurav realized that there is a business opportunity here.
At this time, Gaurav was only 17 years old, so starting a business was not thought to be viable
Over the next few years, Gaurav graduated with a business degree but his love for gadgets remained.By 2014, India was witnessing a smartphone revolution.New companies have come up and smartphone adoption among Indians is rising rapidly.People were booing their new phones, and more stylish covers than phones were being discussed.Realizing this change in the market, during one of Amit's trips to Hong Kong, Gaurav asked him to buy 50 phone covers for the newly launched Xiaomi phone.When Gaurav listed these products on e-commerce marketplaces, they were sold out within 15 minutes.The brothers realized what a great opportunity it was, and that's how Noise 1.0 was born in 2014.In the same year, they set up a factory in India to locally manufacture these phone covers, and by the end of the first year, they made sales of 7-8 crores.The following year in 2015, sales rose to Rs 24 crore, making them the market leader in phone covers in India.
Though their sales grew rapidly, Gaurav and Amit were worried about their business. They first realized that their business was a 'commodity business', meaning their product was no different. They can only make changes in price, and anyone with a low price can beat them. There was no brand in the business. Secondly, access to the market for phone covers is very easy, and with the rise of e-commerce platforms like Amazon and Flipkart, there were concerns that their business would be put on the defensive.
In 2017, Gaurav and Amit started looking for the next product they could sell. Like the first time, Apple showed them the way. Apple released their first smartwatch in 2015, followed by their first wireless AirPods in 2016. These two products have created a new industry called 'smart-wearables' in the tech world.
By the end of 2017, Apple sold more than 18 million smartwatches and more than 15 million AirPods. The wearables market was growing very fast, but here in India this market was actually non-existent. In 2014, the number of smartwatches sold in India was just 1 lakh units and this number is expected to grow to 5 lakh by 2015.
Amit and Gaurav were fascinated by smartwatches and the growth potential in India, which is how Noise 2.0 was born in 2016.In India, companies like Xiaomi and GOQii had a strong influence in this market, but there were some problems with these bands.
First of all, the quality is expensive. For example, when Amit tried to buy a Fitbit in India, it was priced at around Rs 25,000. He realised that most Indians couldn't afford it. The next problem with these bands was their usefulness. These bands mainly had options to track only your health indicators, unlike the options offered by Apple Watches at the time.
Noyes wanted to solve these problems by offering more utility at a price that was affordable to the average Indian. Once it decided to sell smartwatches, the next problem was to figure out its supply chain and manufacturing. In 2016, it was unthinkable to make a smartwatch in India. First you have to invent an operating system, put sensors and algorithms on it and finally build it at scale. Following this, Gaurav and Amit sought help from their tech partners in Taiwan and China.
The idea was to import raw materials and technology from these countries and then assemble them here in India. The U8 smartwatch was one of the first smartwatches made by Noise. If you go to Amazon, you can still find this watch, and if you look at the dates, it was launched in 2015. If you look at the manufacturer, you can see that Noise is not a company called "Salon Technologies" - it must be one of their manufacturers in Taiwan or China, where their first smartwatch originated.
But this first watch was not successful and they received only 3.2 stars from 198 ratings.And some of the reviews are really bad.This is their first review on Amazon "Zero Stars.It doesn't switch on. "Another user said that the watch doesn't have Noise's branding or logo and it doesn't look like the one shown in the images.But despite these early hiccups, Noise made their smartwatches better by listening to their customer feedback and launched their flagship smartwatches, the ColorFit and ColorFit Pro, in 2018.
They have become a hit among users due to their affordable price and attractive features. That same year, Noise released their first wireless earbuds. Their position of offering high engagement utilities at affordable prices has increasingly attracted customers, which has also reflected in their revenues. In FY2018, which was the first full year that they were doing business after their pivot, they generated a revenue of Rs 24 crore, which jumped to Rs 42 crore in FY2019 and Rs 156 crore in FY2020.
2020 has been a bad year for most businesses, with the COVID-19 lockdown disrupting most supply chains, but one positive change that COVID has brought about is that people have become more aware of their health.People now want to track how many calories they've burned, or the amount of oxygen in their blood.For this reason, smartwatches, which until now were a fashion, have become a must-have product.
This has increased the demand for smartwatches in India. Do you remember India bought only 5 lakh smartwatches in 2015? That number increased to 26.6 lakh in 2020 and further to 1.2 crore in 2021. Noise was well positioned to capture this demand. They have been making smartwatches since 2016 and by 2021, theirs had become a well-run company. According to this report from the beginning of 2020, at that time Noise was selling four products every minute, and by the end of the following year, it became the market leader in this industry with a 27% market share. In 2022, they became the third-largest smartwatch brand in the world, behind Apple and Samsung. This is no small feat for a bootstrapped 6-year-old startup. In terms of revenue, it rose to Rs 370 crore in FY21 from about Rs 800 crore in FY22.
But that doesn't mean all is well. Now they are facing the same problem that Gaurav and Amit faced in 2016 regarding the phone cover business. They are facing huge competition and their product is becoming commodities. When Noise started, they were one of the few smartwatch manufacturers in the country, but now more than 80 companies are making smartwatches. Companies such as Boat and Fire Bolt, which previously did not focus on smartwatches, now fall into this category. Boat had a mere 2.8% market share in the smartwatch segment in 2020, which increased to 25% by the end of 2021. This is due to the increased marketing of the boat and the marketing power that came with the arrival of Aman Gupta in Shark Tank.
A bootstrapped company like Noise, on the other hand, had none of these. The next problem is the over-reliance on smartwatches. More than 80% of Noise's revenue comes from smartwatches, and as more people start making smartwatches, this could become an existential crisis for them.
There are also complaints about the quality of the products and their after-sales service. What is Noyce doing to work on these challenges? Having said that about how the boat is successful because of high marketing, Noyes is now trying to do the same. In December 2022, the company replaced its rival Fire Bolt with Virat Kohli as its brand ambassador. But this marketing is now adversely affecting the profitability of Noyes. In FY23, they had a gross margin of about 30%, but their net profit was just 0.07%.
Another thing that makes noise to stay in business is investing in research and development.In 2022, they launched Noise Labs, their in-house incubator to tinker and experiment with new technology.The idea was to find the next Hero product, and there were reports that they had found one.This is the Luna, a smart ring, which according to many is the future of smart wearables.It's like putting all your health-focused smartwatch features in a ring.According to the report, the global smart ring market was estimated to be worth just $147 million in 2022, and is expected to grow 10-fold to $1.4 billion by 2032.
Although it's a small market right now, Noise wants to create this category early on, just like they did with smartwatches.It is reported that big companies like Apple and Samsung are working on smart rings, which proves the usefulness of this product.This ring from Noise is currently priced at Rs 20,000 and is in the mass-premium and affordable segment, similar to their smartwatch strategy.
Eventually, Noise brings their production in-house.This will help them to control the quality and market it in the next Make-in-India image.It has announced a joint venture with IL Jin Electronics to localise the manufacturing of its products in collaboration with Optiemus Electronics and Taiwan's Foxconn.
