Indian phone makers leave China to build at home

Indian smartphone manufacturers, Maxx Mobile and Intex, start building local production lines as costs in China increase, but others say an ecosystem is needed before India is a viable manufacturing alternative.
Written by Mahesh Sharma, Correspondent

Indian mobile phone manufacturers are planning to start assembling devices in their own backyard, due to rising costs in China and increase in import tax in India.

Ecosystem needed before India can be viable manufacturing alternative.

The Hindu reported on Sunday that Indian device manufacturers, faced with growing production costs which were further exacerbated by a falling rupee value, increased their product prices by between 6 and 12 percent in July.

The report added that local players, Maxx Mobile and Intex, will start building in Uttaranchal and Himachal Pradesh, respectively. Intex general manager, Sanjay Kumar, said the company will invest US$16.6 million (1 billion rupees) to set up two assembly lines in three to four months time. 

Maxx will start production in its Uttaranchal facility in July. 

The impetus for the move is rising production costs in China, which have increased by 20 percent recently, according to The Hindu. Additionally, the Indian government introduced tariffs for electronic goods imported into India--with a 7 percent tax on handsets priced above US$33 (2,000 rupees), compared to locally manufactured products which are taxed just 1 percent.

However, Karbonn Mobile's director Sashin Devsare said manufacturing in India was not a viable alternative because of an absence of an ecosystem and parts.

"There has to be an ecosystem first for local manufacturing to be feasible," Devsare, whose company is India's second biggest smartphone manufacturer, told The Hindu.

Sandip Biswas, director at Deloitte Touche Tohmatsu, also warned it might be more expensive to manufacture in India. "The absence of an ecosystem might lead to a situation where, despite local manufacturing, the price of the final product will still be higher than an imported offering," he said.

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