Most of smartphones are now assembled in India

Handset makers have doubled their imports of semi-knocked down (SKD) mobile phone units into India, signalling a big take-off of cellphone assembling in the country. According to data from Cybex Exim Solutions, shared exclusively with ET, top handset makers such as Samsung and Micromax imported 6.9 million SKD mobile phone units in June, more than double the 3.4 million units of imports in the same month a year ago.

In the quarter to June, import of SKD units jumped 64% year-on-year to 18.14 million, while sequentially, SKD shipments soared 55%. A majority of these units were smartphones. The jump in imports was triggered mainly by the government’s decision to change the import duty structure, which made the assembling of phones in India cheaper than importing them.

Imported SKD units are assembled into fully working units in local factories. Assembling is considered the first step towards complete local manufacturing, a desire expressed by most of the top handset vendors such as Xiaomi, Micromax, Lava, Intex, Sony, LG, HTC and Asus.

Market leader Samsung has also talked about expanding its current production capacity, besides setting up a new factory.

“We are dedicated to strengthening our manufacturing infrastructure and we will continue to manufacture India-inspired creations to meet the growing domestic demand for mobile handsets,” a Samsung India spokesperson said.

SKD imports of the South Korean company, which now assembles all of its locally-sold phones at its Noida plant, crossed 4.2 million units last month. It has been importing on an average 3.4 million SKD mobile phone units a month.

Imports of SKD units by Micromax, India’s No 2 handset player, have surged 10 times over the last year. “Local manufacturing makes us stronger as a brand in competition without doubt,” Micromax chief executive officer Vineet Taneja said. “I feel a lot more confident today because we’re able to deliver with great efficiency and speed and better prices than before.” According to data, the company assembled more than 1 million smartphones in June.

Foxconn, the world’s largest contract manufacturer, sees a huge opportunity in India following the changes in the import duty structure. The company, famous for making Apple iPhones and iPads, plans to invest over $2 billion in setting up 10-12 factories for manufacturing smartphones and consumer electronics by 2020.

“Local manufacturing makes a significant impact on bottom line and to remain aggressive in the competitive market,” said Gartner’s research director Anshul Gupta. “In a highly competitive market with low margins, difference in import duty warrants for local manufacturing.”

Intex, Lava and Karbonn, which were mainly importing all their products, are increasing local assembly by the month. Intex has increased production by four times since it started local assembly in November 2014.

“The duty differential of 11.5% as compared to the vendors who are importing their finished product from outside India gives vendors having assembly operations in India a cost advantage of a few hundred rupees over other vendors on a single handset,” said Counterpoint Research’s senior analyst Tarun Pathak.