India’s mobile phone exports on road to oblivion

Sachin Manawaria | The Dollar Business

One of three mobile phones that India imports comes from China

  While India is planning to make itself a manufacturing hub of electronic goods for the rest of the world, the Indian mobile telephony sector seems to be wading through rough waters. India is among the top three markets for mobile phones. According to estimates by the industry body Indian Cellular Association (ICA), the mobile handset market in India stands at around 250 million units worth around Rs.54,000 crore (about $8.5 billion), with a growth rate of about 11%. However, much of the demand is being met by imports and the export sector is languishing. According to India’s Ministry of Commerce, exports of mobile phones stood at around $1.95 billion in FY2013-14, down sharply by about 27% from the previous year. But exports in the first six months of FY2014-15 have plunged further to just $182.44 million. According to ICA, even this minuscule number is expected to become zero next year with the shutdown of the Nokia plant near Chennai last month (Chennai is also home to around 10 of the 13 projects on telecom equipment manufacturing in India, including FoxConn and Alcatel). Nokia had to shut down its factory near Chennai from November 1, 2014, after its parent company, Microsoft, terminated the mobile purchase agreement mainly due to a dispute over payment of tax arrears by Nokia’s Chennai unit to the government.

] Source - Ministry of Commerce, India

Pankaj Mohindroo, National President, ICA, who presides over the Association’s objectives of ensuring the development of the mobile cellular handset industry in India, told The Dollar Business that Microsoft’s move has hurt manufacturing and exports of mobile phones in India. Mohindroo said, “The key reason for the drastic fall in Indian exports of mobile handset was the shutdown of the Nokia’s plant in Tamil Nadu.” However, he adds that failure to build a robust manufacturing facility for mobile manufacturers in India is the main reason for this downslide. India’s imports of mobile phones stood at around $4.7 billion in FY2012-13 which surged to almost $6 billion in FY2013-14. This is further expected to grow by around 30-33% to about $8 billion next year, says ICA. Rising demand and declining production leaves no other option other than importing from countries like China, which already meets around a third of total mobile phone imports by India. ICA has submitted a report to the government urging it to take steps to promote production of mobile phones in India. The report says that mobile phone manufacturing in India is unable to match the competitiveness of companies in China and Taiwan. In its previous recommendations to the government, ICA had urged the government to: protect the industry from low quality, sub-standard products and dumping; catalyse the growth of a robust parts and components industry; creating a strong No.2 position for Indian manufactured accessories; establish a share of at least 25% in the global after sales accessory market with original design and quality; and establish a robust export of mobile handsets with the support of the Telecom Products & Services Export Promotion Council (TELECOMEPC). However, the sharp decline in exports and reliance on a handful of foreign companies shows that nothing much has been done so far to strengthen the domestic mobile phone manufacturing in India. “Going forward, we certainly need to build up a robust manufacturing facility for mobile manufacturers in order to increase our exports from India,” Pankaj Mohindroo who was also the Chairman-Manufacturing Advisory Committee, ICA, said. In a related development, the Indian government has today asked all government departments to procure domestically manufactured electronic products as part of Prime Minister Narendra Modi’s “Make in India” initiative.    

This article was published on December 27, 2014.