India Budget 2022 expectations: Fewer or no increase in component duties for smartphones
- The Indian smartphone industry expects fewer or no increase in component duties for smartphones.
- A 2.5 per cent customs duty on imports of electronics along with other factors led to an increase in smartphone prices.
- For homegrown brands in particular, a separate budget to help bring more Indian smartphone brands is expected.
AdvertisementIn the 2021 Union Budget, a 2.5 per cent customs duty was imposed on the import of electronics. This was in line with the Indian government’s larger plan to boost local manufacturing of electronics. Higher duties on components would lead to smartphone companies relying on local production in the country. But this also led to an increase in smartphone prices along with other factors such as the ongoing global chip shortage.
The Union Budget 2022 will be announced on February 1 by Finance Minister Nirmala Sitharam, and this year fewer or no increases in component duties are expected from the smartphone industry.
According to Hari Om Rai, chairman and managing director of phone maker Lava International, there are two major demands from the industry. One is to not impose any “further increase in component duties in this budget as it impacts our global competitiveness.” The other demand is to create a separate budget for homegrown brands.
“We are looking at creating economies of scale to create global competitiveness, [and] value-addition will follow,” Rai said.
Lava is among the few Indian smartphone brands that still operate and launch products. Other brands like Intex Technologies and Karbonn Mobiles shut shop primarily due to the influx of Chinese brands in the country. Lava launched its first 5G smartphone ‘Agni 5G’ in India last November. Another Indian smartphone brand still floating is Micromax, which made a comeback last year with new smartphones and wireless earbuds as well.
But the majority of the Indian smartphone market is occupied by Chinese brands including Xiaomi, Vivo, Realme and Oppo, according to quarterly data from Counterpoint Research. The reason is aggressive pricing and high-specced devices.
An example of this is Bengaluru-based Smartron, a tech brand backed by Sachin Tendulkar that silently exited the smartphone market in India. It launched budget smartphones under ₹10,000, and it also launched tablets under its product portfolio. The brand is now focusing on expanding its smart home segment with its IoT ecosystem ‘tronX’.
Another homegrown and Bengaluru-based startup Creo that tried its luck not only in smartphones but a custom OS as well. Founded by former Hike employees, Creo had launched the Mark 1 smartphone that ran on Android-based Fuel OS. The company soon decided to end production of the device and focus on Fuel OS.
According to Upasana Joshi, research manager, client devices at IDC India, Indian smartphone brands “continue to struggle in comparison to global or Chinese players owing to the large scale of business and acceptability in the market.”
One way of helping bring up more Indian smartphone brands would be a separate budget to build “National Champions” according to Rai.
Advertisement“To acquire strategic skills and become global Indian champions have a remarkable potential to create national wealth and become beacons of economic progress for India's long term technological and financial independence. It is highly imperative to develop and bolster Indian champions to bring strategic skills and technology and augment GDP, employment, and foreign exchange,” Rai said.
Another expectation is “huge investments to match production, marketing and operational spends in a consolidated smartphone market like India,” according to Joshi.
For the smartphone industry in general,
But we may continue to see smartphone prices increasing even in 2022. “IDC expects ASPs (average selling price) for smartphones to only rise further and peak annually,” Joshi said.
Regardless, as per research firm Counterpoint, India's smartphone market revenue crossed $38 billion in 2021 with 27 per cent (on-year) growth, as shipments grew 11 per cent to reach 169 million units. It would be interesting to see how the upcoming budget will aid the existing Indian manufacturers to bolster their share to survive, unlike their counterparts that had to quit the business.
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