- Production Linked Incentive (PLI) has been extremely instrumental in bringing renewed interest among big players to setup their manufacturing facility in India
- Both Apple and Samsung have plans to focus on vocal for local and save significant import costs to effect better pricing on premium phones
- With high Make in India sentiments prevailing Indian brands including Lava, Micromax, Karbon can regain market share
Currently, several local and global phone manufacturers are keen to diversify their supply chains and expand manufacturing in India. Driven by the burgeoning smartphone market, Government’s ‘Make in India’ program, focus on ‘Ease of Doing Business’, and pull-out of global tech-giants from China, India has grabbed the eyeballs of global majors.
Incentives and schemes
In June 2020, Union Minister Ravi Shankar Prasad at the launch of the ‘Electronics Manufacturing Schemes’ declared India as the second-largest manufacturer of phones in the world, citing more than 200 mobile phone manufacturing units pushing phone manufacturing manifold. He further introduced three schemes to attract substantial investments for this sector: PLI – Production Linked Incentive, CMS – Component Manufacturing Scheme, and Cluster Scheme.
Following the recent events, PLI has been extremely instrumental in appealing to as many as 22 manufacturers including Apple, Foxconn, Rising Star, Samsung, Wistron, and Pegatron. These companies have already registered in the scheme. This list also includes local manufacturers Lava, Micromax, Optiemus Electronics, and Dixon Technologies who plan on expanding facilities.
The scheme offers incentives of 4-6 percent to electronics companies that manufacture mobile phones and other electronic components such as thyristors, transistors, resistors, and other such components.
Speaking to us the Regional Sales Manager of Oppo India said, “Oppo manufactures almost 70-80% of its phone components in India, while some small parts are imported from China. After the recent tension between the two countries, and the shift of focus on indigenous manufacturing in India, Oppo might also consider managing overall manufacturing locally in the country in the future.” He added, “The production incentives being offered under the scheme would certainly help reduce prices and increase exports from India, at the same time for larger companies like Apple, this could be a game-changer.”
The focus of Apple and Samsung on ‘Make in India’ manufacturing
Initially, Apple began to assemble some of its smartphones in India but continued to outsource components from outside the country. So, the cost of production in the initial years remained the same. Additionally, Apple’s global pricing strategy does not variate in accordance to specific local markets, so the shift of assembly did not overall result in any reduction of phone prices.
However, Apple has started manufacturing one of its top-of-the-line models, the iPhone 11 at the Foxconn plant near Chennai. The company also made clear its intention to export made in India iPhone 11 phones, should the manufacturing volume exceed after meeting local demand. According to recent media reports, Apple has plans to expand further in India and is reportedly planning to manufacture the iPhone 12 Series in India.
South Korean electronics major Samsung on the other hand, has put up the world’s largest mobile manufacturing facility in Noida. Samsung started manufacturing in India in the year 2007 and has always considered India as a preferred manufacturing destination for its go-to-brand image and sizeable market share in India.
In August 2020, Samsung also announced plans to shift a major part of its smartphone manufacturing to India. The company plans to manufacture devices worth over $40 billion (Rs 3 lakh crore) in the country, over the next five years under the PLI scheme, as per media reports.
Currently, Apple suppliers Wistron, Pegatron, Foxconn, and Samsung, are all in terms of expanding their manufacturing facilities in India in the coming years. Should these companies successfully expand their supply chain into the country, they may begin using the country in the next few years as an “export hub.”
What’s in store for Indian brands?
Indian smartphone makers such as Karbonn Mobiles, Intex, Micromax, and Lava have lost their grip over the market in the last few years owing to the tough competition from Chinese smartphone manufacturers. However, the increasing sentiment to support home-grown companies can help them rebuild the hold on the smartphone market again. As the Indian brands cater to a rather specific and separate market than giants like Apple and most of Samsung, the Make in India can help recapture sizeable market share. For the companies, the benefits of expanding manufacturing in India would include savings on import duty, getting cheap labor as well as gaining competitive advantage in the local market.
The official added, “Take Apple for example. If they follow through the plan of manufacturing the 12 Series in India, there would be a substantial reduction in prices as they save more than 20% on import duty. This in turn would help Apple capture a wider customer base in India compared to the models lying within a higher price range.”
The growth of smartphone manufacturing in India will also push employment generation for local labors. Competitive and comparatively reduced pricing would also be another added benefit for the customers as manufacturers would also be able to provide premium phones at a better price. Overall, the added capacity in the operations of any manufactures that are based here will also result in the company exporting to global markets. This would by and large help the overall economy of the country.