Another boost for Make in India: Lenovo to make phones in Chennai with Flextronics

Lenovo said for FY15-16, the unit would produce six mn units

Two weeks after the world’s largest electronics contract manufacturer Foxconn announced a $5-billion investment in India, Chinese personal computer and smartphone giant Lenovo said on Tuesday it would start local manufacturing of Lenovo and Motorola smartphones at Sriperumbudur, near Chennai. The company has roped in Flextronics, a large electronics contract manufacturer and a competitor of Foxconn, to manufacture the phones at its unit.

The development will boost the government’s ambitious ‘Make in India’ campaign.

“Lenovo is not new to manufacturing in India. We recognised the potential of India and we invested in PC manufacturing several years ago. Lenovo’s investment in the new manufacturing plant represents the potential we see in the Indian market and our long-term commitment to customers,” said Chen Xudong, president (MBG Group) - Lenovo, and chairman, Motorola Mobility Operating Board.  Lenovo, which acquired US mobile phone brand Motorola from Google last year, said for the current financial year the facility would produce six million units and double the same to 12-15 million units in the next financial year. According to market estimates, the company is selling 6.4 million units annually and it hopes to meet domestic demand through local manufacturing in the new facility. It said it has not yet taken a call on whether to export from this unit or start manufacturing other items such as smart watches. It is aiming for 30 per cent of local sourcing in a few months.

“The Indian government’s thrust on ‘Make in India’ has opened up a plethora of opportunities for organisations looking to conduct business in India”, said Amar Babu, chief operating officer, Asia-Pacific and chairman, Lenovo India.

According to Babu, the company’s flagship Moto E has already started rolling out from the plant and the K3 note will follow soon. “The first batch of products has already been shipped.” In March 2015, Business Standard had reported Lenovo was planning to start manufacturing near Chennai. The manufacturing unit would house 1,500 employees and both Lenovo and Motorola will have separate manufacturing lines at the same unit. Lenovo currently manufactures three million PCs and laptops at Puducherry.

The announcement could also come as a morale booster to the Centre and the state government , which are trying to regain investors' confidence which took a hit after Nokia decided to suspend manufacturing at Sriperumbudur unit last year. That had resulted in 30,000 people - 50 per cent of whom women - losing their jobs.

Babu said one reason which triggered the decision was the recent change in the duty structure. Smartphones used to attract one per cent excise duty and one per cent National Calamity Contingent Duty, versus import duty of 6.5 per cent. Now the import duty has increased to 12.5 per cent, while the excise duty and NCCD remains at two per cent.

“This facility for smartphones is working out to be the cheapest in the world,” Babu added.