Handset Assembly Powerhouse

Mobile manufacturers don’t find the right ecosystem for setting up fully automated production facilities in the country.

Published: 25th October 2015 05:23 AM  |   Last Updated: 25th October 2015 05:25 AM   |  A+A-

When a slew of mobile makers like Xiaomi, OnePlus, Gionee, Vivo and Motorola announced their ‘Make in India’ plans, one would have thought the era of even cheaper smartphones was upon us. Unfortunately, the sticker price of mobile handsets remained unchanged and unlikely to go down in the short term. Often local production would imply cheaper products, but in the case of mobiles, companies say prices may not fall beyond 10 per cent, mostly on newer models, while existing models will continue to retail at the same price tag.

This is primarily because, companies are setting up production plants only to assemble and not actually produce phones. Meaning, cellphone makers are importing all of the 25-30 components that go inside and outside the handset including your screen, chipset, camera, battery and even charger from outside India (read mostly China).

“We don’t have the ecosystem right now and all components including chipsets are imported. It’s very difficult to get chip manufacturers to India and that can probably happen when there is large local demand. Till that happens, imports will continue,” says Vikas Agarwal, General Manager-India, OnePlus, which recently announced plans to produce from Andhra Pradesh.

Without localization, prices will not change. And a few homegrown players like Micromax, who have been assembling for sometime now, are moving in that direction. “We are manufacturing components like charger and battery in India. Currently, we are localizing to the extent of 7-8 per cent and the target is to reach 10 per cent by March, 2016. Localization is also happening at the packaging, plastics and component level,” explains Rajesh Agarwal, Co-founder, Micromax Informatics, which has facilities in Uttarakhand, Andhra Pradesh, Rajasthan, Madhya Pradesh and Telangana.

Companies will not invest in manufacturing unless beneficial. Analysts say, producing in India gives them both direct and indirect benefits. Direct benefits include custom duty benefit. For instance, if you are locally producing, the net cost in terms of duty is 2 per cent, vs 11.5 per cent for imports.

“But the net benefit is not so high due to inefficiencies in India and as factories here are not as automated as they are globally. Production strategies or production output is high in China. Because of lesser automation here, it requires more labour and efficiencies per person is lower in India,” reasons Vikas.

mobile.JPGAs for indirect benefit, it saves precious working capital. Plus, they can rollout handsets faster into the market. When importing, companies need nearly 4-6 weeks to place the order and start production. Domestic production reduces this by 2-3 weeks. “This is especially critical with fluctuating demand. Instead of producing a bigger batch, we can produce in real time and address non-availability of stock during peak demand,” says Vikas. So, that long wait for OnePlus 2 or Redmi Prime will be relatively cut short.

According to Agarwal, domestic production offers definite cost advantages, but the benefits are way beyond cost, as it is conducive to local environment such as power conditions, temperature variations etc.

“There is a definite impact on the product pricing as well as foreign exchange saving benefits.

Cost aside, local manufacturing also adds to the economic benefits with job creation and opportunities for local development in areas where there has been limited growth in the past,” says Agarwal.

Mobile manufacturing is a game of scale and unless production happens in bulk, the industry may not fully evolve. Currently, there are over one billion phone connections, of which a majority comprises mobile connections. Besides domestic market, for companies, India manufacturing makes economic sense when they export. But here too, China has a lead and offers export benefits. Unless, India matches with China, companies may not see value in scaling up operations.


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp