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Kripa Raman

India is becoming a mobile handset manufacturing base. Cheaper handsets will help break the barrier to accessing larger volumes in the low-income segments.

FOR an India that had written itself off as a centre for any kind of hardware manufacture, the year 2004 was rather a surprise as several mobile handset makers, both Indian and foreign, announced plans to set up handset making units here.

The BPL group announced its plans to make handsets out of here. LG Electronics is setting up a facility in Pune that it says will eventually be the second largest facility next to the one it has in China.

Elcoteq, an overseas handset supplier for companies that have their own branded products, is setting up base here. The largest handset manufacturer in the world, Nokia, will be investing $150 million over the next few years in setting up manufacturing capacities in India.

By the end of this calendar year, there will be several handset manufacturing facilities in India. Besides these, there are other international players intending to set up handset assembling units in the country.

If the concept of Special Economic Zones really takes off in the country, handset exports from India could flourish too, feel manufacturers. One of the main attractions for these manufacturers is that India, which buys approximately 50,000 handsets every day, presents a huge domestic market. The other, possibly more long-term one, is that India could end up being a sourcing base for handset manufacturers overseas. Handsets manufactured in India could be cheaper by 25 per cent to 40 per cent, other features being the same, say manufacturers. This would come from savings in shipping costs, customs duties and the like.

Cheaper handsets help the Indian operators breach the single biggest barrier to accessing the lower socio-economic segments that find handset costs prohibitively expensive.

The other advantage with having a domestic manufacturing base is that handsets could be made very region-specific, in terms of the languages offered and the like. Manufacturers would have to operate on very thin margins, and this would mean that some of the existing brands would have to exit from the lower end of the market, finding themselves unable to compete with their `Made in India' counterparts.

Already, Siemens has decided that it will concentrate on the premium market in India: "The price at which handsets are being sold here, it is simply not viable for us, we don't want to get into this game," says a senior official with Siemens Ltd.

Since a lower end handset begins to act up a year into use, there will be a major challenge for manufacturers, going ahead. A repeat investment of even Rs 2,500 every year will be prohibitive for the ordinary man, says an analyst.

In developed countries, or even in South-East-Asia, handsets are changed every six months. Indians are not going to be like that, especially those in the lower socio-economic category. The challenge will be to produce more robust handsets at a lower cost, or to produce handsets that are cheap enough for people to afford to change them at least every one-and-a-half years, says the analyst.

kripram@thehindu.co.in

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