Mobile phone companies push for indigenisation

While saving cost, move part of strategy to make India manufacturing hub for the globe

Mobile phone companies are pushing through a big indigenisation effort by bringing global component vendors to set shop in the country. The move is part of a strategy to make India a global manufacturing hub for mobile phones, rather than just undertake their assembly.

Samsung, for instance, has put up an ambitious plan to indigenise its mobile phones from about 10-12 per cent currently to 40 per cent in two years. “Today, we have a capacity to make 8-10 million phones a year,” said M C Mittal, vice-president, manufacturing, Samsung India. “We are planning to increase it by 50-60 per cent. We are looking at indigenising components like batteries, chargers and folders, among others and have looked at some Taiwanese and Chinese suppliers. At least three to four have been identified.”

The country’s largest mobile phone manufacturer, Nokia, has brought in five of its leading vendors (Salcomp, for instance, is a market leader in phone chargers) who exclusively manufacture a range of components for the company such as back covers, chargers and key mats. Says D Shivakumar, vice-president and managing director, Nokia India: “We have invested $280 million (Rs 1,300 crore) and our vendors have put in a similar amount of money in our facility near Chennai...We have generated about 25,000 jobs. India has a large domestic base and we can use this scale to go for exports.”

The plant has manufactured over 350 million phones since its inception in 2006. Industry experts say Nokia has reached indigenisation levels of 25-30 per cent in India, though the company declined to comment.

LG India, a late starter in the mobile space, is also catching up, though cautious on their indigenisation aim. “We do have some vendors already producing some parts for us in India and plan to add more in the coming months,” said Moon B Shin, managing director of LG Electronics India. Shin said they are at 10 per cent indigenisation, having done so for printed circuit board assembly. Their next target is to go up to 15 per cent.

It is not only individual companies pushing to bring in more investments through vendors. The Indian Cellular Association (ICA), apex body of mobile phone manufacturers, has asked KPMG for a report on how to make India a mobile phone manufacturing hub of the world. The industry, said Pankaj Mohindroo, president of ICA, has endorsed a plan to increase production of mobile phones in India from the current 130 million to 250 million yearly by 2012. Of this, at least 100 million will be for the export market. “The whole effort is to indigenise, so that mobile phone manufacturing becomes a Rs 50,000-crore industry by 2012,” says Mohindroo.

Companies say indigenisation, apart from saving costs, also ensures flexibility in responding to the changing market. “Currently, we keep inventory of two months. This will go down to one week if we indigenise. That means a saving in cost of 5-10 per cent, pretty large in this business,” said Mittal.