India's electronics ministry moots duties on key smartphone component -sources

Samsung Electro-Mechanics

31/03/2018 13:55

By Sankalp Phartiyal and Manoj Kumar
    MUMBAI/NEW DELHI, March 31 (Reuters) - India is exploring
new duties on the import of a key smartphone component,
according to two government sources, the latest in a series of
moves aimed at boosting domestic manufacturing in the world's
second-biggest smartphone market.
    India's Ministry of Electronics and Information Technology
has mooted a proposal to levy a 10 percent duty on the import of
populated printed circuit boards (PCBs), two government
officials told Reuters this week, declining to be named as the
matter is not public.
    A PCB is a bed for key components such as processors, memory
and wireless chip sets that are the heart of an electronic 
device. Once populated with components, PCBs account for about
half the cost of a smartphone. Currently, most manufacturers of
smartphones import PCBs which are already loaded with components
to India and then assemble them locally.
    If India's finance ministry clears the recommendation on new
duties, these could be levied in a matter of days, say
government and industry sources, thus making populated PCB
imports more expensive and pushing players to locally mount
components instead.
    India's finance, electronics and trade ministries did not
respond to requests for comment.
    In the near-term, such actions could spur players like Apple
Inc  AAPL.O  to widen their limited manufacturing and assembly
capabilities in India and give an edge to those like Korea's
Samsung Electronics  005930.KS  and homegrown firm Lava, which
already have machines to mount components onto PCBs.
    Apple did not immediately respond to a request for comment.
    China's OPPO is also putting up surface mounting machines in
a new facility it is building in north India, a company
executive told Reuters in a recent interview.  urn:newsml:reuters.com:*:nL3N1R84ZA The
local unit of Foxconn, one of the biggest global contract
manufacturers of electronics, also has the capability, according
to two industry sources.
    Foxconn was not immediately reachable for comment.
    "This will be a step in a good direction. This is how
full-scale manufacturing happens," said S.N. Rai, co-founder of
Lava, adding the move will gradually also boost local production
of components such as smartphone cameras and screens.
        
    MANUFACTURING AMBITIONS
    The move, if implemented, would be the latest step in Prime
Minister Narendra Modi's phased manufacturing programme (PMP), a
plan unveiled in 2016 to step up local value addition every year
in the smartphone manufacturing space.
    About 134 million smartphones were sold in India last year,
the world's second-biggest market after China.
    Modi's government has since raised duties on a range of
low-value items such as batteries and chargers and on imported
phones.  urn:newsml:reuters.com:*:nL4N1IK2P1  urn:newsml:reuters.com:*:nL4N1OI3YU
    Any move to impose duties on populated PCBs, however, could
risk a backlash from several countries and heighten trade war
concerns. China, Canada and the United States among others last
week raised concerns at the World Trade Organization around
India's imposition of duties on such devices.
    In its annual budget last month, India's government outlined
higher duties on products including imported smartphones and a
range of components.  urn:newsml:reuters.com:*:nL4N1PR3ZQ
    Modi hopes to turn India into a global manufacturing hub in
a bid to boost growth and create tens of millions of new jobs.
    While his flagship 'Make in India' drive is still a long way
from delivering on lofty job promises, Modi has had some success
with the PMP. Over 100 local factories currently assemble mobile
phones and accessories like chargers, batteries, powerbanks and
earphones in India, says tech research firm Counterpoint.
    The PMP currently envisions local assembly of camera modules
and printed circuit boards in the fiscal year beginning April 1,
according to a public electronics ministry document.
    "India has a plan to raise duties for all components bit by
bit," said Tarun Pathak an associate director with Counterpoint,
adding this will gradually force more domestic manufacturing.

 (Reporting by Sankalp Phartiyal
Editing by Euan Rocha and Raju Gopalakrishnan)
 ((sankalp.phartiyal@thomsonreuters.com; +91-22-61807186;
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