India Should Address Ecosystem Challenges to Encourage Local Manufacturing of Smartphones

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Maxx Mobile is one of the early starters when it comes to establishing a manufacturing plant in India is concerned, Ajjay R Agarwal, Chairman and Managing Director, Maxx Mobile speaks with Zia Askari from TelecomDrive.com on the way India is moving ahead with its ‘Make in India’ campaign and what does this mean for the smartphone manufacturing segment in India.

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Why would a company continue investing in manufacturing smartphones in India – are there enough incentives being given by the government -and most importantly – to what extent is it reducing the price pointsand benefiting the end customers?

India is already the fastest growing mobile market in the world with overall handset sales at 257 million (volume) ; Rs.75000 Cr (value) as per the IDC data) (Jan – Dec’14). Smartphone (Volume : 77 million ; Value Rs.52000 Cr)

Incentives Declared by Government:

Excise duty structure for mobile handsets including cellular phones is being changed from 1% without Cenvat credit or 6% with Cenvat credit to 1% without Cenvat credit or 12.5% with Cenvat credit. NCCD of 1% on mobile handsets including cellular phones remains unchanged.

Govt taking steps in the direction of ‘all clearances under one roof’ and fast track approvals.

Government has given in-principle approval to five National Investment and Manufacturing Zones (NIMZs) outside the Delhi-Mumbai Industrial Corridor (DMIC) region. Also, the central government is giving 25% subsidy and various state governments are offering VAT-free operations, amongst other relaxations. This is leading to a lot of investment opportunities for global companies to manufacture in India.

Most importantly, mobile phones made in India are going to get 11.5 per cent duty advantage which can be passed directly to the consumer. All these are important reasons for smartphone companies to seriously look at manufacturing in India. 

India is already one of the biggest markets for mobiles andsmartphones – How can Indian manufactured smartphones furtherreinvigorate the telecom ecosystem now?

India is a huge market and with Made in India initiative the cost per handset will eventually come down and the benefits for the same can be passed to the consumer.Chinese costs are going up,rising wage costs, Companies in labor-intensive industries are moving to India also because of agrowing shortage of workers in China. This is a great time to move production from China to India.

Eventually the margins will go up and working capital costs will come down. With BIS and other initiative the consumer will see lot of improvement and betterment in terms of quality and standard of the product.

The tax change will see an average 4-5 per cent increase in the cost of handsets which are imported to India. Consumers will have to bear the cost-burden. 64.3 million devices are being imported to India

How strong is the India’s smartphone ancillary ecosystem – what more needs to be done in order to make smartphone manufacturing a better proposition?

Various components like the camera, chipset, memory modules etc. are usually sourced from different companies. In order to manufacture a phone in India, you will need the entire ecosystem to be present here. And, that is the biggest hurdle right now. However it should not be that difficult considering how we’ve flourished in the automotive business has all the integral elements, technologies, component suppliers, plants etc, Incentive offered by other countries:

Vietnam offers a 30-year tax holiday window at just 10 percent tax on mobile manufacturing which further goes down to 100 percent exemption in the first four years and reduction of 50 percent in the next nine years .USA for one is offering tax preferences (deductions) to encourage domestic production activities.

What needs to be done more in India?

A 5-10 year tax holiday at least should be offered to on all profits and gains from manufacturing or rendering of services in or in relation to the mobile phone industry.

Goods and Service Tax (‘GST’) regime.

Reduction in Special Additional Duty (‘SAD’)

Quality Component supplier ecosystem should be established for better manufacturing of smartphones in the country.

Does India have the right supplier ecosystem when it comes to manufacturing smartphones? Can you please name some of the smartphoneecosystem suppliers who are active in India?

The entire Ecosystem may take time we are anticipating a window of 2 years from now to have the complete eco system in place.

Intex, Lava and Micromax & Karbon have already started assembly units and very soon manufacturing in India, vendors with ecosystem support are of the likes of Foxconn or Datawind (Tablet manufacture : Aakash)

 

What is Maxx Mobile plans to further strengthen its manufacturing smartphones in India – ? what kind of support do you get from thegovernment?

Maxx is the only Indian mobile phone company to have its own manufacturing set up for accessories and now in mobile phones in Haridwar, Uttarakhand. Our plant is the largest mobile phone accessory plant in India, having the most advanced production and testing facilities. Maxx is India’s largest manufacturer of accessories like mobile chargers, mobile car chargers, mobile batteries and smart chargers.

Our plant was established way back in the year in 2010 with a land Area of about 21 Acres.

What are some of the big challenges that you are still likely tohinder the smartphone manufacturing in India?

Goods and Service Tax (‘GST’) regime

Reduction in Special Additional Duty (‘SAD’)

Eco system challenges


Telecomdrive Bureau
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