CHENNAI: While the government has been facing some criticism for lack of progress in the Make in India initiative, in the mobile manufacturing sector at least, the numbers seem to back steady growth.
According to data from Counterpoint Research, more than 80 per cent of smartphones sold in India during January to March 2017 were manufactured in the country, up from around 30 per cent in 2013 and 65 per cent in 2016.
Experts say that while the industry has only barely managed to bridge the gap left by the exit of Nokia from its Chennai manufacturing plant in 2014, the growth in India-made products has been driven primarily by government policy.
“The government brought in differential duty systems for the segment, making imports of fully built mobile phones costly for foreign manufacturers,” said Neil Shah, co-founder, Counterpoint. “Most of them set up assembly plants here, because most OEMs’ margins are small.”
“When you can effect a difference of more than 10 per cent (between import duty and excise duty) by just setting up an assembly line in India, you take it. But there have been unintended consequences,” said a senior industry source. One of them has been the huge disparity in local value addition.
While in countries like China, local value addition stands at as high as 70 per cent, and even Vietnam boasts 30 per cent, India’s local value addition is just six per cent.
“Three per cent of that is labour and infrastructure. This is because most companies who have facilities only assemble imported semi-knocked down units. There is virtually no high value addition,” pointed out Shah.