India stands second in the largest global smartphone market in terms of users after China. The country has a continuous demand for smartphones owing to the increasing use of the Internet, growing economy that increases the spending power of people and innovative features that smartphone offers. Every mobile player has a substantial opportunity to tap this high-volume market, which is still under-penetrated, and growing when demand for smartphones in other markets is waning.
Looking at this vast potential of the country and its talent, Prime Minister Narendra Modi announced the “Make in India” campaign in the year 2014. This was to make India a manufacturing hub and attract investments from the global players of different industries. It is the result of this initiative only that we have crossed 100 million units mark in smartphones and it is estimated that more than a billion smartphones will be sold in India in next five years. This means that number of smartphones users will increase from a quarter of a billion to half a billion.
This campaign has also attracted several investments from 37 mobile manufacturing companies.
• Chinese manufacturers, Gionee and Xioami, have started making their handsets in the Foxconn plant in Andhra Pradesh.
• Apple has also announced its Bengaluru manufacturing unit Peenya but an official announcement is still waiting.
• Indian manufacturer, Micromax, started a new plant in Uttrakhand and is planning to invest in Telangana, Rajasthan, Maharashtra.
• South Korean mobile Giant, Samsung is the India’s largest phone seller. The company has made investments worth Rs. 500 crores in its Noida plant.
• Another Indian manufacturer LAVA has also made an investment of Rs. 50 crore to increase the capacity of its Noida plant to assemble one million phones in a month.
• Taiwan’s based Foxconn has already announced setting up of 7-8 units in India.
All these announcements make it clear that more mobile manufacturing set ups means more employment and better economic growth. According to Indian cellular association, India has a capacity to assemble around 270 million phones a year. In contrast to this China, due to its economies of scale and full-fledged ecosystem, has a capacity of 1.1 billion phones.
What makes India lack behind China?
• India does not have any component base that adds to its freight costs. This finally adds up to the total manufacturing cost of the smartphones.
• The cost of finance, power and water are higher in India as compared to other Asian countries that restricts the global manufacturers to have their set ups in India.
• The landed cost of materials is 10% lower in China.
• As China is a leader in mobile manufacturing, it needs to import only 5% of components from other countries while India has to import around 80% components.
• In terms of productivity, Chinese labour is more productive as compared to India.
Despite so many unfavourable conditions with India, the country has been successful in attracting investments over the years. One of the major reasons for the same is the large domestic market in the country. Android device manufacturers who are looking for an alternative market to reduce risks, India can be the best option. On the other hand, the labour cost in China has increased by 20% while India has low-cost labour and a large pool of software engineers. Apart from this, India has growing infrastructure, ease of doing business, and beneficial policies with GST that have also attracted android mobiles manufacturing companies towards India to set up their manufacturing base.
India, being the second largest telecommunication market and fast-growing smartphone market, is expected to grow at a rapid pace. According to “India Smartphone Market Outlook” the market will grow at a CAGR rate of 10.95 per cent in 2018 due to data consumption in handheld devices. The global, as well as domestic manufacturers, are trying to offer innovative and unique features that can match a user’s taste, personality and daily requirements. Today’s smartphones are not only smart but also future ready, stylish and durable.
Indian Government has taken many positive steps and industry is moving forward to create a domestic ecosystem for manufacturing smartphones. With this, it is expected that the country will sell around one billion smartphones in a year. These one billion smartphones will make India consume USD 80 billion worth of components. The biggest drawback with India is that these components are not sourced locally and are imported. The Make In India initiative has driven the indigenization of assembly of mobile phones but local value addition (i.e. locally sourced components used by manufacturers) will be as low as 7%. On the other hand, China has a local value addition of 70 per cent with its large and well-established manufacturing base. In fact, most of the Asian countries have local value addition of more than 20%.
As said earlier, phones are assembled in India due to high taxes on imported phones. The locally made components in these phones are just headphones and chargers, which constitutes only 5% of the device’s cost. The scattered and sparse network of local component makers and lack of skilled labour and engineers, high-profile tax disputes between India and global manufacturers such as Nokia are some reasons that make other manufacturers reluctant to make India their manufacturing destination. The nation wide applied Goods and Service Tax (GST) also has its own challenges. The refund process is quite lengthy which delays payments to suppliers.
