Asia > Southern Asia > India > Smartphones made in India? Manufacturing ambition hits hurdles

India: Smartphones made in India? Manufacturing ambition hits hurdles

2017/10/03

India's ambitions to become a smartphone-making powerhouse are foundering over a lack of skilled labor and part suppliers along with a complex tax regime, industry executives say.

Prime Minister Narendra Modi has championed a manufacturing drive, under the slogan 'Make in India', to boost the sluggish economy and create millions of jobs. Part the headline-grabbing details was a plan to from presently on make Apple (APPL.O) iPhones in India.

Three years on, as executives and bureaucrats crowded into a Delhi convention center for an inaugural mobile congress last week, India has managed only to assemble phones from imported components.

While arrangement manufacturers such as iPhone-maker Foxconn Technology Co <2354.TW> and Flextronics Corp have set up base in India, one of the world's fastest-growing smartphone markets, almost none of the higher price chip sets, cameras and other high-end components are made domestically.

Plans for Taiwan-based Foxconn to build an electronics plant in the national of Maharashtra, which local officials said in 2015 could employ some 50,000 people, have gone quiet.

According to tech research firm Counterpoint, while phones are assembled domestically because of taxes on imported phones, locally made content in those phones is usually restricted to headphones and chargers - about 5 % of a device's cost.

"Rather than feeling that India is a place where I should be making mobile phones, it's additional like this is the place I need to(assemble) phones because there is lower business if I import components and assemble here," a senior executive with a Chinese smartphone maker said.

He declined to be named for fear of harming business.

TAX DISPUTES

Others listed the lack of skilled engineers and a sparse network of local component makers. They as well cited high-profile tax disputes between India and foreign companies such as Nokia . Nokia from presently on suspended mobile handset production at its southern India facility.

"The Nokia escapade is in people's memory at the same time as they try approaching here," a second industry source told Reuters at the initial Indian Mobile Congress in capital New Delhi, which ended on Friday.

India's nationwide sales tax (GST), which kicked in this year to replace a string of different levies, is as well fraught with its own challenges, such as a lengthy tax-refund process that delays payments to suppliers, the source added.

Last week, India rattled investors next publicly musing about possible changes in a $2.6 billion 2015 diesel locomotive arrangement with General Electric (GE.N). The government has since said it would not take any hasty decisions.

"We needed some push from the government to start manufacturing," said Neeraj Sharma, the India chief of Chinese chipmaker Spreadtrum. "It was required, because without that nothing was happening."

But India presently needs additional sophisticated technology - such as surface-mounting technology, which places components due on top of a printed board - to build a supply chain, he said. Otherwise, firms will not do research in India, Sharma said. "For design to happen, we need strong local players."

PHASED PROGRAM

The government says it has a phased program to manufacture phones, aiming to step up price added locally each year.

"While we have made a start with getting in mobile assembling, we want to move up the price chain," India's telecoms secretary Aruna Sundarajan told reporters. "A lot of investors have shown very significant interest in this area."

The Phased Manufacturing Programme began in 2016 with the manufacture of phone chargers and batteries and envisages the production of higher-end components by 2020.

Sundarajan said the government was as well trying to give investors "a reasonable degree of certainty", while as well dealing with constant disruption to the industry.

But for smartphone makers used to China's predictability, India may need to do additional, executives warn.

A third senior source at a Chinese smartphone maker in India said some Chinese players were rattled by labor unrest, inclunding suspended operations at a facility belonging to smartphone maker Oppo before this year, next a foreign employee was reported to have torn a picture of the Indian flag.

Oppo said at the time it regretted the incident.

"Labor laws are lax, there's little effort to build a component ecosystem and logistics, and transport remains a large problem," the third source said.

"No one seems to be investing in skilled labor that will build the phones

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