Mobile manufacture banks on India

Posted on | December 13, 2005 |

Financial Express article on global telecom manufacturers like Samsung, Motorola, Nokia and LG setting up manufacturing facilities in India.

Of the expected 810 million global mobile phone sales this year, India is expected to account for about 34 million. A large percentage of mobile handsets market in the country is the below Rs 4000 category of first-time users.

Besides a growing market, handset manufacturing in India got a major thrust when Budget 2005 offered customs duty exemptions on components and peripherals used for manufacturing mobile handsets and network hardware. As one of the 217 items listed in the ITA, it was part of India’s commitment to the World Trade Organisation.

To balance the duty structure between importers of telecom equipment and local manufacturers, the Finance Minister also imposed a 4 % countervailing duty (CVD) on all the 217 items in the ITA. This 4 per cent CVD also diluted the impact on handset prices. While the 5 per cent customs duty on handsets was abolished, the imposition of 4 per cent CVD would mean only a 1 per cent drop in effect. This meant that manufacturing locally would allow the handset companies to avoid that 4% duty and consequently market at lower prices. This explains the spate of manufacturing facilities that have been announced in the last few months.

Internationally, about 40% of handsets are sold out of premium large-format retail outlets. With the retail mall boom in India catching on rapidly, that will probably be the next trigger for an explosive growth in handset sales-that of ‘Made in India’ handsets.

Comments