Increase of smartphone market in India
Here there is a discussion about the rise of locally made smartphones in India, which is mainly due to the presence of foreign companies like Foxconn and Samsung and domestic firms. However, Chinese smartphone makers have a cost advantage over domestic firms like Micromax Informatics, which now faces competition. The Indian government has launched the Production Linked Incentive Scheme for Telecom and Networking Equipment to promote various types of manufacturing within the country and increase domestic production of mobile phone components.
by Ana Machado
Deepa Aswani, a marketing professional in Mumbai, had a challenging time choosing a new smartphone due to her specific requirements. After careful consideration for two months, she eventually opted for the OnePlus 10R, which was priced at $400 (£329) during a sale. This cost was considered reasonable for a smartphone but still a substantial amount in a developing country like India. Aswani was pleased with her purchase and satisfied that she had bought a phone with excellent features without breaking the bank.
The prevalence of locally made smartphones in India has significantly increased in recent years, as stated by the India Cellular and Electronics Association (ICEA). A few years back, most phones sold in India were imported, but in 2022, nearly all phones sold were manufactured in the country. This shift is mainly due to the presence of foreign companies like Foxconn from Taiwan and Samsung from South Korea, which have established operations in India. Meanwhile, domestic firms are also on the rise.
Micromax Informatics, which started manufacturing cheaper feature phones in 2008, is now facing competition from Chinese smartphone makers. The company quickly grew to become one of India’s leading feature phone makers, selling around a million units of a new phone when launched. However, Chinese phone makers can sell ten times that amount, giving them a cost advantage. Micromax co-founder Rajesh Agarwal says that Chinese firms have an advantage in production strength and can source almost all of their components locally, unlike India, which has to import more sophisticated parts like screens and computer chips. Although India manufactures some parts like chargers, cables, and batteries, the more complex components are usually made abroad.
“Our focus right now is on manufacturing, as it marks the beginning of our journey towards self-reliance. We aim to establish our own manufacturing hub where we can locally produce all the necessary components,” explains Mr. Agarwal.
He further adds that their ultimate goal is to shift from catering to domestic demand to meeting global demands, not just limited to phones but also laptops, tablets, and other devices.
To facilitate this transition, the Indian government has launched the Production Linked Incentive (PLI) Scheme for Telecom and Networking Equipment in April 2021. This scheme is part of a long-standing government policy aimed at promoting various types of manufacturing within the country.
Under this scheme, subsidies are offered for mobile phone components manufactured in India, with the hope that it would make them more competitive and result in higher production rates.
Currently, the India Cellular and Electronics Association (ICEA) reports that only 15-20% of the parts that make up an Indian phone are produced domestically. The goal of the PLI scheme is to raise this percentage to between 35% and 40%.
“The implementation of the production-linked incentive scheme has the potential to revolutionize electronics manufacturing,” remarks Pankaj Mohindroo, the chairman of ICEA.
He also notes that India has rapidly emerged as one of the fastest-growing mobile phone manufacturers globally, becoming the second-largest producer of mobile handsets in the world.
Mobile phones constitute the largest single component of India’s electronic exports, and it is expected that they will account for 50% of electronics exports in the upcoming year, according to the ICEA.
Hari Om Rai, the chairman of Lava International, believes that India will become the next global hub for cell phone manufacturing. He cites China’s rising wages, which have decreased its cost advantage over other nations, as a contributing factor to India’s potential success in this field.
Moreover, Mr. Om Rai highlights that companies worldwide are concerned about relying too heavily on products from China. The recent disruptions at Apple’s primary supplier in Zhengzhou have likely exacerbated those concerns.
If firms want to diversify their manufacturing locations, India is an attractive option, according to Mr. Om Rai.
He states, “India possesses 18% of the world’s population, yet its GDP is only 3.1%. As India’s GDP grows, it will emerge as one of the largest global markets. In the long run, every company is striving to establish a foothold and outperform its competitors in India.”
However, all this industrial policy holds little interest for Deepa Aswani in Mumbai. She remarks, “As a consumer, it doesn’t matter to me where my smartphone is made. I believe that the budget and features are the only important factors. As a smartphone purchaser, I would prefer a country that offers advanced technology and is affordable.”
About the author / Ana Machado
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