Mobile phone production in India continues gaining expansion momentum, as global handset supply chain players are gathering there setting up manufacturing operations to better tap tremendous business opportunities in the populous country, further consolidating India's position as a new global mobile phone production hub.

China smartphone vendor Xiaomi has joined forces with its supply chain partners to set up plants in India since the beginning of 2018, and kicked off construction of a printed circuit board (PCB) manufacturing plant there in April in cooperation with Foxconn.

Samsung Electronics has completed capacity expansion at its smartphone plant in Nodia, northern India, in July, seeking to boost its annual production to 120 million units by 2020 from existing 67 million.

The Foxconn Group has also secured a spacious land area in the Jawaharlal Nehru Port Trust (JNPT) Special Economic Zone in central India state of Maharashtra for the construction of a major smartphone plant.

India as future smartphone export hub

The India government has positioned Foxconn's plant in Maharashtra as an export base, requiring Foxconn to ship 51% of the output abroad to qualify for tax incentives. The government is formulating electronics industry development policies aimed at encouraging investors in the country to fully utilize their production capacities to satisfy both India and global market demands, highlighting its strategy of developing India into an export hub for smartphones.

At the moment, there is still a high ratio of India's 1.2 billion population not holding mobile phones, and even around half of handset holders still use 2G feature phones despite the 4G penetration remaining on the rise. Thanks to shorter handset replacement cycle among India consumers, demand for mobile phones in the country will continue to grow significantly.

India now sees annual handset production (including feature and smart phones ) of 225 million units, compared to 350 million units in annual demand there, forcing the country to rely on massive handset imports to satisfy domestic demand. There are now 123 handset manufacturers in India, with their annual aggregate production to reach 500 million units by 2020, according to tallies from India's Ministry of Electronics and Information Technology.

On another front, India's handset exports had declined steadily from US$3.4 billion in 2009 to only US$1.38 billion in 2017, as new handset production capacities there have been absorbed by the ever-growing domestic demand, according to India's International Trade Centre.

Annual output of 500 million handsets by 2020

Indian Cellular Association (ICA) said that India is now the world's second largest handset producer, next only to China, and that only after the country's annual mobile phone production of 500 million units surpasses domestic demand by 2020 will its handset exports start to pick up significantly.

In terms of handset exports from India, the United Arab Emirates (UAE) and Saudi Arabia are the two major outlets, together absorbing 76% of India's handset exports. The neighboring South Asian countries such as Bangladesh, Sri Lanka, Bhutan and Nepal are among other outlets for India-made handsets, which, however, command low ratios of handset imports by the countries.

More and more mobile phone supply chain players have moved to invest in India to cash in on robust market demand there, but some vendors including Samsung, Oppo and Ericsson are expanding their capacities in line with their long-term goal for exports.

Although India is playing an increasingly important role in global handset production, the added values of its handset supply chains remain to be boosted significantly. The government there is promoting localized production of such parts and components as wirings, connectors, plastics materials and PCBs, but whether the India handset supply chains can be thoroughly upgraded hinges on whether production of such precision components as panels and chips can be localized.