International and domestic mobile brands are competing to set up manufacturing plants across India today making the country into a future manufacturing hub. On the market side, consumer preference is increasing for higher MP cameras, dual cameras, higher RAM & ROM for performance & storage capacity.
Many large mobile manufacturing companies are now making India their second manufacturing base after China, and also the hub and take off point to export products to Middle East and African countries — due to India’s logistical advantage.
One of the major trends in 2017 on the market side is the shift in consumer preference for higher MP cameras, dual cameras, higher RAM & ROM for performance & storage capacity. The most recent being preference for bigger screens in mobile phones and moving to Bezelless screens being popular termed as Infinity Display.
Sanjay Kalirona, CEO, COMIO India, comments, “The year 2017 has witnessed many trends which were a big hit just like bezel-less screen and HD screen for budget phones, USB C which enables higher rate of exchange of data and power, fingerprint sensor, dual cameras, fast charging, more smartphones ditching the headphone jack, waterproofing, etc. Whereas the emerging new trends for 2018 are under-glass fingerprint sensor, Iris scanner and face recognition, Bluetooth ear-buds and headphones, and AR (Augmented Reality). Fine-tuning in the design and display of the smartphones will be seen. Metal body has once dominated the build materials of smartphones, but there are more smartphones adopting a glass body. More curves are being introduced to the glass body design, making the smartphones even more comfortable to hold. Antenna lines are moving towards the edges of the display as seen in some smartphones. Apart from these trends, dual cameras and bezel-less displays are here to stay.”
Nidhi Markhanday, Intex shares, “The smartphone segment is constantly witnessing new innovations in features being offered by brands. In 2017, industry witnessed an overall market growth of 10-15% while the online market grew by 45-50%. Smartphones segment saw models priced in the range of Rs 8K-15K driving the market with over 40% share in total sales, owing to high conversion rate by consumers to higher price segment due to effective 0% finance schemes availability.”
Another trend of the year is we saw resurgence of feature phones in a big way. With RJio, the concept of Smart Feature Phone or 4G feature phone is taking shape, and it is being seen that feature phone segment is getting as a new lease of life.
Nidhi Markhanday adds, “Intex has been working on its maiden 4G-Volte feature phone and is in talks with various telcos on offering affordable smartphones through bundling in order to enhance our market share and tap the vast pool of 500 million feature phone users who are still to get the taste of data consumption. In fact, we launched several feature phones like the Navratna Series that included our maiden 4G Feature too. We also adopted the ‘bundling strategy’ by partnering with Vodafone and Airtel, both of which worked really well for us. Year 2017 has been a defining year as we launched 29 models. Our Mobile Accessories division also saw some tremendous growth as we sold as many as 300k power banks in last three months alone.”
Over the past year, the Indian smartphone market has grown tremendously. According to the Canalys report, India surpassed US to become the world’s second-largest smartphone market (with China at No. 1), with over 40 million units shipped in the third quarter of 2017. With many new players entering the market, consumers continue to seek more enhanced mobility experience with innovative devices that help them stay more connected.
Arijeet Talapatra, Sr VP – Sales & Distribution, Transsion India, states, “Consumers today in the emerging markets have evolved and factors such as strong build quality, amazing features, premium experience and competitive pricing, act as influencers while making a purchase decision. Amongst the most important developments for 2018 is Android Go, the latest effort by Google to help the launch of budget-friendly smartphones. The OS is designed to run on smartphones that have 1GB or less of RAM, with a focus on data management. We believe that this will help immensely in developing markets like India, giving a boost to entry and mid-level smartphones. Dual camera capture technology also is likely to feature in a wider variety of phones, and in 2018 more budget phones shall offer this technology. Full displays, bigger screen sizes, and bezel-less screens with 18:9 aspect ratios will also become more popular, buoyed by their inclusion into more affordable mid-range smartphones in 2018. Bigger and more powerful batteries, while maintaining a slim, pocket-friendly (literally, not in terms of expense) size will also be a trend in 2018.”
Deepak Kabu CEO, ZIOX Mobiles, asserts “Digital India ensures that technology is made available to citizens, enabling India to be digitally empowered in the field of technology. With Demonetization, adoption of Digital currency brought a new facet among the smartphones. Mobile development has gained momentum in past few years and the trend has progressed from smartphones to Internet of Things. IoT-based solutions are not just for urban India; they offer rural citizens access to services that were earlier out of reach. The government has taken up the initiative of building smart cities across the countr. Along with the growing developments, security is of utmost importance in the digital world. It seems that everyone is talking about mobility, the cloud, and digitization. Bio-metric systems and other unique technologies are being developed for tighter digital security.”
Make in India finally takes off
Make in India, which initially started as a strong wish in 2015, has now started to materialize practical process in 2017. Mobile manufacturing in India is set to touch 500 million in the coming two years. Thanks to the ‘Make in India’ initiative propelled by Prime Minister Narendra Modi, India produced 110 million mobile phones in FY15-16 (50 million feature phones and 60 million smartphones), up from 60 million in the previous year.
