According to a Canalys report, the Union budget’s BCD reductions on smartphones and electronics may boost India’s manufacturing competitiveness, attract global investment, and challenge Vietnam and China.
In the Union budget this time, the Indian government proposed reducing the basic customs duty on mobile phones, PCBs, and chargers from 20% to 15% and exempting 5% duties on essential minerals. As per a report published by Canalys, this initiative may enhance manufacturing competitiveness, attract global players, and encourage long-term investments in the smartphone sector to better compete with Vietnam and China.
The government also extended duty exemptions for inputs and raw materials used in smartphone manufacturing and capital goods in the electronics sector. The report inferred that this move would benefit the entire smartphone value chain.
The lower costs will support local production for entrant brands like HONOR, enabling global Android brands to push premium devices and may lead Apple to lower prices. The premium segment could see increased spending despite stable overall demand.
Canalys assessed the impact of the Indian government’s budget decisions on the smartphone market and highlighted the following points:
Apple’s impact
Apple will benefit from reduced import duties on Pro and Pro Max models, potentially passing some cost savings to consumers indirectly. Currently, these models account for only 15% of shipments, and semi-knocked down (SKD) manufacturing in India is complex due to component fitting issues with China.
Although the import duty remains high at 15% plus additional charges, Apple is expected to offer more promotional discounts rather than direct price cuts for the new models launching in September 2024.
Opportunity for Android brands
The duty cuts will allow Android brands to see aggressive pricing for high-end devices, such as Flip and Fold models, which are crucial for market competitiveness. Devices like the Motorola Razr 40 and TECNO V Flip, priced between ₹35,000 and ₹45,000, are set to see more entry-level models and price reductions, especially for foldables. Consumer interest in foldables is growing, with 32% showing interest in purchasing such devices.
Budget segment challenges
The report highlighted that despite the overall cost reductions, budget smartphones are unlikely to see price drops immediately. High operational costs, channel diversification, and expensive components contribute to stable pricing.
Consumers are currently willing to accept higher prices due to financing options and rising disposable income. Long-term benefits may arise as brands become more competitive, but price adjustments will depend on individual strategies.
Manufacturing and export focus
The Indian government focuses on enhancing manufacturing efficiency and boosting exports. In 2024, India exported 30.5 million smartphones. Major exports include models like the iPhone 14/15 and Galaxy A55 5G, primarily to the US and UAE.
While local assembly faces cost challenges compared to China, upcoming policy reviews are expected to simplify export processes and improve budget model competitiveness.
Finally, the report concluded that overall consumer demand will remain stable since 60% of market shipments fall under the sub-$200 price range, though the premium segment is expected to experience increased consumer spending.
