Make in India? When it comes to smartphones, not yet
India's goal of becoming a smartphone-making hub has hit a major roadblock due to lack of skilled labor and component makers. The situation gets worsened further by the complex tax regime that phone manufacturers have to face here, say industry insiders. If this situation persists, the "Make in India" dream, at least, in the mobile phone segment will remain unrealized. Here's more.
Prime Minister Modi has been championing "Make in India" for some time now, to encourage foreign entities to set up their manufacturing plants in India by offering them various sops and facilities. His initiative, to bring momentum to the stagnant economy and create millions of job opportunities, included lofty plans such as getting Apple to develop its iPhones here in India.
Three years have passed, but the progress in this segment remains lackluster. Although several bureaucrats, telecom executives, phone manufacturers make their presence felt at India's first mobile congress, the fact remains that India, up until now, has only managed to assemble phones using the parts that were imported and not the "Make in India" components.
Few contract manufacturers, such as iPhone-maker Foxconn Technology Co and Flextronics Corp, do have their bases in India. However, almost none of the upper range chipset makers or premium component manufacturers have their production facility here. Even the plans of Foxconn building an electronic facility in Maharashtra, which according to the local officials would have garnered employment for around 50,000 people, have been stymied.
India is among the world's fastest-growing smartphone markets but it also comes with its own set of hiccups. Counterpoint research says, while manufacturers assemble phones in India to avoid taxation that's levied on imported phones, they limit their production of locally made components to only headphones and chargers for the devices, which account for merely 5% of a device's manufacturing cost.
A Chinese smartphone firm's senior executive informed Reuters, on condition of anonymity, "Rather than feeling that India is a place where I should be making mobile phones, it's more like this is the place I need to (assemble) phones because there is lower duty if I import components and assemble here." It's a feeling shared by several smartphone manufacturers when it comes to India.
Several have rued over the lack of labor and local component makers. Even the newly reintroduced GST comes with its own set of problems for them. The lengthy tax-refund process of the new regime causes serious delay in supplier payments. In the past, there have been several tax disputes between India and foreign OEMs, such as Nokia, which is also a cause for concern.