ICEA Make In India

“We must dream of Made in India products around the world…”
Shri Narendra Modi,
Hon’ble Prime Minister of India.

Making India the Global Manufacturing Powerhouse for Mobile Handsets and Components

If India extends its ambition beyond making in India for India, to making mobile handsets and components in India for the world, it could manufacture around 1,250 million handsets across various segments by 2025, firing up an industry worth around USD 230 billion.This would create around 47 lakh jobs in the process through the APTP operations and PMP sub-assembly plants set up in the country.The job creation and investment potential is even larger when considering the component manufacturing ecosystem that could beset up beyond the PMP roadmap.

 

Phased Manufacturing Program (PMP) and Charting the Way Forward:

At its peak in 2011, India produced 155 million handsets, of which it exported 105 million. This was driven to a large extent by Nokia’s manufacturing operations in India. Over the years, India’s mobile manufacturing sector deteriorated rapidly, producing only 58 million handsets in 2014 while exports were nil. The subsequent closure of the Nokia plant due to tax disputes, and a failure to attract other mobile manufacturers led to this collapse.

Resurgence due to the phased manufacturing program and domestic demand Today, India is steadily reclaiming its position as a global manufacturer of mobile devices and parts. Around 120 manufacturing units have come up since 2014, driven by the introduction of the Phased Manufacturing Program (PMP) and on the back of strong domestic market demand. India produced 225 million mobile phones in 2017 worth USD 20 billion, with exports of around USD 0.1 billion. The tapering domestic market, however, is now prompting a shift in focus from “Making in India for India” to “Making in India for the world”. If India extends its ambitions to the export market, it could manufacture around 1,250 million handsets by 2025.This could fire up an industry worth around USD 230 billion and create more than 47 lakh jobs in the process just from Assembly, Programming,Testing and Packaging (APTP) operations and PMP sub-assembly operations.

Beyond PMP” PMP is effective but does not go far enough to establish India as a global manufacturing hub While PMP has helped kickstart this recent growth in mobile manufacturing, it has failed to address two major focus areas that could help capture the industry’s full potential:

  • Adoption of an Export Orientation:In value terms, the 2017 estimated exports of around USD 0.1 billion are short of the target for 2019 of USD 9 billion. Despite some improvement in exports since 2015, India still has a long way to become an export hub.
  • Creation of a component/sub-assembly ecosystem:
    While appreciable progress was achieved under the PMP–2016 roadmap by establishing approximately 51 components manufacturing units,only 10 manufacturing units have been set up so far under the PMP–2017 roadmap (approximately seven manufacturing units in mechanical parts and three in USB cables). Thus, PMP has had limited success in establishing a domestic component/ sub-assembly ecosystem that goes beyond chargers and adaptors.

This is due to two main factors:

(a) India has yet to attract the major mobile manufacturing ecosystems or motherships” which represent a combination of the brands and their unique supplier ecosystems. Some of the typical examples of these are Samsung, Apple, Huawei, Oppo, Vivo, Xiaomi,etc.

(b) A suitable policy environment and effective outreach efforts are currently absent to promote investments by major component manufacturers under the Make in India program. The limited success of PMP on these two significant fronts raises a pertinent query regarding the need for a new policy for successfully establishing a mega manufacturing ecosystem. Without a calibrated approach, we may fall short of our aspiration to establish India as a global manufacturing hub for mobile handsets and components.

Lessons from China, Vietnam and Brazil

An analysis of competing locations shows that export oriented policies and incentives can create global leadership and dominance for countries like China, which have a large domestic market, as well as Vietnam, which has shown tremendous success despite a small domestic market. On the other hand, Brazil, with immense potential, failed to make a mark in global handset and component manufacturing due to flawed policies.

It is important to note, however, that both China and Vietnam developed mobile manufacturing while simultaneously nurturing the broader electronics industry. Therefore, India also needs a broader focus on the electronics manufacturing industry beyond just mobile handsets and components. Targeting growth in India’s mobile manufacturing industry like China and Vietnam, while the rest of the electronics manufacturing industry is still nascent, would require a significant push by way of new and tailor-made government policies.

Strategic Measures to Make India the Global Mobile Manufacturing Hub

The vision to set up mega mobile-manufacturing ecosystems and thus become the global manufacturing hub could be achieved by putting into action the eight part strategy originally identified by the India Cellular and
Electronics Association (ICEA).

  • Duty Differential: Imposing duties on imported handsets and components in a phased manner to boost local manufacturing while the industry was still developing.
  • Export Incentives: Developing a robust export promotion strategy through increasing incentives under Merchandise Exports from India Scheme (MEIS) and duty drawback rates available for mobile
    handsets.
  • Easier Set-up and Expansion of Manufacturing Capacity:Allowing easy import of capital goods and easy and cheaper availability of capital for companies manufacturing mobile handsets and their parts, components and accessories.
  • Competitive Direct Tax Policy:Introducing direct tax holidays for the mobile manufacturing industry to ensure competitiveness against manufacturers enjoying low tax schemes in other countries.
  • Labour Reforms:Introducing reforms to ease retrenchment of labour and closing of establishments, allowing flexibility in working hours and overtime, and improving skill development efforts in the country.
  • Ease of Doing Business: Introducing measures to improve turnaround time at ports, streamlining GST rules and refining e-waste disposal rules.
  • Effective Outreach Efforts: Introducing coordinated outreach efforts between the government and the industry bodies to attract the major handset and component manufacturers to set up operations in India.
  • Design Ecosystem: Creating a thriving and stable design ecosystem in the country by aiding in skilling and talent availability for mobile handset design and manufacturing.