Smartphones have become very expensive compared to what they cost two years ago. This is due to the supply chain issues caused by the pandemic. Costs to consumers are very unlikely to return to older price levels, but costs should decrease to some extent. The demand for semiconductors is also too high, which has also led to an overall increase in the production of smartphones. There are still shortages of semiconductors, and governments around the world are inviting major manufacturers to make chips locally to boost production and also lower the cost of electronics.
On February 1, 2023, Finance Minister Nirmala Sitharaman announced measures that would reduce the cost of manufacturing smartphones in the country. During her budget speech, Sitharaman said “to further deepen domestic value-added in cellphone manufacturing, a proposal for tariff relief on the import of certain parts and inputs.”
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This would ensure that the cost of manufacturing smartphones would decrease. It would be an incentive for the global players to manufacture devices in India, which already offers huge benefits under the Production Linked Incentive (PLI) program for smartphones. Companies like Apple, Samsung and others are already manufacturing devices in India. This government move would further encourage global smartphone players to manufacture devices locally.
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As more companies set up manufacturing facilities in India, the youth and local talent would have more opportunities to get jobs and contribute to the country’s economy. The PLI system has already been appreciated by industry players and economists. Even the telecoms want that.
The more 5G phones that are produced locally and made available to the public at lower costs, the faster telcos can scale their 5G network business as well. Overall, India will benefit from this government decision. The cheaper smartphones become, the faster Telekom’s business grows. It would also allow digital application providers to sell and resell services to a larger market.
But as I said, the prices would not fall dramatically. The flagships would still be in the premium and ultra-premium segments. It wouldn’t make sense for companies to lower the price from a point where customers are already a little comfortable.
