Is Noida the new favourite hub for mobile phone manufacturers? 

Noida is fast becoming a hub for phone makers for manufacturing phones and accessories. Close to 30 per cent of the 70 mobile phone makers that have opened shops in the last two years in India have a presence in Noida -

Noida is back into the limelight with the opening of the new manufacturing hub by Samsung which also happens to be the largest in the world for the company. The region has been projected and promoted of late as an electronics manufacturing hub and the new facility set up by the South Korean giant further bolsters this claim. 

Going by the latest trends, Noida is fast becoming a hub for phone makers for manufacturing phones and accessories. Close to30 per cent of the 70 mobile phone makers that have opened shops in the last two years in India have a presence in Noida.

The reasons could be many. First is Noida’s proximity to Delhi, which makes the place easily accessible from the capital city for manufacturers to fly in their imported components. Second, seven out of ten companies have their head offices in Delhi NCR which becomes an added advantage for the vendors for transit, distribution and warehousing. Third, the region boasts of skilled manpower, which is another plus for manufacturing vendors. Fourth, because of big vendors like LG, Samsung and Nokia having opened their shops already, Noida has a strong component ecosystem in place. 

The region thus has the potential to grow according to manufacturers, with a lot of localisation taking place in future. 

According to Aruna Sundararajan, secretary, ministry of electronics and information and technology, mobile manufacturing today takes place in three to four places in the country - Tirupati in Andhra Pradesh, Sriperumbudur in Tamil Nadu, Maharashtra, Noida and Greater Noida.

India – an emerging manufacturing hub…

Besides being the fastest growing smartphone market in the world (it is expected to be the largest by 2020), India also enjoys the privilege of becoming the second largest mobile phone producer globally. 

According to data shared by the Indian Cellular Association (ICA), India is now the second largest mobile phone producer in the world after China. This has been further corroborated by Prime Minister Narendra Modi in his speech he gave during the opening of the Samsung facility in Noida. 

According to the data (that was available from market research firm IHS, China's National Bureau of Statistics and Vietnam General Statistics Office), around 225 million mobile phones have been produced in the country as of 2017 with a value of Rs 1.32 trillion. This feat has thus placed India in the second position, replacing Vietnam in 2017. The rise in mobile phone production also led to the decrease in the imports of the devices into the country by less than half in 2017-18.

The rough 70 units that have started assembling handsets in the country in the last two years have generated 36,700 jobs both directly and indirectly, according to official data. This brings the cumulative capacity of these units to about 20 million phones per month.

The fast track task Force, a body formed under the Ministry of Electronics and IT that has members from the industry and government,has set the target to achieve around 500 million mobile phone production in India by 2019, with value estimated to be around USD 46 billion.It has also set forththe target to create component manufacturing worth USD 8 billion and in the process create 1.5 million direct and indirect jobs by the same year.

Thus India has two years in hand to meet the ambitious target, having reached the 225 million mark already. 

So what is it that is boosting this sudden spurt in mobile manufacturing?

Manufacturers claim that the ‘Make in India’ as also the Digital India initiatives have given a major boost to the manufacturing eco-system in the country. 

The Make in India line-up is long and impressive, led by the big names in the international mobile devices industry - 
•    Taiwanese contract manufacturer Foxconn has committed Rs 326.46 billion in a mega unit in Maharashtra
•    Wistron is mulling a Rs 65.29 billion investment to set up a plant in Bengaluru
•    Xiaomi is investing Rs 32.64 billion and has just roped in over 50 vendors who could bring in over Rs 163.23 billion to the table in a few years
•    Oppo too has a multi-billion plan for a second plant 
•    Gionee wants to kick-start manufacturing with an ambitious investment
•    Samsung has announced mega investments, too, besides the one in Noida
•    Domestic players such as Spice and Lava are also chipping in to support the Make in India scheme.

In a nutshell, some 120-odd mobile devices and component manufacturers have committed over Rs 450-billion investments to manufacture in India.

According to ICA, the total capital investment by device and component players by the end of 2018 under the phased manufacturing programme (PMP) is expected to hit Rs 57 billion, with a bulk of it likely to come this year. As of 2017, their total investment was around Rs 21 billion.

However, since many manufacturers are planning only to shift their equipment and lines from China and South Korea, and there would beno new machinery put in, the investments entailed will not be that high. At present, investments have been made to primarily set up assembly lines and components, including battery packs, chargers, wired headsets or keypads. Manufacturers have also put in an additional Rs 50 billion as working capital, mainly to buy components for assembling phones.

The government, on its part has promised to support the manufacturers through its PMP – Phased Manufacturing Programmethat kicked off in 2015.The Phased Manufacturing Programme notified by government includes the roadmap for duty or tax intervention for locally-produced components that are used in mobile devices in a phased manner. The move is in line with the government's target to have zero import of electronics by 2020 under its Digital India programme.

As per ICA, manufacturers have committed to meeting their yearly target for net value addition in mobile devices which was earmarked under the government’s PMP. In smartphones, the current net value addition in the industry is 11 per cent, against the 2017 target of 14.7 per cent. Mobile players are expecting the value addition in smartphones to rise dramatically to at least 18 per cent this year.The total net value addition targeted for smartphones is around 40 per cent by 2020. The story is similar in feature phones too — net value addition is at 21 per cent, though the target was over 25 per cent.

Going ahead…

Although the critical components are still flown in from China and Taiwan, the assembling of the devices and meeting the net value addition can still be seen as a significant start for the industry. The PMP strategy has further helped in pushing companies to at least move towards manufacturing from direct imports. In 2014-15, imports as a percentage of domestic production were at 78 per cent, but they have dropped to 18 per cent in 2017-18. PMP as well as a hike in import duties on mobile devices have contributed to this, analysts said.

However the need of the hour is to develop a component ecosystem for India to become a mobile manufacturing hub. This also means that there should be more design centres built in the country in order to attract component makers like Qualcomm. 

Mobile handset manufacturers are also taking steps to scale up their manufacturing operations either on their own or with contract manufacturers in the country. Nokia, for instance, has already started manufacturing smartphones in India. It produces about 12 models in the country. According to an official in Nokia, the company is already in talks with Foxconn to manufacture device components in India.

IT minister Ravi Shankar Prasad in support of manufacturing said that more initiatives are in the pipeline to boost the Electronics manufacturing in the country. Electronic manufacturing is also a major focus of the government as part of the `Make in India' initiative. 

Samrita Baruah
samrita@varindia.com