Surge in Smartphone Exports from India Show Incentive Schemes Work
In the first two months of 2023, smartphone exports from India surpassed the US$2 billion mark, indicating strong government support and the growth of a local industrial ecosystem.
Major technology companies, including Apple and Samsung, have played a crucial role in boosting these mobile exports through their contract manufacturers in India. These two companies account for nearly 90 percent of Indian smartphone exports since April 2022. Apple’s iPhone contract manufacturers in India are Foxconn, Wistron, and Pegatron – who account for approximately 55 percent of the exports, while Samsung makes up the rest at 35 percent. Recently, Samsung established its largest manufacturing plant in Uttar Pradesh, where it produces most of its models sold in India and abroad, including premium foldable phones.
According to data from the India Cellular and Electronics Association (ICEA), the total export value of India’s smartphone shipments exceeded US$9 billion between April 2022 and February 2023, as reported by The Economic Times. This value is almost twice that of the corresponding period last year. Since September 2022, India’s smartphone makers have been exporting devices worth about US$1 billion per month.
As per the ICEA, Indian origin devices are being exported to the UK, Netherlands, Austria, and Italy besides MENA and South American markets. Exports account for 24 percent of the total mobile device production in India in FY 2023, up from 16 percent the previous fiscal.
India is expected to produce smartphones worth US$40 billion in FY 2023, showing a 20 percent growth year-on-year. Out of these, about US$10 billion worth of devices will head to export markets.
Upward tick in India’s overall electronics exports
India’s electronics exports overall is projected to grow 36.8 percent to cross INR 1.6 trillion (US$19.36 billion) end of FY 2023 (ICEA estimate, January 2023).
Between April to December 2022, India electronics exports totaled INR 1.3 trillion (US$16.13 billion), up from INR 817 billion (US$9.89 billion) in 2021.
India’s electronics exports in 2021-22 amounted to INR 1.16 trillion (US$14.15 billion), of which mobile phone exports were INR 450 billion (US$5.44 billion).
Over the past decade, India has been working diligently to build a domestics electronics manufacturing ecosystem, leveraging its vast labor market and thriving IT services sector. As of the end of FY 2022-2023, local value addition could reach 25 percent, according to an ICEA-ICRIER report.
The recent surge in export-oriented production can be attributed to the central government’s new production-linked incentive (PLI) schemes. Even Apple’s contract manufacturers and Samsung have applied for PLI scheme benefits.
Foreign companies and investors in this space can expect continued government support – provided they meet clearly stipulated targets, such as in the PLI schemes. These include scope of investment, employment creation, domestic value addition, and sales.
India’s efforts to attract greater foreign investment also align with the ‘China Plus One’ strategy. This is where companies avoid being solely reliant on the Chinese market for production and sourcing.
In light of growing US-China tensions and trends towards decoupling in the technology sector, many companies will increasingly diversify their China manufacturing footprint or spread out their supply chains across multiple locations – to deal with western and non-western market expectations.
This may include efforts at nearshoring, where business gets transferred to a nearby location (Mexico in North America, for example) and friend shoring or allyshoring (manufacturing or sourcing from friendly countries that share similar values). Regardless, India is well poised to reap the rewards by building a stable and cost competitive industrial ecosystem in key states as well constructing connectivity infrastructure to improve last mile linkages. Recent efforts by New Delhi to kick-start semiconductor manufacturing at home is slowly garnering foreign investor interest, including from the US.