Micromax to start assembling phones in India

Written by ENS Economic Bureau | New Delhi | Updated: Nov 14 2013, 15:01pm hrs
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Homegrown handset maker Micromax plans to start assembling phones locally by early next year, marking a shift in its current strategy of importing devices from China, where it has tie ups with manufacturers such as Foxconn.

The company has a plant in Rudrapur in Uttarakhand that employs around 400 people, where it has already started assembling of phones. Micromax, which had a turnover of around Rs 3,200 crore at the end of last fiscal, is learnt to be aiming to start domestic manufacturing at a substantial scale by the first quarter of FY15. It is also trying to position itself as a global brand, planning to enter Russia by December and Romania in the first quarter of next year. Company co-founder Rahul Sharma has told PTI they aim to touch $1 billion turnover (Rs 6,000 crore) by next financial year.

Some of the incentives to switch from China come from supportive India government steps. By FY17, equipment makers must source at least 45 per cent of their value addition from within India.

Although the government has eased up on a preferential market access requirement that aimed to give advantage to local firms in supply to government departments after protests from American companies, the telecom department plans to provide an incentive equivalent to 30 per cent of the sale value of a local manufacturer from a Rs 10,000-crore Telecom Manufacturing Promotion Fund.

According to industry insiders, apart from Micromax, many other Indian manufacturers had put off their plans to shift production here from China after having burnt a lot of money due to the fluctuating dollar. Now, with the rupee stabilising, they were once again looking at the option of moving manufacturing to India. Another trigger for the move could be the fact that some of the original design manufacturers (ODMs) which were making the phones for Indian companies are now fancying the chances of entering the country with their own brands. One such, player is Gionee, which has been making strong strides since it launched its smartphones in India earlier this year.

Sanjay Kumar Kalirona, business head, Mobile, Intex Technologies said he was aware of Micromax looking at setting up manufacturing within the country. Most top Indian manufacturer are exploring this option. We are also in the process of setting up manufacturing for one or two models in our existing factory, he said. Kalirona said that in the long run all manufacturers will want to take this route. Dollar fluctuations, high import cost along with the need to be self dependent in manufacturing were the triggers for this move, he added.

According to research firm IDC, Micromax has already emerged as the second-largest smartphone brand in India with a 22 per cent market share (April-June 2013), marginally lower than Samsungs 26 per cent. Micromax is followed by Karbonn, another domestic brand, with a 13 per cent share. While global firms such as Nokia and Sony have 5 per cent share each, Apple, along with other homegrown firms such as Intex, Zen and Lava, make up for the rest. Micromax is also second-largest in neighbouring Bangladesh and third in Sri Lanka, besides having a strong presence in Nepal.

However, at least initially, all production in India will basically be assembly of the final product. This is because unlike China, there is still no robust ecosystem to provide the rest of the components for a phone.