India may have taken the first steps to reduce its dependence on international markets to smartphones. The country has seen a reduction in smartphone imports from China. This is due to the increase in companies choosing to manufacture more devices locally. Through the Phased Manufacturing Program (PMP) and the Production Linked Incentive (PLI) schemes introduced by the government, India was able to change its requirement to bring in devices from China. Through the new initiatives, the government offers an incentive of 3 to 5% for companies that reach a defined production target.
according to one report published by CRISIL, one of the country’s leading credit rating agencies, India saw a visible benefit in manufacture devices locally. It states that there was a nearly 33% year-over-year reduction in mobile phone imports during fiscal year 2022. Imports declined primarily from China and Vietnam by nearly 37% and 21% respectively.
The study also shows that the country has seen 24-26% growth in 2022 so far in smartphone production. This is compared to a compounded growth rate of 33% between 2016 and 2021. This has been achieved despite continued lack of chips. The CRISIL study also mentions that three major players have achieved their PLI targets for fiscal year 2022.
India has also seen an immense increase in the export of budget smartphones to international markets. Device price below BRL 10,000 are in demand in many countries, such as the Netherlands, which has an annual growth rate of 108%. Big markets like the US, Hong Kong and Japan are more interested in smartphones with prices below BRL 15,000.
Growth will continue in the coming years as Apple and Samsung, two major players in the market, are expected to expand their business in India. Apple is already working on plans to start producing more devices in the country.
The report predicts that there will be a gradual decline in feature phone sales and an increase in 4G smartphone sales. While there has been growing interest in 5G smartphones, users are expected to get more compatible devices in the coming months. The launch of 5G services and festive sales offers will further increase sales.
One step at a time
While there has been a decline in smartphone imports from international markets, there has been an increase in component dependency. Internal hardware and components for many devices in Korea and the Netherlands increased by 186% and 512%, respectively.
While this is an early stage, there is scope for many other industries to produce more of these components locally. It may not run right away, but as larger companies decide to expand or diversify their production facilities in India, we can expect more relief.
This will require a large investment from companies, but one step at a time may be possible. Companies can work together to set up entire production facilities to service a country or region’s production and sales.