Import of mobile handsets to jump as China whets the appetite

The imports of mobile handsets in 2014 are projected to constitute more than 80% of the total domestic market

 

Home grown Micromax might have dislodged South Korean Samsung to become the largest mobile devices player in the country inthe quarter of April-June. And as many as three of the top five mobile players  in the pecking order are now desi companies, which also include Karbonn and Lava, and control about 40% of the Indian mobile handset market.

Yet there is no reason to cheer for Indian industry. That is because the imports of mobile handsets in 2014 is projected to constitute more than 80% of the total domestic market, up from 67% of the total 245 million units handset market in 2013. And that is because import of mobile phones will go up by about 26% to hit the 209 million units mark for the first time in this calender year 2014 from 165 million units lastyear.

The reason is simple - the contentious tax case has seen the virtual closure of the Nokia plant, one of the largest outside Chinafor the company, which was bought over by Microsoft except for the Indian operation. But the production in the Chennai plant has been severely curtailed. And all the top home-grown mobile players hardly manufacture any phone in the country importing their entire requirement mostly from China.

As a result total domestic production of mobile devices for the Indian market is projected to fall dramatically by over 60% from 80 million devices in 2013 to a mere 51 million in 2014, even though demand for mobile phones is expected to go up from 245 million in 2013 to 260 million this year. The data is based on Indian Cellular Association (ICA), which has all mobile device players as its member.

ICA has made its projections based on actual production till July as well as projections in the next six months based onwhat its members have estimated as their plan. What it simply means is a huge foreign exchange outgo. According to ICA, the import bill as a result of this hugeincrease in imports will go up from Rs 36,000 crore in 2013 to around Rs 56,000 crore in 2014 a staggering increase of more than 50% as smart phones, which are more expensive than feature phones take the centre stage in the market amongst consumers.

The possibility of India becominga base for export of mobile phones which was kicked off with Nokia's low-costAasha phones is not a distant dream. Exports are projected to fall nearly byhalf from 45 million in 2013 to a mere 27 million in 2014.