Smaller smartphone brands in India may be left with no option but to importing completely built mobile devices instead of assembling in India. This may happen because the aggregate duty on components has become almost equal to that on a complete unit, a development which may hit the government’s plans of encouraging local manufacturing in India.
From October 1, 2020, the government has levied 10% import or basic customs duty on display assembly, touch panel/cover glass assembly, as per the phased manufacturing program milestones. And these components, which are critical for the production of mobile phones, make up to 25% of a device’s cost. The levy is also expected to increase the prices of devices by up to 5%, which may dampen demand during the crucial festive season, especially in the case of feature phones and entry-level smartphones (below Rs 5000).
While bigger players may even absorb the cost increase ahead of the festive season, smaller players working on lower scales and thinner margins may be forced to raise prices of entry-level smartphones by Rs 150-175, industry experts say. The industry had pushed for delaying the levy by a year, saying local production of display assembly hasn’t scaled up as needed, but the cash-strapped government has gone ahead with the levy.
In addition to the price hike, smaller brands such as LG, ASUS, iTel, Infinix, Tecno etc, which do not have dedicated surface-mount technology (SMT) lines for mounting printed circuit boards (PCBs) in India, may look at an increase in the total import duty they need to pay to the levels needed while importing fully built devices. This could drive them with no option but to import completely built units, instead of spending on local production capability in India.
According to estimates, one SMT line requires an investment of Rs 12 crores and only the bigger contract manufacturers like Foxconn, which makes Apple, Xiaomi and Nokia branded devices, Wistron, which makes iPhones, Samsung feature phone maker Dixon, Samsung, BBK group, Lava and Gionee/Karbonn have dedicated SMT lines for mounting printed circuit boards (PCBs) in India.