Smartphone industry seeks tariff reduction

Smartphone makers have urged the Finance Ministry to lower custom duties on crucial components in the full budget for financial year 2024-25. Sources suggest that the smartphone and laptop makers are meeting with the Ministry of Electronics and IT as well as the Finance Ministry to get duties down on components such as printed circuit board assembly (PCBA) and certain sub assemblies. 

This means that iPhone makers, Apple, Samsung and Xiaomi are hoping for further cuts in import duties in the final budget for 2024-25 which will come out in June or July.

Import duties

On January 31st the Centre cut import duties on certain mechanical components such as battery covers, main camera lenses, back covers to zero, from the earlier 7 per cent import duty on these components. 

Responding to businessline’s queries, Pankaj Mohindroo, Chairman of India Cellular and Electronics Association (ICEA) explained, “we are recommending rationalization of duties on PCBAs from 20 per cent to 15 per cent. This rationalisation will have no impact whatsoever on domestic manufacturing. We produce most of the PCBAs and charger adaptors required for mobile phones are also produced domestically. Therefore it will have no impact on the revenue for the government” 

Mohindroo further added that they are also seeking removal of 2.5 per cent duty on subassemblies like PCBA parts connectors and camera modules, “these tariffs of 2.5 per cent don’t protect the domestic industry as intended but create a burden on legitimate manufacturers,” he said. 

Cost rationalisation

While ICEA argues that this rationalisation will have no impact on domestic manufacturing, an industry expert explained to businessline that at present India imports 100 per cent of its printed circuit boards, as that ecosystem has not been localised. “An estimated $2 billion PCBs (printed circuit boards) are imported every year,” the expert explained. 

Further reduction in import duties will entice global smartphone brands such as Apple and Samsung to shift their facilities to India further. 

As of 2023, India has become the 2nd largest mobile manufacturing nation in the world. Producing more than 2 billion smartphone units locally. While local manufacturing for mobile balloons, smartphone makers have not localized end to end manufacturing in India.

Local value addition still remains low, and India is still seen as an assembly market, it could be as low as 15 per cent of the total smartphone value according to some estimates. Reducing import duties encourage the existing import and assembly paradigm according to some experts. 

Value addition

Tarun Pathak, Research Director at Counterpoint Research added, “The true local value addition in India mobile phone sector is around 16 per cent. While the Phased manufacturing programme did localise some components, the high-end component or even sub-components of some parts are still imported (even with the duty rise). This is due to the lack of local component ecosystem in India.

Especially in bare PCBs or battery cells that together contribute to around 7-8 per cent of the BoM of a phone. However, we believe as the larger semi-conductor ecosystem localises in India. in the next decade, such components are likely to be localized here as well.”
 

Source:The Hindu Business Line