How EMS cos will make India a net exporter of mobile phones by 2025

With the recognition of electronics as a key segment for policy focus, India has risen significantly in the global rankings to become a favoured investment destination for EMS. The National Policy on Electronics (NPE) emphasized local value addition and created an enabling environment

India is expected to achieve a breakthrough and become a net exporter of mobile phones by 2025 and consolidate this trend in the future, as per a new Frost & Sullivan (F&S) report. India is transforming to a global manufacturing hub, adding to the country's GDP and balance of trade.

The country produced around 300 million units in 2021 and nearly 50 per cent of the mobile phones manufactured in India are for the export market.

Current export market of overall mobile phones in FY22 is around 34.7 million units, with smartphones contributing to 32.6 million units, which is around 94 per cent of the total mobile phones market (Source: Frost & Sullivan).

Around Rs20,000 billion ($300 billion) has been set aside for the Government of India's PLI (Production Linked Incentive) scheme over the next five years, as per Frost & Sullivan research.

The PLI scheme expected to result in an increase in production of approximately $520 billion over the next five years. The scheme provides an average of 5 per cent of production as an incentive.

Smartphone: Pillar of Make in India

The production of mobile phones is projected to increase in the near future as a result of numerous government initiatives in India. Several investment announcements had been made by Global Smartphone manufactures after support from government of India to boost the domestic manufacturing ecosystem through various initiatives and schemes. As more players are setting up manufacturing units in India, the production is expected to rise and hence the exports.

India has attracted interest from companies such global giant Samsung and Chinese OEMs in the mobile phone segment driven by the right set of incentives for manufacturing.

The large domestic market, which was underpenetrated for long, has provided an opportunity to these players to address local demand as well as set-up base. China is the world's leading mobile phone manufacturer, followed by India, Vietnam, Indonesia, the United States, and Brazil. These top five nations account for 70 per cent of all mobile phone production worldwide.

Smartphone manufacturing has become a pillar of the 'Make in India' initiative. India exports to 24 countries, with some of those countries re-exporting to other markets, such as the UAE, allowing millions of consumers to use Made-in-India phones.

India's mobile phone industry is well-established in the Middle East and North Africa (MENA) region, providing India with a sizable export market. Mobile phone exports swelled by 40 per cent in the last financial year, from Rs 229 billion in FY'21 to 357 billion in FY'22, and accounts for nearly 31 per cent of the total exports from the country.

Mobile Phones, Consumer Electronics and Industrial Electronics contribute to more than 83 per cent of the total Electronic Manufacturing Services (EMS) market in India.

Why India is bullish on EMS…

With the recognition of electronics as a key segment for policy focus, India has risen significantly in the global rankings to become a favoured investment destination for Electronic Manufacturing Services (EMS). The National Policy on Electronics (NPE) emphasized local value addition and created an enabling environment.

Part of China+1 strategy, India has made efforts to position itself as an alternate manufacturing destination. All investments in China with prime focus on the US market may seek relocation and India would definitely be one of the options.

Huge addressable market for EMS

The total addressable EMS market in India was valued at Rs 3,372 billion ($45 billion) in FY22, and is expected to grow to Rs 7,504 billion ($101 billion) in FY26 with a CAGR of 22.1 per cent.

Contribution of Indian EMS companies is around 43.5 per cent - Rs 1,469 billion ($20 billion) in FY22. This is expected to grow at 32.3 per cent CAGR to reach Rs 4,502 billion ($60 billion) by FY26. The Indian EMS industry accounts for little above 2 per cent of the global EMS market.

In FY22, domestic electronics production is estimated to be $86 billion which includes domestically manufactured electronics components worth $12 billion and imported components worth $18 billion.

The EMS market size for mobile phones is estimated to grow from Rs. 912 billion in FY22 to Rs 2,723 billion by FY26 at a CAGR of 31.5 per cent as per Frost & Sullivan research. Mobile Phones are the fastest growing electronics segment in India and second largest market globally.

It accounts for approximately two-third of EMS business in India. EMS companies offer end to end manufacturing services for mobile phones including designing for select models.

OEMs outsource to EMS players

With nearly 300 mobile handset and accessory manufacturing units in India, only top players have end to end manufacturing capabilities. The majority of OEMs are now outsourcing manufacturing to EMS providers.

Mobile handset manufacturing involves the design of the handset, the assembly of components, and the manufacturing of the device. With nearly 300 mobile handset and accessory manufacturing units in India, only the leading players have complete, integrated manufacturing capabilities.

Chinese OEMs like Xiaomi, Vivo, and Oppo have established themselves as competitors to market giants such as Apple and Samsung. Certain Indian manufacturers, including Lava, Micromax, and Intex, are also has presence.

There are nearly 700 EMS companies in the market, ranging from large, medium-sized, to small players. Major global companies are Bharat FIH, Flex, Wistron, Pegatron, Jabil; large Indian companies include Dixon, Amber, SFO, Syrma, Elin, Centum among other.

(Kalinga Nath is a Mumbai based senior journalist)