Slash duties on smartphone parts, electronics lobby tells government

Indian Cellular Electronics Association called on the Union govt to slash import duties for smartphone parts in the upcoming Union Budget.

The Indian Cellular Electronics Association, which represents domestic electronics manufacturers, called on the Union government to slash import duties for smartphone parts in the upcoming Union Budget, arguing that doing so would boost export volumes by allowing assembly firms to purchase a higher quantity of components. These tariffs are effectively higher than those in place in Vietnam and China, the ICEA pointed out in a press release.

The main reason this demand is being made now is that the market for phones assembled in India is saturating. “India’s domestic production [of smartphones] exceeds domestic demand, while simultaneously domestic smartphone demand except in the very high-end phones is slowing down,” the industry body said, pointing to a plateauing of demand for new handsets.

China and Vietnam have lower tariffs for smartphone components, and they also import these parts heavily from countries they have free trade agreements with, or do manufacturing in duty-free ‘bonded zones,’ bringing assembly units’ expenses on parts even further. 

The demand marks a shift for Indian assembly units, which had earlier advocated for import tariffs so that they would be able to compete with foreign firms. “We were in the ICU,” Pankaj Mohindroo, ICEA’s chairperson said. “Now, things have changed.” Most smartphones sold in India are assembled in India, he pointed out, with the market going “from 78% import dependency in revenue terms in 2014-15 to only 4% in 2022-23”. 

Mr. Mohindroo indicated that the motivation to impose duties on smartphone parts was not particularly compelling anymore — a domestic component ecosystem would come into place once there were greater volumes of handsets being assembled in India, something he said lower tariffs would facilitate. Domestic suppliers were actually taking advantage of tariff-impacted imports by expanding their prices until there was a barely “noticeable difference” between imported and domestically made components, an outcome he characterised as anti-competitive. 

The ICEA recommended a “glidepath” that would transition tariffs for smartphone parts in the 20% slab to 15%, fifteen percent to 10%, and eliminate tariffs altogether. “To position India as a global manufacturing powerhouse, it is strategic to focus on the most impactful aspects of smartphone production rather than aiming to locally produce every single one of the components,” ICEA said in its report to the government.