Samsung likely to set up handset production base

Samsung, the world's third largest manufacturer of mobile phone, may set up a manufacturing base in India.

The company is awaiting the findings of a study initiated by Indian Cellular Association (ICA) on the possibility of developing telecom manufacturing industry, especially mobile handset in the country.

Samsung is also looking at the option on its own independent of the ICA study.

Kunal Ahooja, vice president (telecom) of Samsung, said the company was exploring issues like potential for market growth, possibility of making India as an export hub and probable tariff structure on imported phones.

"After ICA comes out with the position paper which is being prepared by KPMG, we will take a call on this issue," Ahooja added.

The market for handset, both GSM and CDMA put together, is 26-27 million in 2004 in India. According to predictions, the industry will grow by 35 per cent year-on-year basis till 2010.

Pankaj Mohindroo, president of ICA, said at least 7-8 companies were looking at India as possible manufacturing base.

"There is potential to have an industry with 50 million handset production, which is valued at 5-7 billion," Mohindroo said.

The draft position paper prepared by KPMG points out that there is need to have a clear electronic manufacturing strategy for attracting global OEMs in the country.

It says there is absence of significant electronic component vendor indicating that most of the parts are to be imported.

The factors which is attracting the handset manufacturing industry are local demand and proximity to demand centres, labour arbitrage, electronic manufacturing base, government policy, the report said. China, eastern Europe, Mexico, Brazil, Korea are the key places at present.

Ahooja said the key issues before taking a decision for Samsung would be available of components, costs and logistics.

"The final position paper would be ready by end of this year and would throw light on these topics," he added.

Samsung is the second largest share of the handset market after Finnish giant Nokia. It will earn 20-25 per cent of projected revenue of Rs 5,200 crore from telecom business in India.

Ahooja said it was focusing more on mid and high end phones even as it would have presence at the entry level segment. Its per unit realisation from handset is Rs 6,500 on average.

Samsung said it was banking on colour and camera phone to drive future growth.