Sanjay Kalirona of COMIO India, clarifies, “The fact that India has a large domestic market makes manufacturing in India viable for brands. Many international players have already set up their manufacturing units in India. It is the volume of users that has triggered the growth of mobile manufacturing in India. Recently, India was rated one among the world’s fastest growing mobile phone markets globally. This show the massive untapped potential in India, making it a key factor for large companies to start manufacturing here.
According to reports, India has attracted investment from nearly 50 mobile manufacturing companies so far and many foreign as well as domestic players are building new capacities in India.
Nidhi Makjhanday adds, “Intex has been working on increased local value addition starting with manufacturing speakers and now has become the largest domestic manufacturer of Multimedia Speakers in India, with its Jammu Plant set-up in 2004, indigenously manufacturing approx 1.5 million speakers that are 100% Make-in-India. Intex took indigenous manufacturing to mobiles with components manufacturing unit set-up in Noida producing batteries, chargers and mobile accessories. Recently, Intex stepped up its Make in India program with the implementation of vertical integration in durables business starting with the launch of ‘LED Panel manufacturing’ of LED TV in Baddi, Himachal Pradesh, now ingenuously manufacture a critical component – LED panel (imported till now) and its accompanying parts as against just assembling them.”
For instance, Chinese companies such as Gionee and Xiaomi have already started making their handsets at Foxconn’s plant in Andhra Pradesh. Last year, South Korea’s Samsung has added investments to enhance capacity at its Noida plant, while homegrown Micromax started a new plant in Uttarakhand and is planning investments in Telangana, Rajasthan and Maharashtra. Another Indian company LAVA International has set up facility in Noida to assemble one million units a month. A second unit that can roll out 10 million units a month is on the anvil. The Indian domestic manufacturers such as Celkon Mobiles, Spice Mobility and Karbonn are also planning new capacities.
Minor Obstacles in the short run to Make in India
According to data from the Indian Cellular Association, India has a capacity to assemble 270 million phones a year, compared to China’s 1.1 billion. Because of its economies of scale and presence of a full-fledged ecosystem, production cost for mobile phones in China is the lowest in the world. The question, therefore, is: why should anyone make in India, especially when there are too many gaps in the country’s ecosystem? First, there is no component base here, which means high freight costs that adds to the overall cost of manufacturing. Second, the cost of finance, power and water — key to electronic manufacturing — is high in India compared to other Asian countries.
Back in 2011, when KPMG compared manufacturing competitiveness of Indian and Chinese mobile handset manufacturers, it found the landed cost of materials was 10% lower for China. And while Indian manufacturer needed to import 80% components, KPMG said the Chinese would need only 5%. Plus it said Chinese labor was found to be 2 times more productive than Indians and power cost there was 20-30% lower and water 30-35% cheaper.
The study showed that a mid-sized Chinese manufacturer with a capacity of 20 million-units-a-year would have a profit margin of 9%, where as an Indian company would have a margin of 2.6% only.
Factors that can propel mobile manufacturing in India!
On the other hand, in the last three to four years, labor costs in China have risen by 20%, eroding the advantage of Chinese manufacturers to some extent. With the country having moved up the value chain, there are not enough people in China willing to do manual low-paying jobs. This may push some amount of manufacturing to shift out of China. Another factor that may push manufacturing of feature phones out of China is that local Chinese are buying more expensive phones and few feature phones. With China’s competitiveness slowly dropping, many leading mobile phone manufacturers from developed countries are thus looking at shifting production to India or other Southeast Asian countries.
According to LG India, the demand for smartphones is growing exponentially in India and their local manufacturing will contribute handsomely to the growth of their company and to the nation as well.
LAVA believes that China is reaching the closing stages of low-end electronics design and manufacturing with the cost of engineering and labor is steadily rising in China. On the contrary, India has a large consumption base, low labor wages, minimal skill-sets required in electronics manufacturing and large pool of software engineers. This puts India at an advantageous position to become the global hub for electronics manufacturing.
Then there are other factors working in favor of India such as the ease of doing business, growing infrastructure, beneficial policies under reformed GST and lower income tax proposals. No wonder, many large mobile manufacturing companies have made India their second manufacturing base after China, and also the hub to export products to Middle East and African countries — due to India’s logistical advantage.
Chinese company Gionee, for instance, set up its office in India in 2013, plans to set up around 550 exclusive service centers to ensure optimum quality of service and will be doubling their strength of sales representatives to 20,000 for better presence in the market. Gionee is planning to bring in not just smartphones, but also ancillaries like design houses and R&D to India.
Syed Tajuddin, CEO, Coolpad India, adds, “The year 2016 was important for Coolpad as we achieved some key milestones as a brand after launching our first Made in India product – Coolpad Note 3 Lite, manufactured locally at Videocon factory in Aurangabad. We are committed to Make in India to contribute towards the government’s ‘Make in India’ initiative. Make in India strenghthens the Indian manufacturing sector and also helps to transfer a part of the financial benefit to the customer.”
Intex Technologies (India) believes that the government’s incentives have improved the cost advantage of companies that have started moving their manufacturing to domestic frontiers. At present, Intex has 30% localization in its products and it intends to increase it to 70% in the next two years.
