India aims to become global hub for manufacturing smartphones

With the Indian government determined to promote local manufacturing in 25 sectors including electronic equipment, around two dozen new smartphone assembling units have been established by various companies in less than two years in India, as part of Prime Minister Narendra Modi's "Make in India" campaign launched in September 2014.

According to International Data Corporation's (IDC) Quarterly Mobile Phone Tracker report released last week, more than two thirds of the smartphones shipped in Q1 2016 were assembled within the country and some of the companies, which are currently assembling mobile phones locally, are likely to start manufacturing components like batteries, chargers, and data cables, owing to support from the federal and state governments.

As many as 23.5 million units of smartphones were shipped in India in Q1 2016, registering 5.2 percent growth over the same period last year. "4G based smartphones shipments clocked 15.4 million units in Q1 2016, which has grown more than six times over the same period last year," the report said.

The two dozen companies that are engaged in assembling smartphones include Chinese phone makers Vivo and Gionee -- which have set up assembling units in Greater Noida near Delhi and in Andhra Pradesh respectively -- and Samsung, also in Noida. Others such as Xiaomi, Motorola, and Lenovo too have set up their plants, while South Korea's LG Electronics is looking for a suitable place to establish a local component base for its business in the country.

One of the reasons why Apple is interested in establishing its manufacturing facility in India, according to the IDC report, is that smartphone penetration has been only 30 percent at present and there was good scope for other companies to set up units in the country.

However, smartphone shipments shrank by 8.2 percent over Q4 2015, dipping consecutively for two quarters, but the market is expected to gain momentum in the upcoming months, the report said.

Indian Cellular Association associate director Bijesh Roul said that India was on its way to become a global hub in manufacturing smartphones because of the support extended by the Indian government and also due to the investor-friendly policies adopted by various states.

Some of the advantages for these companies to establish their units in India include the provision of capex subsidy and also the reduction in excise duty. "The Chinese companies are also looking at India as manufacturing has become expensive in their country whereas it is cheap here," Roul explained.

There has been 185 percent growth in terms of value in mobile manufacturing sector in 2015-16 compared with the preceding year and the "Make in India" initiative also helped the creation of 40,000 jobs in the mobile phone manufacturing sector in the country last year, Roul added.

Karthik J, senior market analyst for Client Devices at IDC India, said that India was mainly into assembling semi knocked down (SKD) mobile phones than end-to-end manufacturing of mobile phones in countries like China and Taiwan at present.

"However, a few quarters down the line, when India enters the 'completely knocked down' (CKD) and component manufacturing era, India would emerge as a global mobile phone manufacturing hub catering to the demand of other South Asia and SEA markets in the Asia-Pacific region," he said.

He said that there were at least 25 smartphone vendors engaged in assembling SKD mobile phones in India. "With the recent hike in the import duties on the components, it is clear that government is expecting mobile phone vendors to move from SKD to CKD/component manufacturing phase soon. Few big vendors are also considering moving into CKD manufacturing given the volume of the market," Karthik added.

"We expect many transitional phases to unfold in the mobile phone ecosystem this year as more vendors begin local assembling/manufacturing and an increasing trend for higher data consumption owing to affordable 4G devices and data plans," said Navkendar Singh, senior research manager, IDC India.

According to him, smartphone penetration is still at less than 30 percent in the country which makes it one of the most attractive markets in the world. "While the new entrants continue to make the Indian mobile market more competitive, vendors differentiating themselves with value added services could be expected in this year," Singh added.