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India’s rise as the Mobile manufacturing hub of the world

Recently, in July 2018, Samsung inaugurated the world’s largest mobile phone factory in Noida, India, which will roll out 120 million units per year. Samsung plans to use India not only for manufacturing and local selling but also as an export hub for India-made handsets. “We ‘Make in India’, ‘Make for India’ and now we will ‘Make for the World’, H C Hong, Chief Executive Officer at Samsung India said in his statement.

It must be noted that Samsung is just one cog in the large wheel of Mobile phones manufacturing industry in India which has developed at a mind-boggling pace within the last three years. A Business World report titled “Is India The New Mobile Manufacturing hub” reports the following promising developments –

  • India has attracted investment from 37 mobile manufacturing companies in the last one year
  • Many large global mobile phone manufacturers including American giant Apple and Chinese players Gionee, Xiaomi, Vivo, Oppo have set up large-scale manufacturing in India
  • Local Indian players are rapidly expanding manufacturing too. Micromax started a new plant in Uttarakhand and is planning investments in Telangana, Rajasthan and Maharashtra. Another Indian company LAVA built a facility in Noida and is planning a second unit shortly. Other Indian manufacturers like Celkon Mobiles, Spice Mobility and Karbonn are also adding new capacities
  • Mobile production in India crossed 100-million units and may cross 500 million in the next two years
  • In 2017, India became the world’s second largest mobile phone producer after the proportion of global handsets produced in India increased from 3% in 2014 to 11% in 2017
  • World’s biggest contract manufacturer of mobile phones, Foxconn is planning to build additional seven to eight new units in India

Foxconn’s competitor and Apple’s largest contract manufacturer Wistron is also investing INR 3000 crores (US$ 450 million) for setting up a manufacturing unit in Karnataka which will produce 100 million units every year and will generate thousands of jobs.

Source: Business World and Financial Express

 

Manufacturing vs Assembling

Admittedly, a large part of current mobile phone manufacturing in India includes only “assembling” of components imported from other countries. However, most manufacturing industries start similarly, while local component manufacturing develops subsequently.

A similar trend was witnessed in India’s automotive industry. In 1983, Maruti started operations with CKD (completely-knocked-down) kits of imported components. Over the years, localized production of components increased significantly, as part of the phased manufacturing process. Today, there are close to 250 Indian and Japanese component-makers operating in India. This enabled the Indian auto-components business to rise to global expectations and created vibrant clusters of auto component makers in Gurugram, Pune, Indore and Chennai.

Mobile manufacturing industry in China had followed the same cycle. When Foxconn established a massive presence in Zhengzhou, an entire vertical mobile phone supply chain developed in the region.

Similar green-shoots are now being witnessed in Indian mobile phones industry too. Vedanta has planned to start manufacturing LCD screens to be used in phones and other electronics. MediaTek, the chipsets‘ manufacturer has also started operations in India. As mobile phone manufacturing continues growing in India, more and more related businesses and component manufacturers are expected to spring up around phone manufacturing hubs.

Source: Economic Times, news18 and iTers News

To promote Prime Minister Modi’s “Make in India” project, the Indian government has incentivized local production through a variety of policies, including raising import duties on critical parts which makes direct investment in India more financially compelling to manufacturers. Consequently, more and more indigenous development is expected to replace the import of components.

For instance, in 2016-17, electronics worth $50 billion were manufactured in India compared to $43 billion in Imports. For the first time ever, local manufacturing in electronics exceeded imports. With the Electronics manufacturing corridor coming up in U.P., local manufacturing of electronic components is further expected to increase substantially.

Source: International Business Times and Financial Express

Way forward

Today, almost every big and small mobile company in the world is competing for not only selling in India but also manufacturing in India.

The FTTF (fast track task force), a government body under Ministry of Electronics and IT, has set a target to achieve around 500 million mobile phone production in India by 2019, with an estimated value of around US$ 46 billion. FTTF, with members from industry and government, has also set the target to create US$ 8 billion component manufacturing as result of growth in mobile phone production and create 1.5 million direct and indirect jobs by 2019. It’s an attractive opportunity which rings a sign of good times for global and Indian mobile phone manufacturers, consumers as well as for technology job seekers.

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Shashank Goyal
IIM-A alumnus, Software Sales Professional, Writes about business, economy and politics; Passionate about numbers, facts and analysis Tweets @shashankgoyal01

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