Does ‘Make in India’ really help the domestic handset companies?

By Krishna Mukherjee

Mobile handset manufacturing is gaining traction on the back of ‘Make in India’ with domestic as well as global companies mulling over making in India. But the million-dollar question is whether domestic manufacturers have an upper hand over the foreign players, if the latter also extensively start manufacturing in the country?

At present, the domestic players manufacture 75% of the shipments locally. However, ‘Make in India’ has propelled the global vendors too to manufacture in India and as a result, today their local manufacturing stands at around 65% (as per data available till April 2017).

Recently, world’s largest contract manufacturer for electronics Foxconn announced its plans to invest up to $5 billion in India and make India a manufacturing hub just after China. In fact, Foxconn, Flex, Salcomp, Wistron and Samsung together have plans to invest billions into the country and set up over 70 phone and component manufacturing units in the next few years.

It could be good news for India’s exchequer as foreign investments pour into the country, but it should not harm the interest of Indian players. As foreign vendors manufacture in the country, the cost of a mobile handset would go down and their advanced technology would also give tough competition to the Indian vendors. In a way, the local competition would increase significantly.

The best part about ‘Make in India’ is that the component manufacturing of a mobile handset has increased from 25% earlier to around 35% presently that includes batteries, chargers, etc., and this ratio is likely to increase to 40-45% soon with the addition of more SMT lines by different companies. In fact, out of the overall shipments, domestic manufacturing today is contributing around 77% of total shipments, with imports standing at 23%.

Although, the government provides some cushion to the local manufacturers with imposition of 10% Basic Customs Duty on imported handsets, but it would hardly help the domestic players, whose market share has also considerably declined.

The share of domestic handset players has plunged from 51% in Q1, 2016, to 31% in the first quarter of this year. In addition, the market share of some of the local players also slipped drastically with the mushrooming of Chinese players. For instance, the market share of Micromax declined from 13% in Q1, 2016, to 6% in Q1, 2017. Likewise, Intex Technologies saw its market share declining from 12% to 5% in the first quarter of 2017. Lava and Karbonn witnessed their market shares plunging from 9% and 6% to 5% and 4%, respectively, in the first quarter of this year.

Even though ‘Make in India’ provides the cog to the manufacturing scenario of the country, the government should look beyond and safeguard the interest of domestic handset vendors. Make in India’ may drive a lot of foreign investment into the country, but at the end, it is coming with a cost and the cost is being paid by the domestic handset manufacturers.