Import Duty Cut On Mobile Parts May Lead To Drop In Entry-Level Smartphone Prices: Report

The revised import duty, effective as of January 30, covers various components such as battery enclosures, primary lenses, rear covers, and mechanical components.

The move is seen as a positive step for manufacturers.

Source : Praveen Raj/Pixabay

The Indian government has decided to reduce import duties on components used in mobile phone manufacturing from 15 per cent to 10 per cent, potentially leading to a decrease in prices for entry and budget smartphones, industry experts have noted, as reported by Moneycontrol.

The move is seen as a positive step for manufacturers, as it is expected to enhance the competitiveness of the Indian market against counterparts like Vietnam and China. The revised import duty, effective as of January 30, covers various components such as battery enclosures, primary lenses, rear covers, and mechanical components made from a combination of plastic and metal, as well as SIM sockets.

Union Minister for Electronics & Information Technology, Ashwini Vaishnaw says, "This rationalisation of custom duties brings much-needed certainty and clarity for the industry and in customs processes. I thank Hon’ble PM & FM for this step towards strengthening the mobile phone… pic.twitter.com/bAb6MOS1I8

— ANI (@ANI) January 31, 2024

As per the report, according to Prachir Singh, a senior analyst at Counterpoint Research, the decision is likely to benefit original equipment makers (OEMs) by reducing costs, and these savings may be passed on to end customers in the short term, as per the Moneycontrol report. Singh suggests that smartphone prices could potentially witness a decline of 3-5 per cent, especially in the entry and budget segments, providing relief to consumers affected by currency fluctuations and price increases over the past year.

Faisal Kawoosa, founder and analyst at TechArc, believes that while the reduction in import duties on components, which constitute 20-25 per cent of the Bill of Materials (BOM), should lead to cost reduction, OEMs may not be eager to transfer these savings directly to consumers. The flexibility exists for manufacturers to utilise the benefits in other areas, such as increasing channel margins.

Navkendar Singh, Associate Vice President of Devices Research at IDC India, South Asia & ANZ, points out that the impact on the Bill of Materials (BOM) may vary based on whether key high-value components are covered under the order. Singh suggests a potential reduction in end pricing by 1-2 per cent, or even no impact on consumer pricing at all, depending on the components included.

Singh from IDC believes that the reduction in import duties, particularly on major components, is expected to alleviate the cost pressure on ecosystem vendors. However, he emphasises that for a significant impact on smartphone exports from India, production costs need to be lowered through reduced import duties and export subsidies.

Pankaj Mohindroo, Chairman of the Indian Cellular and Electronics Association (ICEA), applauds the government's move, stating that it is a critical intervention to enhance competitiveness in mobile manufacturing in India. Mohindroo highlights the progress of the electronics industry, especially mobiles, which constitute over 52 per cent of electronics exports.

Prabhu Ram, Head of Industry Intelligence Group at CyberMedia Research (CMR), sees the decision as a positive step for the domestic smartphone industry. He anticipates that it will boost production, make Indian phones more competitive for exports, and further strengthen the local components ecosystem, aligning with the broader policy focus on promoting "Made in India" for the global market.