Niket Shah, Chief Investment Officer at Motilal Oswal Mutual Fund, says a ₹1.5-lakh crore opportunity is ripe for the plucking for India in the mobile phone manufacturing space.
Speaking during a CNBC-TV18 special on Wednesday, December 18, Shah said the government’s production-linked incentive (PLI) schemes and a surge in domestic production, coupled with India’s semiconductor aspirations, has presented the country with a golden opportunity.
Shah noted how India and China were on the same footing in the 1970s, and how China went on to become a global manufacturing powerhouse — the country is home to 18% of the world’s population and contributes 18% to global GDP, while India — with 17% of the world’s population — contributes around 3%. Shah believes the government is on the right track.
“I think the (really big) move that the government has done in terms of PLI, on the manufacturing front, say, mobile PLI, components PLI — which is likely to (be) announced shortly — (has helped) ramp up merchandise export from India,” Shah said, adding that Apple is expected to account for $10 billion of India’s mobile phone manufacturing pie. “This used to be zero … some of these PLI initiatives are going to come in handy as we move forward.”
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In 2014, 78% of mobile phones sold in India were imported. Today, the country has achieved a net export position of 25%, which Shah says is thanks to PLI schemes that incentivise local production.
“Vietnam’s exports this year are about $120 billion, and India has a lot of catching up to do,” Shah said, pointing out that in 2013, India and Vietnam were at similar levels of exports. However, with anti-China sentiment growing globally and companies looking to diversify their supply chains, Shah believes this is the best time for India to scale up its manufacturing capabilities.
The semiconductor challenge
While India has made impressive strides in mobile phone manufacturing, Shah said 50% of the ₹3 lakh crore mobile phone component market is tied to semiconductors — a space where India currently plays no significant role.
The global semiconductor market, valued at approximately $466 billion (₹35 lakh crore) in 2020, is projected to grow to around $656 billion (₹49 lakh crore) by 2025. However, Shah said he expects India’s first semiconductor manufacturing facility — a ₹91,000-crore joint venture between Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) coming up in Dholera, Gujarat — to become operational only by FY28.
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“We are now getting into manufacturing in a meaningful fashion… the first signs of manufacturing will be visible now, with PLI of electronic component manufacturing going live… you will also see that in other categories… all these moves will play a big role to change the unit economics of manufacturing in India,” Shah said.
According to Shah, the remainder of the component market, which includes displays, camera modules, and plastic components, is worth ₹1.5 lakh crore and presents a significant opportunity for Indian manufacturers.
“I think there is a reasonable amount of money to be made, but you have to be ahead of the curve,” Shah said, “…identify companies which have those capabilities, like, for example, if you look at mobile phone, the real essence is display, camera modules and, to some extent, plastic component manufacturing, which is quite relevant.”
India’s semiconductor push
In 2022, the government launched the India Semiconductor Mission (ISM) with an outlay of ₹76,000 crore, aimed at building a robust domestic semiconductor ecosystem.
In September, the US Department of State announced a strategic partnership with the India Semiconductor Mission to enhance and diversify the global semiconductor ecosystem.
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