Can India lead the world in mobile phone manufacturing by 2020?

Over the past couple of years, the mobile ecosystem in India has been revolutionised. This industry has now helped the nation to become the world’s second largest mobile phone manufacturer after China, although exports of the devices are still in the nascent stage. Currently, the country not only boasts of the largest number of smartphone consumers, but also the fastest growing production and manufacturing facilities. The government’s ‘Make in India’ initiative has been driven by a reduction in duty. International EMS giants such as Wistron and Foxconn have established their manufacturing units in India. And during the first quarter of 2018, India became the leading market for mobile apps.

By Nijhum Rudra

Recently, the India Cellular and Electronics Association (ICEA) stated that the yearly shipments of cellular devices in the country have escalated from 3 million devices in 2014 to 11 million devices in 2017. The country now accounts for 11 per cent of the worldwide mobile manufacturing output, a figure that was only 3 per cent in 2014. Moreover, the mobile manufacturing industry is now one of the leading sectors in India in creating employment opportunities. The global human resource consulting firm Randstad India reported that India’s mobile phone segment has generated over 4 million direct and indirect jobs over the past few years.

Under the government’s Phased Manufacturing Programme (PMP), the overall investment by the global component and device companies is speculated to cross ₹ 50 billion. The PMP scheme was launched by the government in 2017 to boost domestic manufacturing of mobile phones and also to create a robust local ecosystem for this. Pankaj Mohindroo, president of the ICEA, says, “I am very hopeful that in the next two years, with such conducive policies, there will be additional massive investments coming into the mobile phone components sector.”

Challenges faced by India’s mobile and electronics manufacturing sectors
Highlighting the challenges of India’s manufacturing units, Faisal Kawoosa, founder and research analyst at techARC, says, “Manufacturing is a long term commitment, so the decision has to be taken keeping a very long term view in mind. Global companies that drive most of the electronics manufacturing do not look at India in isolation. They compare it with other global destinations, and still find areas where India can improve further.”

Some of these areas include:

• Access to and the cost of capital
• Infrastructure like ports, power, water, etc, which can support importers as well as exporters
• Logistics and supply chain management
• Scarcity of raw inputs and the lack of a vibrant components ecosystem in India
• Not a wide enough base of skilled manpower

“The end point is that while a lot has been done to bring Indian electronics manufacturing from almost zero to its present state, we cannot stop here as we’re compared to other global electronics hubs by potential customers or investors,” adds Faisal.

The challenge is to develop the entire ecosystem, which could be leveraged for value added manufacturing. Despite smartphone manufacturing having grown so well, India still has not been able to create a single cluster. “Cluster manufacturing works well and has shown great results in China, Taiwan, etc. We need to have a manufacturing cluster, where a lot of the activities can be clubbed and shared by different OEMs to bring down costs and enjoy economies of scale,” Faisal adds.

Another mobile ecosystem research expert, Navkendar Singh, research director – devices and ecosystem, India and South Asia, IDC, feels that India has taken definite strides in the development of electronics manufacturing over the past few years, by introducing various schemes and incentives for local production. However, to match China in terms of infrastructure and capabilities, a few challenges remain to be overcome. These include ease of doing business with various approvals, the infrastructure to manufacture advanced electronics, and an ecosystem that produces the different components for electronic items like smartphones. While these challenges are being gradually addressed, a lot remains to be done.

“Now, even if we strengthen our manufacturing sector, exports are still not that strong. What are the steps required to improve our smartphone exports? If we are able to build a strong manufacturing ecosystem in India, it will attract manufacturers here, since India also offers a huge domestic market. India can be considered as a serious potential export hub for any player who decides to choose the country as an alternative to China.” —Navkendar Singh, research director – devices and ecosystem, India & South Asia, IDC

“We have to essentially look at some of the critical elements that will empower our smartphone manufacturing. These include R&D, IP and product development, creating a supportive infrastructure and above all, keeping up with global developments. We start initiatives but are not able to keep up with the global pace, which results in a new project becoming irrelevant when completed. This has to fundamentally change, and that is why I feel we should start small but stay focused and target something of high impact. Then we can expand.” —Faisal Kawoosa, founder & chief analyst, techARC

Domestic smartphone manufacturing
Recently, India overtook Vietnam to become the world’s second largest manufacturer of mobile phones. Industry body ICEA stated to a leading English portal that India has achieved this due to government initiatives like the PMP, which helped the country set up 268 mobile phone assembling units. This has the potential to create 5 million jobs by the end of 2025. But the biggest problem is that India is still dependent on China and other Asian countries for the components required for assembly.

Renowned research firm IDC reports that by 2021, mobile subscriptions in India are speculated to increase to 1.4 billion, which is why global smartphone and electronics accessories firms choose India as their first market to launch new models. They keep in mind the preferences of Indian users before introducing any changes and new specifications in their devices.

