Weak demand leaves half of India's mobile manufacturing facilities idle

While mobile phone production capacity reached over 500 million units by the end of 2024, India only produced around 250 million, primarily iPhones for export

Nearly half of India’s mobile phone manufacturing capacity, established under the government’s production-linked incentive (PLI) scheme, is currently underutilised or repurposed due to declining global and domestic demand. Industry executives and market analysts attribute this underutilisation to shrinking demand for feature phones and entry-level smartphones, according to a report by The Economic Times.

 

Data from research firm Counterpoint Research shows that India’s mobile phone production capacity reached over 500 million units by the end of 2024. Meanwhile, the Electronic Industries Association of India (ELCINA) has estimated a slightly lower range of 400-420 million units. However, actual production remains around 250 million units annually, with 200 million catering to the domestic market and the rest, primarily iPhones, being exported, the report states.

   

PLI-eligible manufacturers like Dixon Technologies, Samsung Electronics, Tata Electronics, and Hon Hai (Foxconn) are driving production. Smaller players such as Lava International, Karbonn, and Micromax have struggled to meet targets, with many shifting to producing telecom equipment and wearables or shutting operations.

 

Decline in demand

But what is the reason for this underutilisation? A slowdown in demand post-Covid may explain recent trends. 

 

The underutilisation trend has been pronounced since 2022, following a drop in post-Covid pent-up demand. Feature phone shipments declined by 14 per cent year-on-year in the third quarter of financial year 2024-25, with a sharp 46 per cent drop in 4G feature phones, according to research firm CMR. Smartphone shipments have remained flat, with only 1 per cent growth in 2023 after a 10 per cent decline in 2022.

 

Global demand surge expected in 2025

Despite current challenges, industry analysts view the underutilised capacity as a potential advantage for future growth. A global demand surge anticipated from 2025 could improve utilisation rates. Since the introduction of the PLI scheme, India’s smartphone production capacity has grown by 35 per cent, driven by significant investments exceeding government targets. iPhone manufacturers like Foxconn have been pivotal, with the industry investing Rs 9,100 crore against a target of Rs 7,000 crore.

 

Only iPhone suppliers have expanded capacities recently, with Foxconn, Tata Electronics, and Pegatron leading the way. Companies like Dixon have increased their capacity through acquisitions. High-capacity utilisation rates are seen in PLI-eligible exporters, with companies like Dixon Technologies and Foxconn achieving over 60 per cent utilisation and planning further expansions to meet growing export demand.

 

While India’s mobile phone manufacturing sector currently faces challenges due to weak demand, the existing underutilised capacity and ongoing investments position it for future growth, particularly with an expected increase in global demand from 2025.