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Government mulls 10 pc import duty on mobile components to boost local manufacturing

Sohini Mitter
2nd Apr 2018
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India accounted for 11 percent of worldwide mobile production in 2017 compared to a mere three percent in 2014. The government's Make in India drive is bearing fruit.

In a bid to further push domestic production of smartphones, the government is said to be mulling additional duties on imported components.

The Ministry of Electronics and Information Technology (MeitY) has floated a proposal to levy a 10-percent import duty on printed circuit boards (PCBs) — which make up half the cost of a smartphone. The proposals are awaiting approvals from the finance ministry, according to a Reuters report.

If implemented, it could increase the selling price of smartphones in the coming months unless handset-makers boost local production and start assembling PCBs in India. At present, Samsung is the only major international player that assembles PCBs (which include chipsets, processors, expansion cards, and so on) locally. The rest, including Apple, continue to import them from China.

The MeiTY’s proposal not only furthers the PM’s phased manufacturing program (PMP) for the mobile phone industry, which was launched in 2016, but is also a shot in the arm for Make in India.

Recent data released by the Indian Cellular Association (ICA) indicates that ‘Make in India’ has propelled India to become the second-largest producer of mobile phones in the world. India accounted for 11 percent of worldwide mobile production in 2017 compared to a mere 3 percent in 2014. Now, it trails only China, which is leading smartphone market in the world.

The data also states that imports of devices was reduced to less than half in 2017-18, in what was a clear win for PMP and Make in India. Further duties like the one proposed now will only accelerate local production as handset-makers would look to reduce the tax burden on them.

The MeitY has, in fact, set up a special task force to oversee the local production of 500 million mobile phones by 2019. According to a Counterpoint Research report, India will consume more than $80-billion worth of mobile components until 2020.

Besides Apple, which still imports 85-90 percent of mobile components from China, most players have ramped up India production. Foxconn, the world’s leading contract manufacturer for phone-makers, is said to have acquired machinery for PCB assembling from Nokia’s erstwhile Chennai plant. Other players like Oppo, Vivo and Motorola too are building PCB-mounting facilities here.

In an earlier statement, Sudhin Mathur, MD of Motorola Mobility India, said,

“Our journey of Make in India began three years ago, and we have been manufacturing and assembling at our unit through our global contract manufacturing partner Flextronics. We have doubled up our production capacity this financial year and will continue to scale up our manufacturing capacities.”

Analysts reckon that India would gradually step up import duties across all components, thus compelling handset-manufacturers to truly make in India as opposed to just assembling phones. At present, the ratio between mobile phone assembling units and components manufacturing facilities is 2.5:1.

It will change if MeitY’s proposed import duty plan is approved.

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