Samsung is most likely to shift a large part of its global smartphone production to India from countries like Vietnam as the Korean smartphone maker prepares to increase its investments and commitment to the world’s second-largest market leveraging the Indian government’s new Production Linked Incentive (PLI) scheme.
The Korean company is currently finalising its plan to make mobile devices worth over $40 billion in India over the next five years leveraging the scheme and has already informed the Indian government about this newly devised plan.
“…out of this, phones with a factory price of over $200 could account for over $25 billion.…most phones manufactured in this category will be exported,” a senior government official was quoted as saying by the Economic Times.
These $200 plus factory price mobile phones currently account for just 2% of Samsung’s exports from India. Under the plan, this share will significantly rise over the next few years.
Samsung already has a large mobile handset manufacturing facility in Noida, which is nearby to India’s capital New Delhi. The company claims that the Noida factory in Uttar Pradesh is its largest facility in the world, which also exports to other markets globally.
The handset maker’s manufacturing setup in Vietnam currently fulfills around 50% of the global demand. The company already has other factories in Brazil and Indonesia, while it has started the process of shutting down the facility in South Korea due to steep labour costs.
The development comes quickly after iPhone maker Apple’s partners deciding to increase investment in India leveraging the Indian government’s PLI scheme to expand manufacturing for local and global needs.
The new entrant Pegatron, which is Apple’s second-largest contract manufacturer, has already applied for the PLI scheme and is planning to establish a new manufacturing facility in India and has already registered a local subsidiary in the country.
Foxconn’s planned $1 billion investment in India to expand its factory in Tamil Nadu, which already makes the iPhone XR. Wistron is also increasing its investment in India and has already begun hiring to support the production of new iPhone models.
Apple’s three partners, Samsung and 19 other global and local companies recently committed investments worth Rs11,000 crore ($1.49 billion) while applying for the government’s PLI scheme. The scheme aims to establish India as a smartphone export hub.
“Samsung’s move would also help plug a major loophole in India’s efforts to find ways to eschew cheap imports from Association of Southeast Asian Nations (ASEAN) countries to India, owing to the Free Trade Agreement the country has with the trading block,” the report said.
According to the India Cellular & Electronics Association (ICEA), which represents Apple and Chinese players like Xiaomi, Oppo and Vivo, the market size of smartphones in India in 2019 was around Rs 2 lakh crore ($27 billion).
Samsung was the second largest Indian smartphone brand with 26% shipment volume market share in the April-June quarter, as per a recent report by Counterpoint Research. The company also became the second-largest online handset brand, which was its best performance in many years given that it is largely focused in the offline retail channel.