Lava set to shift production for export market from China to India

Lava International, a leading Indian mobile device player, is shifting its production for the export market from China to India within six months.  The company is also closing down its design centre, with over 600 employees, in China and relocating it to India.

Lava exports over 33 per cent of its mobile phones to markets such as Southeast Asia, West Asia, Africa, and Mexico.

The move is significant because it comes hot on the heels of the government’s production-linked incentive (PLI) scheme, which offers a 4-6 per cent incentive for domestic as well as global companies that want to make India a hub for mobile device exports for the next five years.

The central government is also pushing a policy to encourage manufacturers in China to shift to India, especially after adverse opinion started building up against the communist state owing to its handling of Covid-19.

Confirming the plan, Hari Om Rai, chairman and managing director, Lava, said: “Thanks to the PLI scheme, the cost disadvantage we had in India vis-a-vis China is no longer there. In the next six months, we will shift the production of all our mobile phones for the export market from China to India. Our design centre will also shift from China to our country.”
 

Lava has been able to source 40 per cent of the value of its components from domestic players and hopes to increase it further.
 

Even for global big players, the local content for large exporters is near the same level and the rest is imported. Lava import components from Japan and South Korea and does not depend only on China.

Rai said the company had a two-pronged strategy in the export market: Sell under its brand name and make it for other electronics manufacturing clusters.
 

The move comes at a time when those privy to discussions between global mobile giants and the government say that Apple Inc could shift around 7 per cent of its production value from China to India in the first year of the PLI scheme. It will go up to 18 per cent in four years.
 

It is expected that if the PLI scheme takes off for global players, it could help India grab over 7 per cent of the $369-billion global mobile device export market by 2025 from a mere 0.5 per cent, or $2 billion, currently. Now, 85 per cent of the mobile device market is controlled by just two countries — China and Vietnam. But the government, under the National Electronics Policy, has formulated a target of exporting $110 billion of mobile phones by 2025 from India.

The PLI scheme for homegrown players does not set any limit on the value of the phone to be exported (it is $200 for global players) to be eligible for the incentive. It also has a much lower threshold of investment (Rs 200 crore compared to Rs 1,000 crore in five years for global players and also of incremental sales annually between Rs 500 crore and Rs 5,000 crore over five years).
 

According to IDC, nearly 76.2 per cent of the domestic smart phone market is for phones below $200. However, the feature phone market still constitutes more than 41.2 per cent of the total.