Despite mega announcements, Made in India mobile handsets still a promise

The Make in India line-up is long and impressive, led by the big boys in the international mobile devices industry. 

Taiwanese contract manufacturer Foxconn has committed Rs 326.46 billion in a mega unit in Maharashtra. Rival Wistron is mulling a Rs 65.29 billion investment to set up a plant in Bengaluru. 

Chinese and South Korean players are catching up too — Xiaomi is investing Rs 32.64 billion and has just roped in over 50 vendors who could bring in over Rs 163.23 billion to the table in a few years. 

Oppo has a multi-billion plan for a second plant and Gionee wants to kick-start manufacturing with an ambitious investment. Samsung has announced mega investments, too, for a new mobile plant. 

Domestic players such as Spice and Lava are also chipping in to support Prime Minister Narendra Modi’s signature Make in India scheme. 

On last count, some 120-odd mobile devices and component manufacturers have committed over Rs 450-billion investment to manufacture in India. 

The investment on the ground, however, is not that gung-ho. Not yet. 

According to the Indian Cellular Association (ICA), the body for mobile device manufacturers, the total capital investment by device and component players by the end of 2018 under the phased manufacturing programme (PMP) is expected to hit Rs 57 billion with a bulk of it likely to come this year. 

As of last year, their total investment was around Rs 21 billion. 

But, the fresh investment which is expected to come (over Rs 35 billion this year), may also fall far short of the target as many manufacturers are planning only to shift their equipment and lines from China and South Korea. 

They are unlikely to put in new machinery, which would have entailed higher investments. 

So far, investments have been made to primarily set up assembly lines and components, including battery packs, chargers, wired headsets or keypads. 

Manufacturers have, however, also put in an additional Rs 50 billion as working capital, mainly to buy components for assembling phones. 

The government target is steep. By 2019, it wants 500 million handsets valued at $46 billion (Rs 3 trillion) to be manufactured in India. Also, that should generate as many as 1.5 million jobs. 

Around 225 million mobile phones have been produced in the country as of 2017 with a value of Rs 1.32 trillion. 

It has two years to meet the ambitious target. 

Manufacturers have also slipped in meeting their yearly target for net value addition in mobile devices which were earmarked under the government’s PMP, which kicked off in 2015. In smartphones, the current net value addition for most in the industry is 11 per cent, against the 2017 target of 14.7 per cent, according to ICA. The total net value addition targeted for smartphones is around 40 per cent by 2020. The story is similar in feature phones too — net value addition is at 21 per cent, though the target was over 25 per cent. 

However, the PMP has helped in nudging companies to at least move towards manufacturing from direct imports. In 2014-15, imports as a percentage of domestic production were at 78 per cent, but they have dropped to 18 per cent in 2017-18. PMP as well as a hike in import duties on mobile devices have contributed to this, analysts said. 

Mobile players are expecting the value addition in smartphones to rise dramatically to at least 18 per cent this year. 

Pankaj Mohindroo, president of the ICA, is hopeful. In the next two years, there would be massive investments in components, he said.

“This year, printed circuit board assembly will be done in India under the PMP and that will lead to a major value addition,” he said. Also, he pointed out that as many as 450,000 jobs have already been created by the industry. 

Mobile handset manufacturers are also taking steps to scale up their manufacturing operations either on their own or with contract manufacturers in the country. Nokia, for instance, has already started manufacturing smartphones in India. It produces about 12 models in the country. A Nokia spokesperson said, “We will be following a PMP from 2018 onwards in India." The company is already in talks with Foxconn to manufacture device components in India, he added. Amitabh Khurana, head of manufacturing at Intex Technologies, which has ambitious plans to produce mobile handsets in Uttar Pradesh, said the company was focused on PMP.