Nidhi Markhanday of Intex clarifies, “The PMP notification is an enabling one to give a clear road map to local manufacturers as to how the government intends to support the increased local value-addition with proper fiscal and financial incentives. It will enable each company to plan its indigenization program with the help of local and overseas vendors. For the country, it is a commitment given by the government that they would like to develop India into a competitive manufacturing hub for mobile phones, leading to creation of several thousands of new jobs, saving in foreign exchange and increased exports. The Phase 1 of PMP, kicked off in 2015, has encouraged local mobile assembly APTP (Assembly, Programming, Test & Packaging) and in the Second phase, the policy has encouraged in moving up the value chain by localization of mobile accessories viz. Charger, Earphone, Data Cable, Mobile batteries. And the next step in PMP is critical as it needs developments in areas such as Mobile Design and IDH that would primarily drive the ecosystem for Fabrication, PCB design etc.”
The big factor, according to Videocon, that has triggered growth of mobile manufacturing in India is the volume of users here. India now surpassed the US among the world’s fastest growing mobile phone markets globally which leaves a huge untapped potential in India, making it a key factor for large companies to start manufacturing here.
In the last 3 years, the Indian government has taken many positive steps and the industry is moving towards creating a domestic ecosystem for manufacturing smartphones to curb imports. The announcements in the Union Budget 2017-18 underline the government’s intent to make the country a formidable manufacturing hub of electronics and technology-based products.
Videocon, which started its smartphone manufacturing journey from its Aurangabad plant, has spread to five more locations in India now. So far, the company has launched more than 250 models in the market.
ASUS India has witnessed consistent growth across all its business segments and believes that the move by the Indian government to focus on manufacturing in India has opened up a plethora of opportunities for them. ASUS started with manufacturing in Sri City, Andhra Pradesh and in Daman. By starting local production of smartphones, ASUS now expects the demand and local manufacturing of its products to witness a significant increase in 2018.
How different providers see the opportunity
According to industry analysts, the Indian mobile industry is growing at a rapid pace and will continue to be the growth engine for the smartphone market. According to market reports, the market is expected to grow at a CAGR of 11% till 2018 driven by a strong adoption of data consumption on handheld devices.
Arijeet Talapatra of Transsion India, believes, “With ‘Make in India’ policies, manufacturing in India has become a lucrative option for smartphone manufacturers. Over the years, India as a country has made a shift from assembling the part here to manufacturing, resulting in a boost to economy and employment. We are sure the contribution of manufacturing will continue to increase and boost the Indian economy in the coming years.”
India is expected to have over 180 million smartphones by 2019, contributing around 13.5% to the global smartphone market, based on rising affordability and better availability of data services among other factors.
Gionee’s strategy and philosophy is to be different and disruptive. Last few years, when brands were busy replicating the Western markets and propagating the online sales model, Gionee continued expanding its on-ground retailer base, and soon became one of the top offline retail smartphone brands in India. Today, over 90% of its revenue comes from the offline retail model.
Indian company Videocon’s banks on the trust associated with the brand name more than others in the market. In case of any problem, Videocon aims to resolve it within 48 hours of registration. Videocon is giving customers an 18-month long warranty and 15-day replacement warranty on some of their smart phones.
ASUS believes that their innovative and well-conceptualized & designed will win the hearts and minds of Indian consumers through our distinguished and superior offerings.
According to Swipe Technologies, their feature-rich mobile communications devices, developed using global best practices, and sold at affordable prices will win the market.
Deepak Kabu of Ziox Mobiles, concludes, “India has a large domestic market, so for global manufacturers looking to de-risk in an alternative market, India is one of the most suited options. The closing stages of low-end electronics design and manufacturing in China is evident now as the cost of engineering and labor is steadily rising there. On the contrary, India has a large consumption base, low labor wages, minimal skill-sets required in electronics manufacturing which proves to be beneficial for the manufacturers. Lastly India brings wider ease of doing business with growing infrastructure, beneficial policies under upcoming GST and lower income tax proposals. All this and much more drive the growth of Mobile Sector in India. But on the other hand, The Mobile manufacturing sector suffers from a host of problems including stringent labor laws, poor infrastructure and a very poor supply chain. These factors cause hindrances and badly affect the growth of this sector causing major problems and lose to the manufacturers. However, to reduce their limitations the Government of India must take some effective measures and introduce policies to not only to reduce but to remove these boundaries, helping in making a way for easy growth and development of the sector.”
Today, almost every mobile company in the world, big and small, is competing for a share of the Indian market and Indian market is that big! With increasing per capita income and most people moving up the socio-economic levels, labor costs in China are increasing and soon will become uneconomical to for manufacturing. If India can improve upon the availability of components and raw materials and infrastructure, within the next 2 to 3 years, we can see dramatic improvement in the Make in India, which is set benefit local workforce and propel the economy.
Now, everything indicates that India will become a big mobile manufacturing hub, in addition to being the second biggest market for mobiles, in the coming few years.