Leon Zhang
Three years into office, the NDA government has already initiated myriad reforms. The one area that’s proving a major challenge, however, has been job creation. Although initiatives such as Make-in-India, Skill India, Start-up India and others aim to boost employment generation and create entrepreneurial opportunities, the results are not yet apparent. But there is one segment that could tap potential demand across the country and help drive faster job creation—the smartphone industry. With India’s smartphone user base estimated to have crossed 300 million in December 2016, it is the clear number two in smartphone usage, having surpassed the US in the first half of 2016. Nonetheless, a population that exceeds 1.3 billion indicates the country has some way to go in reaching maximum smartphone penetration. Since it has 440 million millennials in a population of 1.3 billion, India is well positioned to enjoy the advantage of its demographic dividend.
Domestic manufacturing: Before the Make-in-India initiative, there were only two smartphone manufacturing factories in the country. Today, there are over 40 smartphone plants, including 15 units that manufacture components. Data from a Counterpoint Research study reveals that in the January-March 2017 quarter, about 80% of 59 million phones sold in the country were locally manufactured, evidently indicating the impact of Make-in-India. Domestic manufacturing has generated employment for about 40,000 people.
The total mobile manufacturing capacity was around 68 million units in 2014, rising to 100 million in 2015 and 400 million the following year. By 2020, the government’s manufacturing target is 500 million devices. As aspirations and salaries rise among the millennials, an increasing number of them are switching from feature phones to smartphones. Consequently, most major smartphone makers are keen on having a manufacturing and marketing presence in India, including top companies from China. Studies have highlighted the link between greater mobile penetration and higher GDP growth.
India’s mobile phone industry contributed to 6.5% of its GDP in 2015 (amounting to $140 billion or more than Rs 9 lakh crore) according to The Mobile Economy, India 2016-GSMA Intelligence Report. In other words, this denotes direct employment for about 2.2 million people in the organised as well as unorganised sectors, while around 1.8 million employment opportunities will be indirectly supported. Most of this will benefit millennials and be supported by them. By 2020, it is expected that the industry will contribute around 8.2% to India’s GDP, adding another 800,000 jobs.
Promoting design and innovation: As per a joint study by IIM Bangalore and Counterpoint Research, during the five-year period 2016-21, almost a billion smartphones will be sold in India. This would consume $80 billion worth of mobile components by 2021. The immense opportunities for mobile phone manufacturers to produce domestically and reduce the nation’s reliance on imports can well be imagined. An emphasis on domestic smartphone manufacturing will also propel India into the domain of technological leadership rather than continuing the me-too practice of simply assembling high-end components and devices. Ambitious targets in this sphere would also ensure the country crosses the 500-million mark of smartphone users.
In this connection, India could take a cue from China, which already enjoys pole position as a global telecom manufacturing hub. Despite notions to the contrary, some Chinese companies are raising the quality benchmarks in mobile hardware and software. One company has gone as far as launching a customised Android operating system known as Flyme that is even more intuitive, refined, powerful and reliable, wholly customised as per customer preferences.
In fact, our latest smartphone also has a self-developed artificial intelligence system service, One Mind, which is able to adjust system performance according to user preference. Partnerships and investments from Chinese companies in India are bound to boost the country’s proficiency in smartphone manufacturing. In this manner, an enabling ecosystem for domestic manufacturing could be created, which would lead to rising employment and entrepreneurial opportunities. If India continues to focus on proper infrastructure development, a supportive tariff regime, strong skills development and robust design knowledge, it has the opportunity to emerge as a major global hub in smartphone manufacturing.
The author is South Asia Head, Meizu India. Views are personal