This means India still has to work a lot to be a real manufacturing hub. There is a need for more sophisticated technology. For any design to happen in India, there is a need for strong local players. The real success will be when India will be able to manufacture smartphones and features phones with each and every component sourced locally.
Looking at this vast potential of the country and its talent, Prime Minister Narendra Modi announced the “Make in India” campaign in the year 2014. This was to make India a manufacturing hub and attract investments from the global players of different industries. It is the result of this initiative only that we have crossed 100 million units mark in smartphones and it is estimated that more than a billion smartphones will be sold in India in next five years. This means that number of smartphones users will increase from a quarter of a billion to half a billion.
This campaign has also attracted several investments from 37 mobile manufacturing companies.
• Chinese manufacturers, Gionee and Xioami, have started making their handsets in the Foxconn plant in Andhra Pradesh.
• Apple has also announced its Bengaluru manufacturing unit Peenya but an official announcement is still waiting.
• Indian manufacturer, Micromax, started a new plant in Uttrakhand and is planning to invest in Telangana, Rajasthan, Maharashtra.
• South Korean mobile Giant, Samsung is the India’s largest phone seller. The company has made investments worth Rs. 500 crores in its Noida plant.
• Another Indian manufacturer LAVA has also made an investment of Rs. 50 crore to increase the capacity of its Noida plant to assemble one million phones in a month.
• Taiwan’s based Foxconn has already announced setting up of 7-8 units in India.
All these announcements make it clear that more mobile manufacturing set ups means more employment and better economic growth. According to Indian cellular association, India has a capacity to assemble around 270 million phones a year. In contrast to this China, due to its economies of scale and full-fledged ecosystem, has a capacity of 1.1 billion phones.
What makes India lack behind China?
• India does not have any component base that adds to its freight costs. This finally adds up to the total manufacturing cost of the smartphones.
• The cost of finance, power and water are higher in India as compared to other Asian countries that restricts the global manufacturers to have their set ups in India.
• The landed cost of materials is 10% lower in China.
• As China is a leader in mobile manufacturing, it needs to import only 5% of components from other countries while India has to import around 80% components.
• In terms of productivity, Chinese labour is more productive as compared to India.
Despite so many unfavourable conditions with India, the country has been successful in attracting investments over the years. One of the major reasons for the same is the large domestic market in the country. Android device manufacturers who are looking for an alternative market to reduce risks, India can be the best option. On the other hand, the labour cost in China has increased by 20% while India has low-cost labour and a large pool of software engineers. Apart from this, India has growing infrastructure, ease of doing business, and beneficial policies with GST that have also attracted android mobiles manufacturing companies towards India to set up their manufacturing base.
India, being the second largest telecommunication market and fast-growing smartphone market, is expected to grow at a rapid pace. According to “India Smartphone Market Outlook” the market will grow at a CAGR rate of 10.95 per cent in 2018 due to data consumption in handheld devices. The global, as well as domestic manufacturers, are trying to offer innovative and unique features that can match a user’s taste, personality and daily requirements. Today’s smartphones are not only smart but also future ready, stylish and durable.
Indian Government has taken many positive steps and industry is moving forward to create a domestic ecosystem for manufacturing smartphones. With this, it is expected that the country will sell around one billion smartphones in a year. These one billion smartphones will make India consume USD 80 billion worth of components. The biggest drawback with India is that these components are not sourced locally and are imported. The Make In India initiative has driven the indigenization of assembly of mobile phones but local value addition (i.e. locally sourced components used by manufacturers) will be as low as 7%. On the other hand, China has a local value addition of 70 per cent with its large and well-established manufacturing base. In fact, most of the Asian countries have local value addition of more than 20%.
As said earlier, phones are assembled in India due to high taxes on imported phones. The locally made components in these phones are just headphones and chargers, which constitutes only 5% of the device’s cost. The scattered and sparse network of local component makers and lack of skilled labour and engineers, high-profile tax disputes between India and global manufacturers such as Nokia are some reasons that make other manufacturers reluctant to make India their manufacturing destination. The nation wide applied Goods and Service Tax (GST) also has its own challenges. The refund process is quite lengthy which delays payments to suppliers.
This means India still has to work a lot to be a real manufacturing hub. There is a need for more sophisticated technology. For any design to happen in India, there is a need for strong local players. The real success will be when India will be able to manufacture smartphones and features phones with each and every component sourced locally.
Comments
Post a Comment