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Small and medium enterprises ride piggyback on cellphone boom

SMEs accounted for nearly a third of the electronics sector revenue pie, with varied share in different segments

Business Standard 

SMEs ride piggyback on cellphone boom

Small and medium enterprises (SMEs) are making their presence felt in the electronics market as the mobile manufacturing segment sets a scorching pace of growth.

In fiscal 2018, the electronics sector is estimated to have seen its revenue jump 21 per cent year-on-year to Rs 3.86 trillion. That growth rode on a 45 per cent-plus spurt in the mobile phone manufacturing segment, which constituted about 34 per cent of the total market.

SMEs accounted for nearly a third of the electronics sector revenue pie, with varied share in different segments.

To be sure, SMEs have a huge presence in the assembly of mobile phone components, and provide customised offerings in other segments. These units are usually clustered around electronics hubs such as Bengaluru and Delhi-NCR, which constitute more than 20 per cent of the total output of the industry.

Graph

Favourable government policy is expected to fuel growth further, with the ongoing phased manufacturing programme aiding development of the segment. The programme provides a road map for in-house manufacturing of mobile components by imposing higher basic customs duties (of 10-15 per cent) on import of mobile components in a phased manner till fiscal 2020. This will help SMEs move up the value chain in the electronics sector.

The government has deferred the imposition of basic customs duties which were planned from February 1, 2019 on key mobile handset components such as LCD displays, touch panels and vibrator motors. CRISIL Research is of the view that the deferment will provide players time to develop a favourable ecosystem for local manufacture of such components.

On the flipside, since 60-70 per cent of the costs pertain to raw material, which are mostly imported, currency fluctuation is a key risk for the segment.

Besides, the industry is characterised by short product lifecycles, with high levels of obsolescence. This entails continuous investment in technology and process upgradation, along with investment in research and development, to remain competitive.

…as local manufacturing got a leg-up

2018

Vivo

Location: Uttar Pradesh

Announcement: Will set up new manufacturing facility at an investment of Rs 4000 crore over a period of four years

Samsung

Location: Uttar Pradesh

Announcement: Plans to invest Rs 4915 crore to double its manufacturing facility in Noida,

Uttar Pradesh, for production of smartphones and refrigerators

Holitech Technology

Location: Andhra Pradesh

Announcement: A Xiaomi supplier, it will invest Rs 1300-1400 crore in three years to start component manufacturing for compact camera modules, thin film transistors, capacitive touch screen modules, flexible printed circuits, and finger print sensors, locally in India

2019

Foxconn

Location: Tamil Nadu

Announcement: Plans to invest Rs 150 crore in Tamil Nadu to expand their production

lines in Chennai for manufacturing high-end Apple iPhones

Karbonn Mobile

Location: Andhra Pradesh

Announcement: Plans to invest Rs 200 crore to setup mobile manufacturing plant capable of producing 1 million per month

First Published: Mon, February 18 2019. 16:52 IST
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