The Indian government has implemented a reduction in import duties on various components used in mobile phone manufacturing, a move that is expected to have a positive impact on the country’s smartphone industry. The decision, effective from January 30, sees the import duty on components such as battery enclosures, primary lenses, rear covers, and mechanical components decrease from 15% to 10%. Industry experts suggest that this reduction in import duties could potentially lead to a drop in prices for entry and budget smartphones.
The revision in import duties is considered a favorable development for manufacturers, aiming to enhance the competitiveness of the Indian market in comparison to other major manufacturing hubs like Vietnam and China. The components covered by the revised import duty also include SIM sockets, and the reduction is anticipated to benefit original equipment makers (OEMs) by lowering costs.
Prachir Singh, a senior analyst at Counterpoint Research, suggests that the cost savings resulting from the reduced import duties may be passed on to end customers in the short term. Singh believes that smartphone prices, particularly in the entry and budget segments, could potentially witness a decline of 3-5%. This reduction is seen as a relief for consumers who have experienced fluctuations in currency values and price increases over the past year.
However, Faisal Kawoosa, founder and analyst at TechArc, points out that while the reduction in import duties on components, which constitute 20-25% of the Bill of Materials (BOM), should lead to cost reduction, OEMs might choose not to transfer these savings directly to consumers. Manufacturers could opt to utilize the cost benefits in other areas, such as increasing channel margins.
Navkendar Singh, Associate Vice President of Devices Research at IDC India, South Asia & ANZ, emphasizes that the impact on the Bill of Materials (BOM) may vary based on whether key high-value components are covered by the revised import duty. Singh anticipates a potential reduction in end pricing by 1-2%, or there might be no impact on consumer pricing at all, depending on the components included.
Singh from IDC believes that the reduction in import duties, particularly on major components, is expected to alleviate cost pressures on ecosystem vendors. However, he underscores the importance of further measures, such as reduced import duties and export subsidies, to significantly impact smartphone exports from India.
Pankaj Mohindroo, Chairman of the Indian Cellular and Electronics Association (ICEA), commends the government’s move, describing it as a critical intervention to enhance competitiveness in mobile manufacturing in India. He highlights the progress of the electronics industry, especially mobiles, which constitute over 52% of electronics exports.
Prabhu Ram, Head of Industry Intelligence Group at CyberMedia Research (CMR), sees the reduction in import duties as a positive step for the domestic smartphone industry. Ram anticipates that it will stimulate production, enhance the competitiveness of Indian phones for exports, and strengthen the local components ecosystem, aligning with the broader policy focus on promoting “Made in India” for the global market.
