How India Plans to Dominate the Smartphone Industry

How India Plans to Dominate the Smartphone Industry

India is planning to build a competitive smartphone supply chain to overtake china. The technical and logistical feat is being put to the test whether India can become the world’s next smartphone superpower.

Before the trade war, India ranked third behind Vietnam and China when it came to the global production of mobile phones. With increasing trade tensions India is now in second place and starting to chip away at China’s market share. The trade war has pushed foreign tech companies to relocate part of their production outside of China. India wants to be their next best option. The number of smartphone users worldwide from 2016-2021 shows an upward trend. 

Even though the smartphone penetration rate is still lower than 70%, the consumers reside in many highly populated countries, in particular China and India. Thus, the industry has high growth potential. A report published by Statista also shows the Volume of smartphone shipments across India from 2010 to 2019.

As smartphones continue to become an integral part of everyday life, flag-ship products from domestic as well as foreign manufacturers in the mid-tier range, packed with powerful features for a reasonable price are expected to make a huge impact in the coming years.

The number of smartphone users in India was estimated to increase to about 442 million in 2022.  But India isn’t starting from scratch. The smartphone industry went through a downturn in the previous decade as cheaper Chinese products flooded the country. Now the industry is dusting off their design skills and ramping up its manufacturing capabilities to get back in the game.

On top of that, the US$ 5 trillion economical dreams of the government are also adding an incentive to push tech companies to grow their business in the country. Therefore, it’s offering to pay them up to 6% of the value to the additional mobile phones they sell each year. Smartphones sourced from India with the government’s help to expect favourable outcomes.

For India to achieve its goal of becoming the world’ smartphone leader it’s going to have to deal with the problems at home first. Smartphones are one such commodity of everyday use. India is planning to make the ecosystem much better domestically as well as internationally. Its focus remains on catering to the global market and becoming a dominant player.

The Indian customs officials started to manually check tech components imported from China and ended up stopping production for months. This shortage of parts along with the impact of the coronavirus pandemic covid-19 has had a significant effect in the whole supply chain. The procurement of components became extremely difficult. 

The government simplified taxation and labour regulations which in turn encouraged infrastructure development. This further made it significantly easier for foreign companies to invest in India. It has also introduced the so-called Phased Manufacturing Programme, which is a step by step plan to incentivize phone makers to bring their manufacturing to India.

Case study

Micromax- The Indian tech and appliances company Micromax is pivoting to smartphones because of politics and geopolitical situation, especially between the U.S and China.

Indian smartphone industry since the start of the trade war makes it impossible for a company like Micromax to source a majority of the components locally at the moment. This is because India’s tech industry as a whole still has a long way to go. The value added by the components which are sourced locally is at 12% annually. Certain components and manufacturers require an extremely sophisticated infrastructure and robust policy framework. 

While the country can produce simple components like battery chargers or the exterior of phones, it hasn’t yet tackled the challenge of building a domestic and robust supply chain for more sophisticated technology like LCD screens or memory chips. As a consequence, the majority of these components are still coming from China. The raw material that goes into the batteries produced in factories, china controls the global supply for lithium.

But changes have been put in motion. India has already signed agreements with Australia and Bolivia to tap their large lithium reserves but until India can fully peel away from Chinese suppliers its smartphone ambitions are under threat. 

Back in 2014, over 2/3rds of the phones in the country were sold by Indian brands like Micromax, Karbonn, Intex and Lava, and that same year, Micromax actually managed to outsell Samsung or the first time and briefly became the largest mobile brand in India. 

This explosive domestic success didn’t last very long though, as just a year later, Samsung re-claimed the throne, and Chinese brands like Xiaomi, OPPO and Vivo started entering the market. Turns out, the Indian brands didn’t stand a chance against this new onslaught, as their whole strategy was just to buy ready-made phones from second or third-tier manufacturers in China, stick their logos on them and sell them to customers in India.

The revival 

So now, Instead of Indian companies selling phones made in China, it’s the other way around. The Chinese (and Korean) companies are selling phones made and to some extent developed in India. That’s still far from India having its own Samsung or Xiaomi, but it is a significant revival of the industry.

In their frenzy to out-spend and out-compete each other, these foreign companies quickly realized that to win in India, they needed to invest more and more locally. Samsung, OPPO, Xiaomi and Huawei now all have local R&D facilities in India, even if they are somewhat small, and all major brands now assemble the majority of their phones sold in India domestically. These phones, while assembled in India, still use components that are mostly imported, but that’s a major step forward nonetheless.

Smartphones are rolling out what is called “made in India” phones. This speedy buildup in India’s smartphone production capacity has caught the attention of various tech giants. The South Korean-based mobile phone company, Samsung, has opened the world’s biggest mobile manufacturing plant in Noida, INDIA. It also closed all its manufacturing facilities in China by the end of 2019. Even apple’s supplier Foxconn is now producing iPhones in India.

Takeaway

The smartphone market across the south Asian country is likely to prosper in the future. With the foundation of trailblazing technology, stunning features and designs, the new evolved smartphones will presumably catch the eye of the burgeoning middle class India went from being a complete import-driven phone economy to having a reasonably large manufacturing sector, and there are no signs of a slow-down.