Trade Analytics

India Emerging as a Mobile Phone Manufacturing Hub

November 09, 2018

Bolstered by the growing demand and support from the Government, mobile handset manufacturing has rapidly gathered pace in India over the past few years, and India could actually emerge as a mobile exporting country in the not-so-distant future.

The Digital India programme launched by the Government of India has identified local electronics manufacturing as one of its main pillars, with a target of net zero imports by 2020. This is a major area of concern for India, considering the rapid rise in demand for electronics within the country. An Assocham-NEC report has projected that electronics demand in India is projected to lead to an import requirement of US$ 300 billion by 20201. India is already the second largest smartphone market in the world after China, and sales are growing at a brisk pace. In Q2, 2018, smartphone shipments to India reached 33.5 million, growing by 19.8% year-on-year2. Projections indicate that electronics imports have exceeded gold imports to be India's second largest import category after oil3. Moreover, while net deficit on gold has come down, electronics imports have nearly doubled in the past five years4.

Due to these reasons, electronics manufacturing is a key pillar of the Digital India initiative by the Government. The Union Cabinet gave its approval to extension of the Modified Special Incentive Package Scheme (M-SIPS) in 2015, which provides subsidy amounting to 20% for investments made in special economic zones (SEZs) and 25% for investments in non-SEZS, on a reimbursement basis. By the end of February 2018, 322 applications with investments amounting to Rs 133,861 crore had been received, out of which 148 applications with investments amounting to Rs 12,253 crore had been approved5. Under the Electronic Manufacturing Cluster (EMC) Scheme, MEITY received 50 applications, out of which it had approved 20 greenfield EMCs and three common facility centres (CFCs) as of February 28, 20186. The Government also set up an Electronics Development Fund with a corpus of US$ 320 million to provide risk capital for startups planning to develop new technology in electronics, nano-electronics and information technology.

One critical area where the initiatives of the Government have had a transformative impact is mobile phone manufacturing. India now has 120 units manufacturing mobile phones compared to 2 units in 2014. Around 225 million mobile handsets were manufactured in India in 2017-18 compared to 60 million in 2014-157. In value terms, the industry stood at US$ 20 billion in 2017-18 compared to US$ 2.99 billion in 2014-158. The industry has generated employment for over 450,000 people9.

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The world's largest mobile factory was set up by Samsung in Noida, Uttar Pradesh in the month of July 201810. Samsung announced that it will double the capacity of the Noida unit to 120 million units annually from 68 million currently. Moreover, Samsung has stated that it intends to manufacture all models from those costing less than US$ 100 to its flagship S9 phone11.

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Further, according to Indian Cellular Association, India emerged as the second largest mobile phone manufacturing nation in 2017, replacing Vietnam in the process12. This also had the additional benefit of reducing mobile phone imports by over 50% during the year13. India also saved around Rs 3 trillion due to replacement of imports of completely-built units with locally assembled and manufactured handsets over the past 4 years, as per a report by Indian Cellular and Electronics Association14.

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Research firm Frost & Sullivan notes that an estimated 35% of the mobile phone market in India was accounted for by domestic manufacturing in 2016, a figure that increased to 38% in 201715. Some of the major companies investing in local manufacturing are Gionee, Xiaomi, Lava, Samsung, Foxconn, Intex, etc. With the help of the phased manufacturing programme to incentivise indigenous production of handsets and their various sub-assemblies, use of locally manufactured components in handsets has improved. Frost & Sullivan further projects mobile phone manufacturing to grow at a CAGR of 48.4% between 2017 and 202516 and also potentially make India a net exporter of mobile handsets thereafter.

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