Why India Will Grow Strong on Smartphone Manufacturing – Part 1

By Zia Askari

Driven by the going Indian government’s strong will to make India a ‘favorable and preferable’ destination for manufacturing products – India’s smartphone industry is moving on the right track to manufacture locally made smartphones in India.

Not too long ago, there was a time when a smartphone was considered to be a luxury item, accessible only to a small group of high income group of people, not anymore. In today’s scenario, a smartphone is available in India for as low as INR 2000. This is exponentially stretching the smartphone market in India and with this trend, there are a number of foreign and even local companies which are seriously looking at having their manufacturing base in India.

Speaking on India’s rising potential for becoming a preferred destination for smartphone manufacturing, Rajesh Agarwal, Co-founder, Micromax Informatics says that the government of India has taken several initiatives to promote a healthy environment for the growth of manufacturing sector in the country with its Make in India campaign.

“Giving a boost to the same, the Budget 2015 provides a slew of benefits for Original Equipment Manufacturers who manufacture in the country. Very recently, custom duty has been reduced on 22 items, including mobiles and tablets being made in India. Mobile phones made in India are going to get 11.5 per cent duty advantage, while tablets made in the country will get 10.5 per cent duty advantage. This initiative will decrease the cost by about 4-5% for handset makers who make in India, which is beneficial to the consumers. Hence, companies like Micromax, who have great intent to develop the manufacturing ecosystem in India will consistently invest in the country,” he explained.

Micromax is one of the biggest success stories of India’s own branded smartphones, not only competing with global brands on Indian turf, but successfully reaching out to other global geographies as well.

“The atmosphere of our country is charged and electric. The current government is keen to drive the ‘Make in India’ project to an unprecedented success, so do we, which is a big step towards creating a holistic business environment. PM’s ‘Make in India’ focus has come at the right time. Yes, China does have an advantage when it comes to the ecosystem but the world will have to look at an alternate destination and we believe that India holds a great potential with a number of international brands entering the country and a large domestic demand in the country. The government should adopt a carrot rather than a stick approach for India's burgeoning Smart Devices market through encouraging and supportive rules & regulations to expedite the eco-system creation in India which is quit essential for Smart Device manufacturing,” Rajesh Agarwal from Micromax adds on.

Coming from China, Gionee is moving at a rapid pace in India and has created a niche for itself when it comes to delivering high-quality smartphones for the Indian consumers. Buoyed by its recent success in India (it did over INR 2700 crore turnover for last year) – Gionee is quite bullish about having its manufacturing in India.

As per the views of Arvind Vohra, Country CEO and MD, Gionee India, Gionee aims to leverage and expand its presence outside China by making India a manufacturing hub to cater to increasing demand in Africa and SAARC countries including Bangladesh, Nepal, Sri Lanka and Pakistan.

“The current government’s plan to boost local manufacturing definitely comes as an added advantage and all these put together gives you a bigger heart to start. We have done an in depth study on smartphone markets, and we are convinced that manufacturing in India is necessary and we have already started the initial process. We also believe that the move will also help develop the entire mobile eco system in India which will invite and make it more lucrative for the component and software manufactures to come and join the campaign,” he explains.

Smartphone penetration in India is increasing at a very fast pace which is gradually spreading in the regional areas as well. Moving forward, more and more people are set to be accessing the Internet through their mobile phones and this will pave the way for even bigger migration from feature phone users to smartphone users. And hence, global as well as local brands must be ready for this revolution.

“It won’t be long when India stands as the most important market and brands should seize the opportunities the Indian market holds and explore the changing trends. India is increasingly becoming the biggest market for the smartphone market in the globe. The make in India drive will not only help the Indian consumer get the best in technology along with the rest of the world but also help in bringing in the consumer experience closer to the needs of Indian consumer. The effect will benefit Indian consumer in more than one way,” Arvind Vohra from Gionee adds on.

What More Needs to Be Done

Moving forward, as the industry players consider moving their manufacturing to Indian shores, the government must ensure that there are friendly policies in place, including tax holidays, interest subsidies etc, which will help to revive a segment which has the potential to create more than a million jobs in India and bring billions of dollars in foreign currency.

“We think it is imperative that the government provides a fillip to manufacturing within the country by making its policies directly competitive and benchmarked with monolith China- including treatment of intellectual property rights. The smartphone industry is growing by leaps and bound and the adoption is expected to continue at a fast pace with annual growth of around 40%, with more than 200-225 million consumers using smartphones. Local manufacturing is pivotal for the growth of handset manufacturers as well as it will help us to improve the design and propel research and development of products to suit the domestic requirements and demands of the Indian market. In addition to this, sincere intent by both handset manufacturers and government will reinvigorate the telecom ecosystem in India.” Rajesh Agarwal from Micromax explains.

The Road Ahead

While there is serious commitment being shown from the government side to drive local manufacturing of products in India, when it comes to smartphone manufacturing, global biggies such as Asus and Xiaomi may also find it interesting to have their manufacturing base set up in India and cater not only to the Indian market demand but also serve other global geographies from Indian plants.