Technology

Samsung may move part of smartphone production to India, plans to make devices worth $40 bn

NEW DELHI: Samsung may shift a major part of its smartphone production to India from Vietnam and other countries with the South Korean electronics major finalising plans to produce devices worth over $ 40 billion (Rs 3 lakh crore) in the country, people familiar with the matter said.

“Samsung is likely to diversify its production lines for making smartphones to India under the PLI (Production Linked Incentive) scheme and this will have an impact in its existing capabilities across various countries like Vietnam,” a person familiar with the matter told ET.

Vietnam is the world’s second-largest exporter of smartphones after China. According to people familiar with the matter, Samsung has submitted estimates of making smartphones worth over $ 40 billion to the government in the next five years (under the PLI scheme). Out of this, phones with factory price of over $ 200 could account for over $ 25 billion. “…most of phones manufactured in this category will be exported,” a senior government official said.

Samsung didn’t respond to ET’s queries.

Move may Help India Plug FTA Gaps
Government officials said Samsung’s move would also help plug a major loophole in India’s efforts to find ways to eschew cheap imports from Association of Southeast Asian Nations (ASEAN) countries to India, owing to the Free Trade Agreement the country has with the trading block.

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The company runs its largest mobile phone manufacturing unit in the world in Noida, from where it also exports to other markets. The company currently makes roughly 50% of its phones in Vietnam, as per industry estimates. It is in the process of winding down manufacturing in South Korea, where labour costs are high. In addition, it has manufacturing bases in Brazil and Indonesia.

Once Samsung’s move fructifies, the company will join iconic smartphone major Apple, which is also in the process of shifting a key part of its production line for smartphones to India. The global smartphone export market is about $ 270 billion. By value, Apple has a 38% market share and Samsung 22%. By volume, Samsung has 20% and Apple 14%.

APPLE CONTRACTORS EYE PLI SOPS
On August 1, communications and IT minister Ravi Shankar Prasad had announced that 22 companies — including Samsung, Foxconn, Wistron and Pegatron — had filed their applications under the PLI scheme, which is aimed at weaning away global manufacturers from countries like China and Vietnam. All of Apple’s three contract manufacturers — Foxconn, Wistron and Pegatron — have applied to take benefits of the PLI scheme and are moving manufacturing from places like China to India.

The market size of smartphones in India in 2019 was around Rs 2 lakh crore, and according to industry body India Cellular & Electronics Association’s estimates, a $ 200 phone at factory price sells at over $ 300 plus, depending on the brand. Such phones constitute 20% of the smartphone market in value and under 10% by volume.

Experts added that this is the category for which foreign manufacturers can avail PLI incentives, and thus most smartphones which will be produced in this price segment will be exported. At present, $ 200 plus factory price phones account for just 2% of the South Korean company’s exports from India.

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Tech-Economic Times

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