Tuesday, October 8, 2024
Smartphone news

Neither buyers, nor makers, may benefit from mobile phone duties


New Delhi: The 2024 Union budget’s mobile phone import duty reduction has left the domestic smartphone industry in a bit of a limbo—with neither the localization narrative nor import of fully-made premium phones for consumers benefitting from the move. As a result, the reduced duties will have nearly no impact on buyers, who have already shunned organic smartphone purchases due to multiple factors—including higher prices and fewer innovative features at competitive pricing.

On 23 July, Union finance minister Nirmala Sitharaman’s seventh straight budget for FY25 reduced the import duties of mobile phones, printed circuit board assemblies (PCBA) of mobile phones, and their chargers—to 15% now, from 20%. Explaining the move, Sitharaman said, “With a 3x increase in domestic production and almost 100x jump in exports of mobile phones over the past six years, the Indian mobile phone industry has matured. In the interest of consumers, I now propose to reduce the BCD (basic customs duties) on mobile phone, mobile PCBA and mobile charger to 15%.”

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The move comes in contrast to the general narrative of the industry’s local manufacturing push, while stakeholders said that consumers are likely to see little to no benefits of the push. A case in point was proved by Apple, which on 26 July reduced the prices of its currently-latest range of iPhones in India.

Prices of the iPhones were reduced by 0.4-3.8% across Apple’s iPhone 15 and 15 Pro Max smartphones, with the most expensive variant receiving a price cut of 5,900. This, industry stakeholders said, is nearly immaterial—but is likely a sign of Apple’s influence on the Ministry of Electronics and Information Technology (Meity).

An industry veteran who consults with Meity on various electronics and semiconductor issues, told Mint on condition of anonymity that the move “does not make sense in the current narrative.”

“The move makes little to no difference for consumers, because there are only two grades of flagship phones that are still imported—Apple’s top-shelf iPhones, and the Google Pixel lineup. Of these, Apple’s phones are the only ones that have some real volume, but buyers of the top iPhones would not be bothered by a 4% price reduction at all. At the same time, this change in duties comes at a time when the Centre wants to localize more components to be made in India—thus making the reduction of duties hard to understand,” the consultant cited above said.

Navkendar Singh, associate vice-president at IDC India, said that even Apple’s pricing changes should not be directly attributed to the import duty revision. “With the festive season approaching, such pricing adjustments are a regular affair. The key issue here is that for consumers, this may not make a material difference since most smartphones are today assembled in India. Also, It is a little counter intuitive to the local manufacturing initiatives that the Centre has been trying to promote, and clearly shows that India’s local supply chain at present does not have enough depth to supply the requisite components for devices such as Apple’s top-shelf iPhones. There’s still more work to be done,” Singh added.

The local smartphone industry, in which over 95% of all devices are locally assembled, is on track to cross $40 billion in annual revenue this calendar year. However, volume growth of the industry has stalled since post-pandemic remote work and education demand fuelled smartphone and overall electronics sales in the country in 2021. This has caused ample concern among brands, but industry experts state that the import duty revision will be immaterial in addressing this consumer concern.

A senior executive with direct knowledge of developments within Samsung, India’s largest mobile phones brand by revenue, said on condition of anonymity that the brand’s overall manufacturing and pricing chain are unlikely to be perturbed by the duty change. “Samsung’s cutting-edge foldables, as well as its flagships, are all made out of its Noida, Uttar Pradesh factory—which means that the overall impact is near-minimal even from a PCBA standpoint,” the executive said.

However, others said that the move is more in line with ensuring that high customs duty rates do not set long-term precedent for the domestic economy, and is done with full knowledge at the Centre that its impact on the industry would be minimal.

“The import duty reduction is essential to ensure that India does not set a wrong precedent of regularizing high taxes, and keeps the nation a healthy economy from both a domestic manufacturing, as well as a global economic and investment standpoint. The 20% import duty was set in the short-term to boost local manufacturing, and that has served the purpose. At any rate, this import duty is today nearly immaterial since hardly any mobile phone, or PCBA or chargers, are imported,” said Pankaj Mohindroo, chairman of industry body, India Cellular and Electronics Association.




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