India to become handset component hub

India is on track to manufacture $80 billion worth of mobile phone components over the next five years, new research suggests.

This will help India become a global manufacturing hub, the study conducted by IIM Bangalore and market research firm Counterpoint Research has revealed.

This presents a significant opportunity from the domestic demand perspective to manufacture mobile phones in the country and source local components, driving the government’s Make in India initiative and reduce dependency on imports.

“India can potentially be the world leader in mobile phone manufacturing ecosystem and this has to be done in a phased manner,” said Aruna Sundararajan, secretary, ministry of electronics and IT, government of India, at an event here where the study findings were released.

India has beaten the US to become the second largest global smartphone market in terms of users in early 2016 and is on track to cross half a billion smartphone users mark within the next five years.

The contribution of domestically manufactured mobile phones has increased from 14% in 2014 to 67% in 2016 and is further estimated to reach 96% by 2020. However, 67% of the handsets manufactured in India contribute to just six per cent of the true local value addition with most of the OEMs still importing Semi Knocked Down components (SKDs).

“Out of 50 facilities from original equipment manufacturers to original design manufacturers and electronics manufacturing services to component suppliers involved in manufacturing of mobile phones in India, almost three-fourth are Indian manufacturers, followed by Taiwanese with 10% and Chinese with 10 %,” the study revealed.

“Under the proposed plan, we estimate that more than $15 billion worth components will be sourced locally over the period of five years through 2020 creating over a million direct and indirect jobs in India.”