A year back, India also beat the US in smartphone manufacturing and shipments. IBEF reports that by 2021, the Indian market will have around 780 million connected smartphones, which is more than double the 359 million in 2016.

Chinese smartphone makers have already established their position in the Indian market, having gained massive traction, somewhat to the detriment of domestic smartphone makers. The Chinese have commenced manufacturing in India as it is the globe’s fastest growing market for cellular devices.

The Mukesh Ambani led firm, Reliance Jio Infocomm, has also revolutionised the market by launching cheaper smartphones, cheaper 4G data and innovative feature phones.
The survey report of the ICEA reveals that the Delhi-NCR region has about 30 mobile handset manufacturing units, followed by Uttar Pradesh with 27, Haryana with 15, Maharashtra with 14 and Uttarakhand with nine. Delhi-NCR also tops the ranking with 18 battery pack factories, followed by UP with 14, Haryana with 13, Himachal Pradesh with seven and Maharashtra with four. The survey further found that UP has about 39 factories dedicated to chargers and adapters, followed by Delhi with 24, Haryana with 18, Maharashtra with 12 and Uttarakhand with 10.

India is a price-sensitive market, due to which phones under ₹ 10,000 have witnessed the highest sales since 2012. Therefore, smartphone companies want to make budget-centric sophisticated phones in the ₹ 10,000-₹ 15,000 price range. From local brands like Micromax and Karbonn to foreign brands like Samsung, Xiaomi and HTC, budget smartphones have flooded the market, states a researcher at IBEF.

India’s smartphone manufacturing potential
To take India’s smartphone manufacturing and production to the next level, global smartphone and accessories players such as Oppo, Vivo, OnePlus, Samsung and Xiaomi, as well as domestic companies like Lava, Intex and many others have decided to invest in manufacturing in association with numerous leading OEMs. Many have already invested in setting up their factories and have commenced production.

One of the leading smartphone makers in India, Lava, responded to Prime Minister Narendra Modi’s ‘Make in India’ initiative to make India a global hub for electronics and mobile manufacturing. Lava now manufactures its own products at its two new factories located in the suburbs of NCR, employing 3,500 people, while expansion plans are in the pipeline. A couple of years back, this company was importing cheaper phones and parts from China and other Asian countries.

The resurgence of the domestic smartphone manufacturing segment could make the prime minister’s aim of generating a large number of new jobs a reality. Around 120 new manufacturing units have created 45,000 new jobs in the mobile industry in the past few years.

Sanjeev Agarwal, chief manufacturing officer at Lava International, says that local production helps in developing cutting-edge devices yet keeps costs down; so a device can be sold for around US$ 150. A major portion of the firm’s production is still done in China, but very soon, Lava will make that happen on Indian soil.

The biggest announcement in the Indian manufacturing sector is South Korean giant Samsung’s commencement of the globe’s largest smartphone assembling plant in Noida in Uttar Pradesh. Samsung’s colossal factory is speculated to ramp up its present mobile phone manufacturing capacity of 67 million to 120 million by the end of 2020. According to the Samsung official newsroom, the company has been manufacturing mobile phones in India since 2007, and is the only brand that is truly made in India. It is even making PCBs right from scratch and is aligned with the government’s Phased Manufacturing Programme’s (PMP) goals. The current investment of ₹ 49.15 billion for this massive Noida plant was announced by the company in the second half of 2017 under the Uttar Pradesh government’s Mega Policy.

Last year, Xiaomi, a leading Chinese smartphone maker that has become immensely popular in India, announced three smartphone manufacturing plants in India. Currently, the company has two manufacturing plants in the country, one of which produces power banks. The new manufacturing plants were started in partnership with Taiwanese electronics giant Foxconn and are located in Sri City, Andhra Pradesh and in Sriperumbudur, Tamil Nadu, covering a total area of 180 acres. The company has also decided to set up an SMT plant for the manufacture of PCBAs as that is the most pivotal element of a smartphone. According to Xiaomi, it assembles and manufactures over 95 per cent of its smartphones in India.

The future of smartphone manufacturing is here
Experts say that by the end of 2020, mobile phone manufacturing in India is speculated to reach US$ 217 billion. Research firm IBEF adds that in the coming five years, the low cost of mobile Internet and smartphone penetration will put 500 million new users online. The Fast Track Task Force (FTTF), under MeitY, estimates an annual manufacturing capacity of 500 million mobile phones in India by the end of 2019, valued at US$ 46 billion. If this target is achieved, then India would also have reached a total capacity in component manufacturing of US$ 8 billion for these smartphones, and generated employment worth US$ 1.5 million by the end of 2019.