Mobile phones manufacturing and industrial policy

FT has this graphic that shows the composition of mobile phones manufacturers in India, the world's second biggest smart phone market.

Four of the top five smart phone sellers today are Chinese, an inversion of the market position till recently. The good thing with the "Make in India" push has been this,

The proportion of locally assembled phones jumped from 30 per cent in 2014 to 80 per cent by early 2016, estimates Bipin Sapra, a partner at Ernst & Young.

Smart industrial policy has helped,

Over the past 18 months, the government has rolled out supplementary import duties to incentivise the domestic manufacturing of components — focusing initially on simple parts with low investment requirements. February’s budget extended this policy to printed circuit boards, a key component that lies at the heart of every smartphone... The new measures are also convincing foreign groups to deepen their manufacturing work in India, says Manu Kumar Jain, country head for Chinese smartphone maker Xiaomi... Today, more than 95 per cent of Xiaomi phones sold in India are made at local facilities run for it by the Taiwanese contract manufacturer Foxconn, helping it to achieve Indian smartphone sales second only to Samsung during the final quarter of 2016.

But the concern,

For many phones in India, Nitin Kunkolienker, vice-president of the industry lobby group MAIT says, “local value addition is not more than 2 or 3 per cent”, with some producers putting together Chinese kits imported in near-complete form. “It’s just screwdriver technology,” he says.

The only surprising thing is that it is the FT, which is implicitly endorsing more industrial policy,

But this growth was driven... largely by a “differential duty” structure that pushed up the cost of imports relative to domestically assembled phones. This has now been superseded by India’s landmark, all-encompassing goods and services tax that came into force at midnight last Friday. From now on, according to policy announced so far, an effective tax of 12 per cent will apply to imported and locally assembled phones alike. The government calmed fears in the small hours of Saturday morning, announcing a 10 per cent duty on imported phones that will maintain the fiscal incentive to produce onshore... But by maintaining — and strengthening — a differential duty regime on imported products, the government can push foreign groups to do more of their manufacturing in India, while eroding the advantages that they enjoy over local brands from their huge international operations, argues Shubhajit Sen, marketing head for Micromax.