Market Insight

'Make in India' to boost domestic mobile phone manufacturing

January 19, 2016  | Subscribers Only

Nitin Sharma Nitin Sharma Analyst, Manufacturing Technology

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In September 2014, the Government of India (GOI) launched the ‘Make-in-India’ program to encourage multinational and domestic companies to manufacture their products in India, with the objective of attracting capital and technological investment in India. Within a year, by August 2015, GOI had received US$17 billion worth of proposals from foreign and homegrown companies for manufacturing electronics in India.

Schemes offered by GOI and strategic port connectivity are the key attractions to investors. “Make in India” initiative will particularly benefit foreign and domestic mobile phone companies manufacturing phones in India, by lowering production costs. Potentially, the success of mobile phone manufacturing will invite other consumer electronic makers to utilize the resources offered by ‘Make in India’.  Despite the Make in India programme and other government initiatives aimed at spurring electronics manufacturing growth in India, IHS suspects that there may still be a delay in achieving full benefits to rapid manufacturing growth because of administration bottlenecks and underdeveloped infrastructure that prevail in the country.

Government incentives are key drivers for attracting investment in domestic electronics manufacturing

The two main schemes offered by the Department of Electronics and Information Technology (DeitY) under the ‘Make in India’ program to attract investment in electronics manufacturing are – Electronic Manufacturing Cluster (EMC) and Modified Special Incentive Package Scheme (M-SIPS). The EMC scheme offers an advanced infrastructure to attract investments in the electronic system design and manufacturing (ESDM) sector. For greenfield EMCs, in an underdeveloped geographical area, GOI offers financial assistance up to 50% of the project cost subject to a ceiling of US$ 7.5 million for every 100 acres of land used. For brownfield EMCs, a geographical area where a significant number of existing ESDM units is located, up to 75% of the project cost is subsidized subject to a ceiling of US$ 7.5 million. There are currently 14 registered greenfield EMCs and 2 brownfield EMCs. In addition, the M-SIPS provides capital expenditure subsidies in investment for both green field and brown field EMCs.

All these 16 EMCs are very well-connected by major trading ports in Andhra Pradesh, Kerala, Tamil Nadu, Karnataka, Odisha and West Bengal; hence, providing the infrastructure required for making international trading more efficient and cost effective.

Implications of ‘Make in India’ to the India’s mobile phone manufacturing ecosystem

Aided by the Make in India program, IHS predicts that mobile phone manufacturers will take this opportunity to either manufacture in India or source mobile phone components from Indian suppliers to further reduce manufacturing costs. With rising labor costs in China, both foreign and homegrown mobile phone manufacturing companies now want to take advantage of lower Indian labor and logistic costs, as well as benefit from the favorable movements in the foreign-exchange.

Company

Location

Country of Origin

Terms

Sector

Investment / Target

Models

ASUS

Sri City, Andhra Pradesh

Taiwan

Contract manufacturing - Foxconn

Mobile phone manufacturing

150 thousand Asus phones per month

Zenfone 2 Laser, Zenfone Go

Sony

Sriperumbudur, Tamil Nadu/ Sri City, Andhra Pradesh

Japan

Contract manufacturing - Foxconn

Mobile phone and TV manufacturing

-

Bravia TV, entry level Xperia smartphone

Samsung

Noida, Uttar Pradesh/ Tamil Nadu

Korea

In-house manufacturing

Mobile phone manufacturing, Software

Investing US$83 million for the expansion of its Noida plant

Samsung ZI (Tizen) smartphone, Galaxy S6 and Galaxy S6 Edge

HTC

Noida, Uttar Pradesh

Taiwan

Contract manufacturing - Global Devices Network

Mobile phone Manufacturing

-

Low and mid-range devices

Lenovo - Motorola

Sriperumbudur, Tamil Nadu

China

Contract manufacturing - Flextronics

Mobile phone manufacturing

6 million handsets in this financial year

Moto E, Moto X Play, Lenovo K3 Note

 Lava

Noida, Uttar Pradesh

India

In-house manufacturing

Mobile phone manufacturing

Investing US$420 million in 7 years to produce 18 million handsets a month

Feature phones, smartphones

Micromax

Rangareddy, Telangana

India

In-house manufacturing

Mobile phone manufacturing

Investing US$13 million to set up a manufacturing facility

Yu Yuphoria

Celkon

Medchal, Hyderabad.

India

In-house manufacturing

Mobile phone and tablet manufacturing

Investing US$32 million in a phone production facility

Low-cost mobile phones and tablets

Spice

Uttar Pradesh

India

In-house manufacturing

Mobile phone manufacturing

Investing US$80 million in a  manufacturing unit

Affordable mobile phones

As illustrated in the above table, many foreign mobile phone manufacturers such as Samsung, Sony, HTC and ASUS have announced investments plans with contract manufacturers like Foxconn, Flextronics and Global Devices Network to manufacture mobile phone in India. Domestic mobile phone brands like Micromax, Karbonn, Lava and Spice have also announced plans to build their own manufacturing plants in India.

Make in India is expected to deliver a win-win situation for mobile phone manufacturers and consumers. Foreign mobile phone manufactures would be able to penetrate the price sensitive rural market by passing on the cost benefit to the consumers. It will also spur technology innovation in the domain as domestic smartphone manufacturers compete with foreign brands. Ultimately, the end users would get to enjoy technology at a more affordable cost.

Other government initiatives complementing ‘Make in India’

There are other ongoing government initiatives including ‘Digital India’ and ‘Skill India’ which investors, including mobile phone manufacturers, can benefit from. ‘Digital India’ program has been launched to ensure that government services are made available to citizens electronically by improving online infrastructure and internet connectivity. It is expected to create a robust connectivity infrastructure in India. GOI has also allocated US$ 231 million for the ‘Skill India’ campaign to train 400 million people by 2022 to help provide trained labor, another boon to investors.

Limitations

‘Make-in-India’, ‘Digital India’ and ‘Skill India’ seem to augur well for making India a manufacturing hub in Asia, including mobile phone, but there are challenges which GOI needs to address. Much remains to be done to tackle the problems of India’s intrusive market regulation, poor infrastructure, inflexible labor-market practices, stiff land-acquisition rules and numerous supply bottlenecks. With the pressure from the opposition party, government’s push to reform agenda may be further delayed, impacting investments and hence manufacturing growth.

More than just mobile phone manufacturing

In coming months, the said government initiatives and the growing demand for mobile phone in the Indian market are going to drive more mobile phone manufacturers to invest in India. IHS is positive that subsequent investments in other consumer goods markets such as TV and tablet will also leverage the resources offered by ‘Make in India’. 

Geography
Asia Asia Pacific India
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