India is removing barriers to become a trusted global the supply chain Option; And according to Bank of America, mobile phone manufacturing in the country is a success story. The bank released a report co-authored by Amish Shah, managing director and head of India research at Bank of America. According to the report, there has been a significant jump in India’s mobile phone exports recently, which grabbed global headlines and established the country as a reliable option in the global supply chain for mobile phones and electronics. Exports have grown at an impressive rate, reaching 2.2x year-over-year and totaling a significant $1 billion per month.
India: Emerging Supply Chain Options
India’s mobile phone exports (2.2x YoY/$1bn/month) recently grabbed global headlines. Export mix in local production also increased from 16% to 25% YoY. “We believe that India can be a reliable global supply chain option for mobile phones/electronics. There is potential for success in other areas as well,” the report said. It listed factors that India’s efforts to cut imports/increase exports could improve its macro-outlook, specifically: reduction in current account deficit by $112 billion over 5 years; Provide stability to rates and INR; Accelerating growth for capex/credit/logistics sector. Also, it can help diversify supply chains for global brands/contract manufacturing companies.
Electronics: $158 billion market, 1/5th trade deficit; localized
India consumed $158bn of electronics in FY23 (11% CAGR over FY17-23), the supply for which was largely met by imports. At $77 billion, it is India’s second largest import bill and accounts for 1/5 of its trade deficit. Therefore, in line with India’s overarching goal of reducing imports/expanding exports, the sector has seen increased policy focus. To push localisation/exports, nearly half of the $37 billion Production-Linked Incentives (PLI) has been allocated to the sector.
Mobile Phones: A Success Story; India prioritizing scale
Mobile phones account for 21.5% of India’s electronics household demand pie and are growing rapidly at 15% CAGR. Mobiles’ PLI scheme to fix India’s production cost gap vs counterparts, among other policies already a success: Since FY17, mobile phone production/exports have grown 3.9x/65x, while imports is below one third. A major criticism is India’s low production value at 18% (China/Vietnam: 38%/24%). However, our analysis shows that 70% of mobile phone cost (display/memory/chips) is difficult to localize in the near term as it requires large capital expenditure and high-level technology. An analysis of the China/Vietnam visit also shows that a high level of focus initially helped them increase the value added ratio in the long run.
India will meet its FY26 targets: 3x production, 5x exports
Given India’s focus on scale, its PLI plan targets large players: SAMSUNG and makes contracts Apple, which contributed 80% of its $11 billion mobile phone exports in FY23. We are confident that India can meet its ambitious target: 3x domestic production/5x exports at $126bn/$55bn by FY26, which over time can help build a vendor ecosystem. Policy stability, labor productivity and last mile connectivity are key factors to watch.
Apple may shift 18% iPhone production to India by FY25
Targets under PLI plan could prompt Apple to move at least 18% globally iphone Production in India by FY25 (7% over FY23, negligible pre-PLI). Apple’s share could increase further if its sellers are encouraged to expand in India in a big way. Apple could see India’s mobile phone market share gains (now 4%) due to improving affordability of locally manufactured iPhones and a shift in favor of premium products. We see India contributing 5% to Apple’s global iPhone sales by CY25 and registering a 21% CAGR over CY22-25.
India: Emerging Supply Chain Options
India’s mobile phone exports (2.2x YoY/$1bn/month) recently grabbed global headlines. Export mix in local production also increased from 16% to 25% YoY. “We believe that India can be a reliable global supply chain option for mobile phones/electronics. There is potential for success in other areas as well,” the report said. It listed factors that India’s efforts to cut imports/increase exports could improve its macro-outlook, specifically: reduction in current account deficit by $112 billion over 5 years; Provide stability to rates and INR; Accelerating growth for capex/credit/logistics sector. Also, it can help diversify supply chains for global brands/contract manufacturing companies.
Electronics: $158 billion market, 1/5th trade deficit; localized
India consumed $158bn of electronics in FY23 (11% CAGR over FY17-23), the supply for which was largely met by imports. At $77 billion, it is India’s second largest import bill and accounts for 1/5 of its trade deficit. Therefore, in line with India’s overarching goal of reducing imports/expanding exports, the sector has seen increased policy focus. To push localisation/exports, nearly half of the $37 billion Production-Linked Incentives (PLI) has been allocated to the sector.
Mobile Phones: A Success Story; India prioritizing scale
Mobile phones account for 21.5% of India’s electronics household demand pie and are growing rapidly at 15% CAGR. Mobiles’ PLI scheme to fix India’s production cost gap vs counterparts, among other policies already a success: Since FY17, mobile phone production/exports have grown 3.9x/65x, while imports is below one third. A major criticism is India’s low production value at 18% (China/Vietnam: 38%/24%). However, our analysis shows that 70% of mobile phone cost (display/memory/chips) is difficult to localize in the near term as it requires large capital expenditure and high-level technology. An analysis of the China/Vietnam visit also shows that a high level of focus initially helped them increase the value added ratio in the long run.
India will meet its FY26 targets: 3x production, 5x exports
Given India’s focus on scale, its PLI plan targets large players: SAMSUNG and makes contracts Apple, which contributed 80% of its $11 billion mobile phone exports in FY23. We are confident that India can meet its ambitious target: 3x domestic production/5x exports at $126bn/$55bn by FY26, which over time can help build a vendor ecosystem. Policy stability, labor productivity and last mile connectivity are key factors to watch.
Apple may shift 18% iPhone production to India by FY25
Targets under PLI plan could prompt Apple to move at least 18% globally iphone Production in India by FY25 (7% over FY23, negligible pre-PLI). Apple’s share could increase further if its sellers are encouraged to expand in India in a big way. Apple could see India’s mobile phone market share gains (now 4%) due to improving affordability of locally manufactured iPhones and a shift in favor of premium products. We see India contributing 5% to Apple’s global iPhone sales by CY25 and registering a 21% CAGR over CY22-25.