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Manufacturing Reboot: Focus on domestic smartphone production

July 06, 2017

Manufacturing Reboot: Focus on domestic ...

By Abhijit Kotnis, Chief Manufacturing and Sourcing Officer, Videocon

With more than 250 million Indians (out of a population of 1.3 billion) now owning a smartphone, India has surpassed the US to become the world’s second largest mobile phone market. Rapid urbanisation and rising disposable incomes indicate an immense scope for manufacturing smartphones domestically.

It is also an apt opportunity to reboot the manufacturing sector for a digitally driven future. A recent study by the Indian Institute of Management, Bangalore, states that almost 96 per cent of mobile phones sold in the country will be manufactured locally by 2020.

Currently, more than 90 per cent of mobile components are imported, primarily from China and Taiwan. In order to create an entire mobile manufacturing ecosystem in India, the government has mandated that some accessories be manufactured locally for achieving its overriding goal of turning the country into a major components manufacturing centre within the next four years.

The government’s focus has been on bringing down manufacturing and compliance costs with the aim of not just manufacturing for the domestic market but also for boosting India’s efficiency to export these locally manufactured parts and handsets. This is clearly reflected in the Union Budget 2017.

Going by industry reports, around 50 new mobile handset manufacturing units and 20 component manufacturing plants were established during the past year. Together, they can manufacture 20 million phones per month.

Focus on Make in India

To turbo-charge the manufacturing sector, the government launched the landmark “Make in India” initiative in September 2014. The initiative has ensured that the benefits of manufacturing in India are telecom sector-centric. Among others, such initiatives could be crucial for creating jobs for the 12 million youth who flood the employment market each year. If managed well, the programme has the potential to achieve the targets envisaged in the National Manufacturing Policy, which aims to create 100 million new jobs and increase the share of manufacturing in the GDP from 16 per cent to an ambitious 25 per cent by 2022.

Further, the government has proposed the implementation of the goods and services tax (GST). The GST regime will usher in growth opportunities by reducing the cascading of taxes and protecting domestic manufactures against imported goods. India imports 30 per cent of the phones sold in the country and the bulk of these comes from China.

GST to boost domestic smartphone manufacturing

Given that manufacturing is a very competitive industry, reducing the cost of production will create incremental value for customers. Also, post the implementation of GST, the entire country will be considered as a common and unified market. This will, in turn, help in making domestically produced smartphones competitive  vis-à-vis imported smartphones. Moreover, imported smartphones will be subject to integrated GST. GST will bring about parity in mobile phone prices across all Indian states due to the removal of value added tax.


Going forward, the demographic dividend, rapid urbanisation, rising disposable incomes, government support and revised duty norms will transform India into a global hub for smartphone manufacturers.





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