By increasing its smartphone shipments by a good 15 percent during Q4 2015, India overtook the United States to become the second largest smartphone market in the world last year. And now, according to a new study, India is most likely to manufacture about $80 billion worth of mobile phone components over the next five years and become a global manufacturing hub with advanced local manufacturing as a result of it.
According to the study done collectively by IIM Bangalore and market research firm Counterpoint Research, the $80 billion figure shows that there is a huge opportunity just from domestic demand perspective to manufacture mobile phones in India and increasingly source components locally, thus, reducing the country’s vast dependency on imports.
Speaking at the event where the study findings were released, Aruna Sundararajan, Secretary, Ministry of Electronics and IT, Government of India said, “India can potentially be the world leader in mobile phone manufacturing ecosystem and this has to be done in a phased manner.”
Statistics have also revealed that the contribution of locally manufactured mobile phones has increased from 14% in the year 2014 to 67% in 2016. This number is estimated to reach 96% by 2020.
While on the surface the numbers look promising but 67% of the domestically produced handsets in India make just 6% of the true local value addition with most of the OEMs still importing Semi Knocked Down components.
According to the study, “Out of 50 facilities from original equipment manufacturers (OEMs) to original design manufacturers (ODMs) and electronics manufacturing services (EMS) to component suppliers involved in manufacturing of mobile phones in India, almost three-fourth are Indian manufacturers, followed by Taiwanese with 10 per cent and Chinese with 10 per cent.”
The phase I plan, which will extend from 2016 to 2018, includes components like battery, chargers, cables, housing, packaging and others that can be localised completely, thus will help in increasing the true local value addition from the current 6% to 17% in just a period of two years.
The components under phase II plan, which will extend from 2018 to 2020, like display, camera and their sub components can further help in taking the increase value addition from 17% to 32% by the year 2020.
The phase III of the plan will include the possibility of localising the semi-conductor components post the year 2020 including setting up semi-conductor fab. This will help in upping the true local value addition much beyond the 33% that will be achieved by the year 2020.
The study also said that going by the proposed plan, they can estimate that more than $15 billion worth components will be sourced domestically over the next five years through 2020 and create more than a million direct and indirect jobs in the country.
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