Now, Oppo and Vivo likely to make key parts locally in next one year

Companies had lobbied hard for the postponement of the import duty to April 1, 2020, instead of it being implemented on February 1, 2019

Mobile phone makers Oppo and Vivo, both from Guanzhou-based BBK Electronics, are likely to follow their South Korean rival Samsung in making key components locally in the next one year. The move comes as the Centre deferred the imposition of duties on crucial parts, sources told Business Standard. 

Companies, it is learnt, had lobbied hard for the postponement of the import duty to April 1, 2020, instead of it being implemented on February 1, 2019. 

Samsung will begin making components from April 2020, once the duty kicks in. Production will start at its Noida facility, which is also its largest mobile phone manufacturing plant in the world. 

While a mail sent to Oppo had elicited no response as of the time of going to press, Vivo said it fully supported the government's 'Make in India' initiative. "In addition to our focus on marketing, innovative products, robust distribution, better after-sales service, manufacturing is a crucial component as we progress towards the next phase of growth," said Nipun Marya, director (brand strategy), Vivo India.
 
Marya added that the company had made an investment of Rs 300 crore last year in setting up a surface-mount technology unit for printed circuit board assembly (an important component of a mobile phone) at its plant in Greater Noida. The company would continue to look at local sourcing of parts, he said.

Sources said the firms like Samsung had been pushing for deferment of the import duty, saying it would hamper investment in a local ecosystem they were building. Oppo and Vivo have manufacturing units in Noida. 

According to industry leaders, the postponement of the duty levy would give handset makers time to align their production plans with suppliers. 

“Many would also have to find suppliers of those components while others may have to put up a plan in co-ordination with their existing suppliers, who would have to start producing parts. It is a step in the right direction,” a senior executive from a smartphone company said. 

Vikas Agarwal, country head, India, OnePlus, said the next phase of manufacturing in the country would require a local base from where components would have to be sourced. “All brands, including OnePlus, are looking at localisation seriously. We are talking with our suppliers and plan to increase the level of local value addition,” Agarwal said. 

To put things in perspective, the government had decided to advance the phased manufacturing programme (PMP) for FY20 by two months, saying it would give ‘Make in India’ a boost. PMP envisages converting India into an electronics manufacturing hub by making imports dearer. Since 2017, the government has increased Customs duty on mobile components, encouraging firms to manufacture these products locally. While the government claimed that the PMP schedule for FY20 was being advanced to coincide with the interim Budget, mobile phone makers had argued that they were unprepared to manufacture these components quickly, since they were expecting the levies to kick in from April 1, 2020. 

Pankaj Mohindroo, chairman of industry body India Cellular & Electronics Association, said that the focus should be on manufacturing components that were part of previous PMP programmes rather than adding new items to the list. 

Samsung had written to the Prime Minister’s Office last month, saying that the advancement of the FY20 PMP deadline to February would hamper its local production and export from India. The firm also said it would have to stop production of some of its flagship models if the government went ahead with its move. Also, it would have to cut exports from India to 15 per cent of its total production from 40 per cent planned earlier.