Indian government announced major changes to import duty on consumer electronics during the Union Budget 2018 on February 1. The government increased import duty on smartphones and components from existing 10 percent to 20 percent in an effort to fuel further investment in its Make In India initiative. Also Read - Samsung Galaxy A72 could be Samsung's first Penta-camera smartphoneAlso Read - Oppo Reno 4 Lite leaks online; to be rebranded F17 Pro
The announcement seems to be already making good on that promise with leading handset makers and global contract manufacturers planning to increase the localization of parts with investments in the tune of up to $900 million (about Rs 6,000 crore). These companies, which currently assemble their devices in the country, now also want to assemble printed circuit boards (PCBs) that go into these devices. Also Read - Samsung Galaxy S21+ with Exynos 2100 chipset spotted on GeekBench
According to ET, Chinese smartphone players such as Vivo, Oppo and OnePlus, and Indian players including Micromax and Lava are planning to increase investments in their local operations. While the impact of increase in import duty on smartphones won’t have a major impact, the hike in duty on mobile components like PCB will affect these smartphone manufacturers significantly.
Since 50 percent of the cost of manufacturing a mobile phone is made up by import of PCBs, these handset makers stand to decrease cost greatly by local assembly of PCB. Contract manufacturers Foxconn and Dixon are also planning additional investment in their existing facilities.
“We’re expecting investments up to $900 million in two years until 2019 by all key players,” said Pankaj Mohindroo, president of the Indian Cellular Association (ICA) that represents all major handset makers in India, including Apple and Samsung. “About 350 SMT (surface mounting technology) lines are expected to be set up by all key players,” he added.
The Surface Mounting Technology is used for assembling PCBs, and it requires heavy investments. The system integrates several electronic components required for the functioning of a mobile phone on a PCB. During the budget announcement, several industry players questioned whether India has a infrastructure ready to start assembling these components in the country.
Samsung has been doing PCB assembly since 2006, and it is investing Rs 5,000 crore to expand with focus being on higher level of mobile phone assembly. Xiaomi, the leading smartphone maker according to IDC, is also planning to initiate component level assembly and manufacturing at its local plant.
“Our first SMT line is already installed in our Baddi plant in Himachal Pradesh, and after its successful running, we will replicate it in all our factories,” said Vikas Jain, co-founder of Micromax Informatics.
The government is planning to levy basic customs duty on assembled PCBs from the next financial year while other parts such as camera modules and connectors will attract higher levies.
With local manufacturing of mobile devices having caught up among leading brands, it is now time for them to start assembling components as well. The government’s move to increase duty to that effect seems to be bearing fruit with major players confirming local assembly of components. Apple, the most profitable company in the world, is staying silent on its plans for the Indian market.