Is India Losing Ground to China and Vietnam in Smartphone Export Market?

In a bid to solidify its position as a major smartphone export hub, India faces a critical juncture as it risks losing ground to competitors like China and Vietnam. The urgency to act swiftly was underscored by the Deputy IT Minister, according to government documents obtained by Reuters.

Mobile data user in Gulf smartphone market
Image by marymarkevich on Freepik

Prime Minister Narendra Modi’s ambitious plans to bolster the economy and generate employment hinge significantly on smartphone manufacturing, with hopes of attracting industry giants such as Apple, Foxconn, and Samsung to India, the world’s second-largest mobile market. However, concerns have emerged regarding the country’s ability to compete on a global scale, primarily due to high tariffs, news report said.

Documents reveal that while financial incentives have contributed to the growth of production, India’s high tariffs have become a stumbling block for companies considering diversifying their supply chains away from China. The result has been a surge in exports from nations like Vietnam, Thailand, and Mexico, which offer more favorable tariff structures.

In a communication dated January 3, Indian Deputy IT Minister Rajeev Chandrasekhar highlighted the urgent need to address the issue, emphasizing India’s high production costs compared to other manufacturing destinations. Rajeev Chandrasekhar warned that failure to act promptly could result in a significant shift of supply chains to competitor nations.

Despite efforts to boost local manufacturing, India continues to rely on imports for many high-end smartphone components, subjecting them to steep tariffs and inflating overall costs. U.S. Ambassador Eric Garcetti echoed concerns over the impact of tariffs, stating that they could deter foreign investments and limit market growth.

Rajeev Chandrasekhar’s documents underscored the stark contrast in export figures between India, China, and Vietnam, emphasizing the need for India to align its tariff policies with those of its competitors to attract global supply chains effectively.

While India aims to capture 25 percent of global electronics manufacturing by 2029, current figures indicate a stake of just 4 percent. Chandrasekhar’s appeal to the Finance Minister for tariff reductions in the annual budget reflects the government’s recognition of the urgency to address the issue.

However, despite some concessions, many tariff cut requests were not approved in the recent budget. India still imposes a 20 percent tax on crucial smartphone components, hindering efforts to compete with more tariff-friendly nations.

With the domestic market nearing saturation, Rajeev Chandrasekhar emphasized the imperative of shifting focus towards exports and implementing a new tariff strategy to realize India’s ambitious production goals. The urgency to adapt to evolving market dynamics is clear, as India seeks to establish itself as a formidable player in the global smartphone export market.