Import duty cut on mobile phone components might impact India’s localisation drive

India’s move to cut import duties on mobile phone spare parts from 15% to 10% is being looked upon as a great boost for the domestic smartphone industry. This applies to specific components such as battery covers, main lenses, back covers, and other mechanical items crafted from plastic and metal. However, it has also raised concerns in some quarters about the government’s vision of bringing a component ecosystem to India.

“Over 80-90% of bill of material for smartphone assembly is imported. Hence, this is a huge incentive for smartphone assemblers. But the cost of imported components should stay higher than domestic supply, else the assembly houses would always prefer imported components,” says Danish Faruqui, CEO, Fab Economics. Faruqui adds, “India must balance import duty reduction on smartphone components so it does not discourage the local components manufacturing—like smartphone battery.”

Currently, India is heavily dependent on sourcing components from China, and only the basic ones are manufactured here. “There is only local assembly, which is happening and parts like cell, PMIC, wafer, etc are imported directly,” explains Navkendra Singh, Associate Vice President, IDC India.

The duty cut on components also indicates that India’s dependence on importing components isn’t subsiding. “We increased the duty at the first instance to promote localisation. Now, we are again decreasing it to give some comfort to OEMs to make in India. Somewhere, we have to stop this roller-coaster approach and be tough with the ecosystem to force time-bound results,” adds Faisal Kawoosa of Tech Arc. “What surprises me is that a lot of these are plastics and mechanical components that we should have been developing in India by now.”

However, Tarun Pathak, Research Director, Counterpoint Research, disagrees. He says the move will not have an adverse impact on the localisation drive, as it is an ongoing process.

Singh of IDC adds that import duty cuts on mobile phone components will ensure that the cost of production is reduced in India, compared to China. He says the objective appears to be to wean critical ecosystem players away from China, where they are currently based.

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