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Home Electronics: Technology, News & Trends India Slashes Import Tariffs on Smartphone Components to 10%

India Slashes Import Tariffs on Smartphone Components to 10%

Make in India
India is reducing import taxes on various mobile device components to boost smartphone production, and the implementation of tax cuts is expected to significantly boost the country's exports, which is good news for companies like Apple increasingly considering India as a global manufacturing base.

According to reports, the Indian Prime Minister Modi’s government recently announced a reduction in tariffs on plastic and metal mechanical parts, SIM card sockets, screws, and other components. The tariff rates for components such as battery covers, front covers, antennas, SIM card sockets, screws, conductive fabrics, and LCD screen conductive pads have been reduced from 15% to 10%.

Becoming a manufacturing powerhouse in consumer electronics is one of the primary economic objectives of the Modi government in India. In recent years, Modi has introduced a series of incentives or tax relief policies aimed at attracting global brands like Apple to establish factories or expand operations locally. Meanwhile, as part of the “Make in India” initiative, Modi is attempting to establish a domestic supplier ecosystem to ensure that India captures a larger portion of the value chain rather than just serving as an assembly location.

As tensions between China and the United States continue to escalate, Apple is exploring ways to reduce dependence on China. While the majority of iPhones have been produced in massive factories in China by its long-time partners, production lines in India have rapidly increased over the past few years.

Thanks to increased investments by Apple’s suppliers, iPhone production in India has grown rapidly. In 2023, the factory value of iPhones produced by Apple suppliers in India exceeded 1 trillion rupees (approximately $12 billion), and the value of exported iPhones, calculated on a Free on Board (FOB) basis, was 650 billion rupees. By market value, the production value of iPhones manufactured in India in 2023 is estimated to be between 1.5 trillion and 1.7 trillion rupees.

Apple has long sought to diversify its supply chain, and the “Make in India” initiative is one of its key strategies. Apple is seeking more suppliers in India and encouraging assembly partners like Foxconn and Wistron to expand their investments in the country. Apple’s goal is to manufacture 50 million iPhones in India by 2030, accounting for about 25% of global iPhone production. Currently, iPhones manufactured in India account for over 7% of global production.

Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA), stated in a release, “This is an important and welcome policy intervention by the government to enhance the competitiveness of mobile manufacturing in India. Scaling up and leveraging low input tariffs are key to transforming India into a global hub for electronic manufacturing and exports.”

ICEA’s members include Apple, suppliers like Foxconn and Wistron, and domestic contract manufacturers like Dixon Technologies. The association warned last month that higher tariffs could lead to a decrease in India’s cost competitiveness by as much as 7%.

The association cautioned last month that unless tariffs are lowered, growth in India’s mobile phone exports may slow down. It was revealed that the import tariffs on mobile phone components such as camera modules and chargers range from 2.5% to 20%, the highest among six manufacturing nations including China, Vietnam, Mexico, and Thailand. This appears to contradict Modi’s goal of making India a powerhouse in electronics manufacturing.

Lower import tariffs will evidently make assembly more cost-effective and may encourage manufacturers to increasingly produce devices for export, especially as domestic smartphone consumption in India slows down. Smartphone exports from India doubled in the fiscal year ending March 2023, reaching approximately $11 billion.

Tarun Pathak, research director at market research firm Counterpoint, stated that these changes will benefit OEM manufacturers in reducing costs, with the cost eventually passed on to the end customers in the short term. This move will help lower smartphone prices by 3% to 5%, thereby enhancing consumers’ purchasing power and making devices more affordable, especially in the entry-level and budget segments of the market.

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