Tata's move will help India consolidate its position as original equipment manufacturer (OEM) as 300 million phones were assembled in India in 2019 alone, making it the second-largest mobile phone manufacturer in the world after China.
Tata Electronics, the wholly-owned subsidiary of salt-to-software conglomerate Tata Sons, has been allotted 500 acres by Tamil Nadu Industrial Development Corporation (TIDCO) to set up the plant to manufacture mobile phones and components.
The number of mobile phone manufacturing/assembling plants has increased from just two in 2014 to around 100 in 2019. With companies including Apple looking to have another unit outside China, Tata Group plans to capitalize on this opportunity to woo mobile makers such as Apple to alternative production sites in India as they seek to diversify out of China.
Besides catering to Apple's sourcing needs, Tata's will also try to meet other global OEMs' requirements to promote India as an alternative to China in becoming a global manufacturing hub for electronics manufacturing.
Titan Engineering and Automation Ltd (TEAL), Titan Co Ltd's precision engineering division, is learned to have been roped in to provide the expertise for this project, which will have a staff strength of 18,000 by October 2021, mostly women.
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Tata has started a discussion with the bankers to raise about $1 billion or Rs 7400 crore for the project through external commercial borrowings (ECB) and fund the rest through internal accruals. A mail sent to Tata Sons spokesperson remained unanswered till the time of publishing.
The government has got a good response for its PLI scheme from global players such as Wistron, Pegatron, Foxconn and Hon Hai from Taiwan, Samsung from South Korea, and companies from Germany and Austria. Foxconn, Hon Hai, Wistron, and Pegatron are contract manufacturers for Apple's iPhones.
Among Indian firms, Lava, Dixon, Micromax, Padget Electronics, Sojo, UTL, and Optiemus have applied for benefits under the government's PLI scheme.
Industry body India Cellular and Electronics Association (ICEA), which represents top mobile phone makers, including Apple, Foxconn, Wistron, and Lava, anticipates mobile phone companies will increase device production in the country to around Rs 27.5 lakh crore under the PLI scheme, well above the government's expectation of over Rs 11 lakh crore.
India is the second-largest smartphone market globally, with 150 million smartphone shipments in 2019 (11% of total global smartphone shipments).
The country still has about 350 million feature phone users, who eventually may upgrade to a smartphone given that the handset replacement cycle for Indian smartphones is less than two years. This would likely keep the demand for smartphones in India high.