The country’s largest mobile component producer Samsung
India is preparing to begin production of key components like display screens, touch panels and vibrator motors from FY2020-21. The move is significant as it comes after the government backtracked on its plan to impose Customs duty on those pricier components from February 1, 2019.
According to sources, the withdrawal of the February 1 deadline came as a breather for the company that had in the past one and a half years struggled to improve its share in the local smartphone market. After it lost the top slot to Xiaomi in September 2017, it charted a comeback plan. It heavily focused on India specific innovations and increased the scope of local value addition in handset production by moving towards complete-knocked down (CKD) manufacturing.
However, the government’s abrupt change in the phased manufacturing programme (PMP) deadline, announced last year, hampered Samsung’s plans to regain the top spot in the smartphone market. For the first time since 2012, Samsung
finished the calendar year 2018 at the second spot with 24 per cent share, behind Xiaomi (28 per cent).
Following the government’s earlier notification that had advanced the deadline for local production — from FY19-20 to February 1, 2019 — Samsung, in a letter to the prime minister’s office expressed deep concerns over sustainability of the local manufacturing unit. The firm had said that the advancement of the deadline would hamper its production and export plans from the India unit. Further, Samsung
might have to stop production of some of its flagship models like Galaxy S9 and Note9, apart from a cut in export from India to 15 per cent of its total production from 40 per cent planned earlier, the letter said.
The firm is now set to manufacture those components at its Noida facility. In July, the Korean manufacturer had announced a mega-expansion plan for the Noida facility in an extravagant ceremony with Prime Minister Narendra Modi as its chief guest. It planned to develop the plant as the world’s largest mobile manufacturing facility by expanding its production capacity to 120 million units of handsets a year by 2020 from 68 million. Further, Samsung said it would increase exports from India and would invest Rs 4,915 crore.
According to the original PMP, firms may begin local production of display screens, touch panels and vibrator motors between April 1, 2019, and March 31, 2020. But sources say the Centre may extend the deadline to April 1, 2020. Industry bodies like India Cellular and Electronics Association and Consumer Electronics and Appliances Manufacturers Association had been lobbying for an extension in the original deadline, given many handset makers are yet to meet the previous deadline of 2017-18 and 2018-19.
Samsung is not resuming production of television in India. Early last year, it had stopped producing TVs locally after the government imposed a 5 per cent import duty on panels. Since then, the firm is importing fully-finished TV sets from its Vietnam facilities. The firm imports from Vietnam without paying any import duty due to a free-trade agreement. “Until the government makes local TV production competitive, it is unlikely that Samsung India
would resume production,” said a senior executive with knowledge of the developments.