From Apple to Oppo: Smartphone makers jump to manufacturing bandwagon in India

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Updated: February 26, 2017 5:09:58 AM

OVER TWO years after Prime Minister Narendra Modi launched the central government’s ambitious ‘Make in India’ initiative, the one sector that seems to have given it a huge boost is electronics, particularly smartphone-makers, which have started, or are...

‘The year 2016 was a watershed one for the smartphone market as far as Make in India is concerned. ‘

OVER TWO years after Prime Minister Narendra Modi launched the central government’s ambitious ‘Make in India’ initiative, the one sector that seems to have given it a huge boost is electronics, particularly smartphone-makers, which have started, or are planning, to manufacture some or all of their products in the country. From established American and Japanese tech majors to relatively new Chinese players, almost every other entity seems to be jumping on to the manufacturing bandwagon in India, indicating how important the country has become for the global smartphone market.

Reports recently confirmed that Apple will start making its iPhone SE model at a plant in Bengaluru—being set up by its contract manufacturer Wistron—as the US-based tech giant eyes a bigger share of the market amid slowing global smartphone growth. Once operational, it will make India only the third country globally where Apple assembles its iconic iPhone handsets.

As per industry observers, by starting local assembly and gradually scaling it up to full manufacturing, Apple will be able to price its products competitively and corner a bigger portion of the market, where up to 80% of handsets are sold in the sub-R10,000 segment. Currently, most of Apple’s new products are priced over R50,000—even the iPhone SE, launched in April 2016 and widely anticipated to be aimed at emerging markets, had a price tag of R39,000 for the basic model. The higher pricing, as per reports, has led to Apple falling way short of its target of selling 10 million mobile phones in India by 2016-17, say reports.

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A few days earlier, news came out that Canadian mobile-maker BlackBerry has announced a partnership with Optiemus, a New Delhi-based telecom enterprise, to license software and services for the production of secure Android handsets in India, Sri Lanka, Nepal and Bangladesh. As per reports, Optiemus will design, manufacture, sell, promote and provide customer support for BlackBerry-branded mobile devices in the region.

Centre of attraction

Clearly, India is becoming a manufacturing hub for cellphone-makers, a territory marked for China not too long ago. “With several brands—international and Indian—establishing their production units in India, the country is gradually growing to become a hotspot. There are several reasons for this: huge demand for smartphones in the Indian market, better opportunity for brands owing to development of the Indian economy and infrastructure, and the availability of skilled and experienced manpower in the country,” explains Sky Li, vice-president, Oppo. Li is also managing director, international mobile business, and president of Oppo India.

Besides its existing facility at Greater Noida, Oppo is also planning a 1,000-acre industrial park with an investment of over R1,400 crore also in Greater Noida. Part of a long-term plan, operations at this park are expected to begin in the next two-three years. “A lot of initiatives have been taken by the government from time to time to attract high-end manufacturing. These initiatives are focused around enabling the entire ecosystem and translate into savings for capital investment, as well as operating expenses. And this has attracted foreign players to look upon India as a manufacturing base,” says Faisal Kawoosa, principal analyst, industry intelligence group, CyberMedia Research (CMR), a market research firm.

Making in India

As per a recent report by market analytics firm Counterpoint Research, India surpassed the US to become the second-largest global smartphone market in terms of users in early 2016 and is on track to cross the half-a-billion smartphone users mark within the next five years. “In this five-year period, close to a billion smartphones—together with almost half-a-billion feature phones—that will be sold in India will consume more than $80 billion worth of components. This offers a huge opportunity to manufacture mobile phones in India and source components locally,” the report says.

The year 2016 was a watershed one for the smartphone market as far as Make in India is concerned. In September, Chinese smartphone-maker Huawei announced that it will start manufacturing smartphones in India in partnership with the US-based company Flextronics—as per reports, Flextronics’ manufacturing plant in Chennai will have the capacity to make three million units by the end of 2017.

The September announcement by Huawei was close on the heels of another Chinese company, LeEco, setting up a manufacturing facility in Greater Noida. Spread over 2,00,000-sq-ft with the capacity to produce nearly 60,000 phones per month initially, the state-of-the-art manufacturing unit of LeEco employs over 200 professionals currently. As per reports, the facility was set up with an investment of $5 million. Another $2 million is being invested for the automation process.

Several other Chinese companies are also in the line. Xiaomi partnered with Taiwanese firm Foxconn in August 2015 to set up local assembly of its phones in the country—it assembles devices like Redmi 2 and Redmi Note in India. Today, Xiaomi manufactures 75% of all the smartphones it sells in India.

Gionee, too, manufactures a majority of its devices—up to 60%, as per reports—sold in India at facilities run by Foxconn in Tamil Nadu and Indian electronic system design and manufacturing company Dixon in Noida. It also signed an agreement with the Haryana government last year for setting up a manufacturing unit in the state, entailing an initial investment of R500 crore. The unit will be set up over 50 acres in Faridabad and will provide employment to over 28,000 people in the next three years, Gionee said in a statement. With an annual capacity of close to 30 million units, Gionee plans to manufacture around six lakh mobiles per month from this facility and use it as an export hub in the future, it added.

Real ‘value addition’

Oppo—which not too long ago edged out Apple and Samsung to become the number one smartphone brand in China—recently announced that it will begin operations at its brand-new ‘SMT’ facility in Greater Noida later in 2017. SMT, or surface mount technology, produces the printed circuit boards of an electronic device on which various circuits are embedded that allow the basic functioning of the device. At present, most companies, except Samsung, assemble phones from semi-knocked down (SKD) mobile phone modules or kits. SMT is part of the completely knocked down (CKD) phase of assembling, wherein a handset-maker imports individual components in a CKD form and assembles them in India. This takes manufacturing a step up from SKD.

The Make in India initiative, however, has been successful in driving only some ‘indigenisation’ of mobile phone assembly. True local value addition will happen only when companies start local sourcing of mobile phone components, as well as sub-components, in addition to local assembly of mobile phones. “It’s critical for Make in India to transform the current manual SKD-level assembly into a large-scale manufacturing ecosystem over the next few years,” says Neil Shah, research director, Counterpoint Research. “There is hardly any incentive or effort to meaningfully invest in research, design and development or advanced SMT-led printed circuit board manufacturing currently,” says Shah.

Need for bigger push

As per estimates by CMR, of the 270 million mobile handsets to be shipped in 2017,

200 million will be made out of India. “We estimate that the government earns over R600 per handset by way of various taxes and, as provisioned in the recently-announced Budget, R750 crore will be given as incentive for electronics manufacturing in India. Predominantly, nearly 70% of this will go in for mobiles, as per the prevalent trend,” says Kawoosa of CMR.

Considering the potential of the mobile handset industry, this incentive could have been more exciting, says Kawoosa. “It’s a great indicator. However, looking at the great success that mobile phones have exhibited in a very short span of time in India, an extra-mile effort would have been the icing on the cake,” he says.

Figure it out

83m: The number of smartphones that were made in India in 2016

200m: The projected number of smartphones that will be made out of India in 2017

Global Hub

Apple to start manufacturing iPhone in Bengaluru this year

BlackBerry to design, manufacture, sell, promote and provide customer support for its mobile devices in India in partnership with

New Delhi-based Optiemus Huawei to manufacture smartphones in India in partnership with US-based Flextronics at its plant in Chennai

LeEco has set up a manufacturing facility in Greater Noida

Xiaomi manufactures 75% of all smartphones it sells in India locally

Gionee manufactures a majority of its devices—up to 60%, as per reports—sold in the country in Tamil Nadu and Noida

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