Samsung India’s plans to double its mobile phone production in India to 120 million units by 2020 — 30% of these will be exported — gave Prime Minister Narendra Modi’s ‘Make in India’ a decisive push.
Samsung India’s plans to double its mobile phone production in India to 120 million units by 2020 — 30% of these will be exported — gave Prime Minister Narendra Modi’s ‘Make in India’ a decisive push. The new facility, the largest in the world, was jointly inaugurated by Modi and Korean President Moon Jae-in in Noida, Uttar Pradesh. Uttar Pradesh chief minister Yogi Adityanath and commerce and industry minister Suresh Prabhu were also present. At the inauguration, Modi said 4 lakh jobs had been created as the number of factories making mobile phones increased. “Today is an important day in making India a global hub of manufacturing,” PTI reported him as saying, adding that the investments in such factories are a cornerstone of India’s economic and commercial engagements with countries like South Korea. Fifty of the mobile phone manufacturing plants, Modi said, were in Noida alone.
While the number of mobile manufacturing plants in India is up from just two in 2014 to 123, and the output up from 48 million phones to a likely 279 million — from 19% in 2014, Made-in-India mobiles will rise to 90% by the end of 2018 — domestic value-addition has been quite poor. Imports of mobile phones were down from 205 million in 2014 to 77 million in 2017, but the import bill shot up from $8.8 billion in 2014 to a likely $13.3 billion in 2018 as imports of components rose from $1.4 billion in 2014 to a likely $11.4 billion in 2018. Domestic value-addition rose from a mere 3.6% in 2014 to a little over 10% in 2017 (see graphic).
Samsung, however, has the highest value-addition of all mobile phone manufacturers and is the only firm that has been ‘populating’ printed circuit boards (PCBs) right from its inception. To that extent, it is aligned with the government’s phased manufacturing programme (PMP) goals. Last year in June, Samsung had announced an investment of `4,915 crore to add new capacity at the Noida plant. While India had a good PMP plan, this got disrupted when the goods and services tax came in since differential excise/CVD for local production and imports were no longer possible.
The government, however, came up with a new PMP with targeted value-addition rising to 33% in FY20 once the PCB assembly (PCBA) was locally produced. The PCBA comprises more than half the value of the phone, but not too much of it can be made locally. But, including the design, some antennae and ‘surface mounting’ of components on the PCB can ensure 20-25% of the PCBA’s value can be captured locally.
Raising the import duty on mobile phones to 20% in the last Budget hit this plan since semi-knocked down imports once again became cheaper. Fortunately, the government imposed a 10% import duty on PCBs in April, once again giving an impetus to firms wanting to do more domestic value addition.