Three firms may revive Indian smartphone brands as incentive scheme takes effect
After a decade-long hiatus during which two out of every three smartphones sold in India came from China-based brands, homegrown phone makers could make a comeback as early as next year, Union IT minister Ashwini Vaishnaw said on Friday.
Vaishnaw, speaking at a press roundtable notifying the Centre’s ₹62,500-crore Mobile Phone Manufacturing Scheme (MPMS), said that three homegrown companies are in talks with the ministry of electronics and IT (MeitY) to apply for the scheme’s ‘Target Segment 2’, which focuses on bringing Indian smartphone brands back to the market.
“There are three companies at the moment, the names of which I cannot reveal, that we are in talks with. There is one most important point that the government has emphasized upon: that the core design-linked intellectual property of the smartphone in question must be owned by an Indian entity where 51% of the ownership is with Indian citizens,” he said.
“There are four broad price categories of the market, and the brands applying for the scheme are evaluating which would be ideal for them to enter—for now, they have expressed intent in investing in the highest-volume segment,” he added.
He further said that with all factors taken into consideration, a new phone brand under the aegis of Meity’s new mobile manufacturing incentives “will enter the industry next year”.
Tough market
India’s smartphone industry is its largest contributor to a $100-billion domestic electronics and appliances market, excluding exports. Between 2013 and 2014, an onslaught of brands from China, such as Xiaomi, Oppo, Vivo and OnePlus, saw homegrown brands Micromax, Lava and Karbonn lose out their market share and practically exit the market. Lava, to be sure, continues to operate—both with new devices and as a contractual manufacturer.
As of June, China’s top brands accounted for nearly 68% of all phones sold in the country, with South Korea’s Samsung and US-based Apple the only two notable exceptions.
Industry stakeholders, however, cautioned that the ceiling for entry in the country’s current phone market could be “too high”.
Navkendar Singh, associate vice-president at independent market research firm International Data Corporation (IDC) India, said India’s smartphone market is facing a double-digit decline, with annual shipments projected at around 130 million.
“This will be the worst year in a decade, and brands currently holding ground in the industry have entrenched themselves in the country by establishing deep-rooted distribution and marketing channels, as well as considerable user trust and recall. Breaking into this hierarchy in such a high-barrier, low-growth market could be very difficult for a new brand,” he warned.
The scheme
The MPMS, announced on 15 July, will offer the finalized brands 5% as cash incentives on net annual sales of devices, and an additional 3% of net sales for research and development (R&D). Phone manufacturers must be registered in India, have 51% domestic ownership and management control, and hold an Indian patent and trademark for the brand to qualify for the incentives.
The scheme will also continue to offer contractual manufacturers incentives for domestic assembly, but a larger share of the incentives has been set aside for local component sourcing. Companies will be eligible for the incentives starting this fiscal year if they report an annual turnover of at least ₹5,000 crore.
Incentives range from 2.75% of a base quantum of sales (which 15% more than net smartphone sales in the previous fiscal year), 5% on additional sales above the base revenue, and an additional 1.5% if the manufacturers source five types of components from within the country for at least 25% of their total volume of phones made.
An empowered committee chaired by MeitY’s secretary will be in charge of the scheme, including assessing which companies qualify to receive manufacturing incentives and selecting India’s next phone brand.
