Korean chaebol LG Electronics is looking at building a local component base for its business in the country, even as the central government urges foreign-based entities to begin manufacturing under the Make in India programme.
LG has identified mobile phones and kitchen appliances for local manufacturing. Additionally, India is a strategic market for LG, which it is keen to develop as a regional hub for exports. Implying it will have to build a local component base here, they said.
Kim Ki Wan, managing director of LG India, told this newspaper: “We were asked by the PM and other ministers to make in India and we are studying the market to see how we can build a component base.” LG's recently launched K7 and K10 smartphones will be made at Greater Noida. Kitchen appliances such as water purifiers are being produced locally since February at its plant in Pune, says Wan. The plan is to add more products to the Make in India list, which will require a viable component base, executives said.
LG and Samsung, say experts, have worked to improve local sourcing of components in recent years but import and assembling of parts still remains the industry norm, since the size of the domestic market is small. This, manufacturers in general say, does not make it a viable exercise for them to set up a component base.
White and brown goods — including refrigerators, air conditioners, washing machines, microwave ovens and television sets — are Rs 50,000 crore in size. Small appliances, including kitchen items, are around Rs 10,000 crore, experts tracking the market said.
Most key components such as the display panel of flat panel TVs or compressor and indoor units of split air conditioners, microwave ovens, high-end refrigerators and washing machines are all imported from Asean countries under trade pacts.
Estimates by the Consumer Electronics and Appliance Manufacturers’ Association (CEAMA) are that at least 30 to 40 per cent of the Rs 50,000-crore white and brown goods market in India is fed by imports. And, that those made or assembled here also have a high import content.
To reverse this, the government is providing manufacturing sops under the Modified Special Incentive Package Scheme. Consumer electronics and smartphone majors such as Micromax, Lava Mobiles, Xiaomi, Gionee, Oppo and Coolpad have already expressed their desire to manufacture in India. Some more are now joining the list.