What India Needs to do to Become A Smartphone Manufacturing Hub

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Ever since the India-China clash in Ladakh’s Galwan Valley, tensions between the two countries have been intensifying. Even the trends like boycott Chinese products have plagued social media in the past few weeks, and while being patriotic and Amta Nirbhar is an important push for India, India is far from being self-reliant when it comes to consumer electronics.

The latest trends on Twitter and Facebook point to the boycott of Chinese smartphone brands like Xiaomi, Realme, Oppo, and Vivo. As easy as it may sound, it’s not that easy and is perhaps best illustrated by India’s smartphone market.

Smartphone market share as of Q1 2020
Chinese brands have captured almost 3/4th smartphone market share

According to Counterpoint Research, Chinese smartphone brands like Mi, Vivo, Oppo, and Realme, with their value-for-money smartphones, have captured almost 3/4th the market share of India. These companies have suppressed home-grown companies like Micromax, Karbonn, and Lava to their feet.

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There’s a difference between manufacturing a smartphone and assembling a smartphone. Most of these companies, like Xiaomi, Oppo, and even Apple, assemble their smartphones in India, and not manufacture. These companies import the essential parts (mostly) of a smartphone, like chips and batteries, and then just assemble them here.

Oppo factory in Noida, Uttar Pradesh, India
Oppo factory in Noida, Uttar Pradesh

So Why Doesn’t India Have its own Apple or Samsung?

Manufacturing chips is a pricey business

A chip, or processor, is the most vital component of a smartphone or rather every computing device. This is possibly the biggest hurdle in manufacturing a smartphone in India, whereas China and Taiwan are world leaders when it comes to making these chips.

Most smartphones today use chips that lie in the range of 7-14 nanometers (the smaller the better). It’s such a pricey business that even Apple outsources its chips business to TSMC. Most of the smartphone makers send their ‘Chip Designs’ to these fabrication units, which then manufacture it according to the company’s needs.

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India, currently, has only a handful of semiconductor wafer fabrication units that can fabricate chips in the range of 100nms, which doesn’t meet the needs of these smartphone manufacturers, and thus they have to rely on companies outside India.

TSMC (Taiwan Semiconductor Manufacturing Company) started investing in building chips way back in 2010, which cost them $10B then, and now the total investment sits over $30B. Samsung, on the other hand, invested a whopping $14.3B (in 2014) in setting up a new fabrication unit.

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All-in-all, it’s a very costly business and the government will have to invest a lot of money in setting these up, which seems a bit hard given the current situation.

Outsourcing, outsourcing, outsourcing

Every smartphone has a display, a battery, and a camera. Most of these components are outsourced.

Samsung leads the display market, followed by LG. Camera lenses for phones are usually designed by Samsung or Sony.

Batteries are made out of lithium, and China has the world’s largest lithium reserves. Companies rely on lithium-ion batteries since they charge faster, store lots of energy (and stay light), making them idle for electronics and even electric vehicles

Recently, a Banglore-based company log9 Materials came out with a new battery technology that used Aluminum. India, having sufficient Aluminum reserves, needs to develop those batteries for the use of consumer products.

The need for R&D Parks and Indian tech Companies’ Investment

With more and more companies setting up their R&D centers in India, the situation is getting better but still, the industry leaders like Anuj believe that government should ‘announce special support, say for instance inviting only local brands to invest in an R&D park where the government matches the funding raised by the local OEMs.’

For India, top players like RIL, Mahindra, and Tata should venture into electronics manufacturing as they are well equipped to pump money to build the infrastructure required to create a globally competitive smartphone brand.

In this era of ‘global’ economy, building a smartphone independent of other countries is next to impossible, but if our government wants us to move in an ‘Atma Nirbhar’ direction, there’s a need for huge investments, increased spending on R&D and skilling our labour.

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