India set to consume $80 billion worth of mobile components in five years

India, the second largest global smartphone market in terms of users, is on track to consume $80 billion worth of mobile components by 2021, according to a joint study from IIM-Bangalore and Counterpoint Researchers.

In this five-year period, close to a billion smartphones, together with almost half a billion feature phones, that will be sold in India, will consume more than $80 billion worth of components, the study said, pointing out to opportunities from domestic demand perspective to manufacture mobile phones in India and increasingly source components locally, thus, reducing the dependency on imports.

Aruna Sundararajan, Secretary, Ministry of Electronics & IT, said the government would have to work with local industry and several partners to achieve this.

“India can potentially be world leader in mobile phone manufacturing ecosystem and this has to be done in a phased manner,” she said.

She also announced that the government was sending close to a 100 design engineers to Taiwan to learn important facets of aligning product design and customer needs from their Taiwanese counterparts.

Ajay Kumar, Additional Secretary, DeitY, said: “During the last 18 months, 40 new mobile phone assembly units and 12 new component/ accessory manufacturing units have started in the country as part of Digital India initiatives.

But mobile phones itself have potential to create electronic manufacturing to the tune of over $250 billion industry.”

IIM-Bangalore’s Professor Chirantan Chatterjee, from the Corporate Strategy and Policy Area, who is the lead author of the study, said, “Under the proposed plan, we estimate that more than $15 billion worth components will be sourced locally over the period of five years through 2020, realising not only significant savings in foreign exchange, reducing the level of imports but also assisting the creation of over million direct and indirect jobs.”

According to the study, the contribution of domestically manufactured mobile phones has increased from 14 percent in CY 2014 to 67 percent in CY 2016. This is further estimated to contributed 96 percent by CY 2020.

However, 67 per cent of the handsets manufactured in India contributes to just 6 per cent of the ‘true local value addition’ with most of the OEMs still importing Semi Knocked Down components (SKDs).

Counterpoint Research’s Senior Analyst and co-author of the study Tarun Pathak said the number of mobile phone and related components manufacturing facilities are estimated to exceed 50 units by the end of CY2016, up from just two units before the ‘Make in India’ programme was announced.

“We estimate more than 180 million mobile phones will be assembled in India, out of the total 267 million phones to be sold in India in 2016. However, the overall ‘true localisation rate’ of manufacturing and sourcing components will be just under 6 per cent of the total value of $11 billion worth components going into those 267 million phones in CY2016.”

Comparatively, other global manufacturing hubs such as China, which has raced ahead to build a robust local manufacturing ecosystem, is seeing localisation rate of almost 70 per cent.

Other leading hubs such as South Korea and Taiwan have crossed 50 per cent localisation of components.

Whereas, the emerging hubs such as Vietnam and Brazil are seeing local value addition around 30 per cent and sub-20 per cent level, respectively. Thus, to transform India into a global manufacturing hub, the “Make in India” programme needs to propel to the next stage to maximise the true local value addition, Pathak said.

The study further said that under the phased local value addition plan, the components under Phase I plan (CY2016-CY 2018) such as battery, chargers, cables, housing, packaging and others can be localised completely, thus driving the ‘true local value addition’ from current 6 per cent to 17 per cent in just two years and can further increase value addition from 18 per cent to 32 per cent by 2020.

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