India Cuts Import Tax On Smartphone Parts: Will Handset Prices Drop?

In a bid to strengthen its position as a global smartphone manufacturing hub, India has reduced import duty on key components used in mobile phone production. The Finance Ministry's recent announcement brings down the import duty from 15% to 10% on vital components like battery covers, main camera lenses, and other mechanical items made of plastic and metal.

This move is anticipated to benefit major players such as Apple and Xiaomi, both actively manufacturing in India.

Prime Minister Narendra Modi's push to position India as a smartphone manufacturing destination has prompted companies like Samsung Electronics and Vivo to expand their assembly operations within the country.

The decision addresses concerns within the industry, as India's import duties on mobile phone parts were comparatively higher than those of similar manufacturing nations. The reduction applies to a range of components, including GSM antennas, crucial for mobile phone assembly.

Rajat Mohan, director at tax consultancy firm MOORE Singhi, stated that "Duty cuts on import of mobile phone parts would help big global manufacturers to set up large scale mobile assembly lines in India, and substantially increase exports of mobile phones," according to Reuters.

India Cellular and Electronics Association Reacts

The India Cellular and Electronics Association (ICEA) welcomed the move, emphasising its potential to enhance the competitiveness of mobile phone manufacturing in the country.

Current estimates suggest that mobile phone exports from India doubled year-on-year, reaching $11.1 billion in the fiscal year ending March 2023, with projections indicating further growth to $15 billion in the current fiscal year.

Pankaj Mohindroo, chairman of ICEA, said, “building scale, riding on low input tariffs, is key to transforming India into a global hub for electronics manufacturing and exports,” as per the Economic Times. 

Sunil Vachani, head of Dixon Technologies, which makes phones for Motorola, Samsung, and Xiaomi, believes that India will become more competitive globally due to this decision.

What is the goal?

According to Counterpoint Research, the goal is to boost demand in the smartphone industry. Prachir Singh, a senior analyst at Counterpoint Research, thinks it will help manufacturers cut costs, leading to a potential 3-5% drop in smartphone prices for locally consumed handsets.

However, IDC, another market research firm, holds a different perspective, expecting a minimal impact on the end prices of mobile phones.

Upasana Joshi, research manager at IDC, commented, "Considering the current list, it seems that only a few basic components are covered. Therefore, the reduction in end pricing may fall in the range of 1-2%, or more realistically, it might not impact consumer pricing at all."

This decision aligns with India's broader goal of attracting investments in manufacturing, positioning itself as a global player in the technology and electronics industry. The move is expected to boost exports, create job opportunities, and foster a thriving ecosystem for mobile phone manufacturing in India.