The Indian leadership has decided to reduce taxes on the import of several components for mobile devices.
The mentioned decision is aimed at increasing the volume of smartphone production in the South Asian country. For companies like Apple, tax cuts are definitely a positive circumstance. Currently, many smartphone makers are considering India as a potential global manufacturing base. So far, the South Asian country does not have the appropriate status in terms of the actual level of development of the industrial sector, but movement in this direction has already begun.
In part, the current tension in the geopolitical space contributes to India’s assertion in the framework of the status of a global manufacturing base. The United States has restricted Chinese companies’ access to advanced chips. As part of the retaliatory measures, Beijing announced its intention to limit shipments of germanium, gallium, and graphite, which are critical for the semiconductor industry. Against the background of these realities, many companies are starting or planning to diversify production outside of China, fearing that deepening cooperation with Beijing may cause Washington to impose sanctions on their business.
The government of Indian Prime Minister Narendra Modi on Tuesday, January 30, announced a reduction in tariffs on components such as plastic and metal mechanical parts, SIM sockets, and screws. The industry group welcomed the decision, describing it as a step in the right direction.
The government of Narendra Modi is making efforts to make India a global electronics manufacturing hub. Currently, local authorities are trying to create an ecosystem of homegrown suppliers. If progress is made in this direction, India will occupy a large part of the value chain, ceasing to be just a place of assembly.
Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association, said the tariff reduction is an important and long-awaited political intervention by the government, which aims to make local mobile device manufacturing competitive. According to him, increasing the scale of production due to low tariffs on raw materials is the key to turning the South Asian country into a global hub for the making and export of electronics.
The lobbying group, which includes Apple, its Taiwanese suppliers Foxconn Technology Group and Pegatron Corp., and contract manufacturer Dixon Technologies India Ltd., said last month that the increase in duties had reduced India’s cost competitiveness by up to 7%.
The efforts of the Government of Narendra Modi to develop production in the South Asian country have already had some positive results. Currently, India’s share of the global iPhone making is over 7%.
Apple is currently exploring options to reduce its dependence on China. These intentions of the tech giant are explained by the above-mentioned geopolitical tensions. The company’s partners, which produce most of the iPhones in large factories in China, have intensively launched additional assembly lines in India in recent years.
Lower import tariffs will make the assembly of electronics products in the South Asian country more cost-effective and may encourage manufacturers to increasingly create devices for export, as the dynamic of domestic demand for smartphones shows a slowing trend.
In the fiscal year through March 2023, the volume of smartphone exports from India doubled, amounting to about $11 billion in monetary terms.
Navkendar Singh, an analyst at IDC, says that the mentioned scale will help strengthen ambitions to become the factory of the world by pushing manufacturers to set up local plants.
As we have reported earlier, Foxconn Adds $1 Billion to Investment in Apple India Plant.