Samsung Can Stop Manufacturing Smartphones In India: What Is The Issue Here?

The issue here is Phased Manufacturing Programme (PMP) under Make in India initiative.

Samsung may stop manufacturing in India
Samsung may stop manufacturing in India

Samsung, world’s one of the largest manufacturers of electronic products and gadgets may stop manufacturing their smartphones in India. 

In case Samsung reduces production or stops it entirely, then it will be a major set back for Govt.’s Make in India initiative.

What is the main issue here?

Samsung: We Will Have To Stop Production in India

As per reports coming in, Samsung is concerned over the changes made to the Make in India program, which directly affects their manufacturing operations in India.

And in order to showcase their protest, they have written a letter to the Govt., saying that “we will have to stop the manufacturing of Samsung flagship products (Note 9 and S9) in India,”

Besides, Samsung has also said that if the promises made with regards to import duties is not met, then they will have to scale down production of smartphones from “more than 40% in 2019” from “15% of the total production”

It seems that under the present situation, Samsung won’t be able to save costs in India. Samsung said to the Govt: “India-made mobiles will not be able to compete with the costs of low-cost manufacturing economies like Vietnam,”

This letter has been written by Samsung India Electronics senior vice president Manu Kapoor and addressed to the PM office, the department of industrial policy & promotion (DIPP), the ministry of electronics and information technology and the Central Board of Indirect Taxes and Customs.

Why Samsung Can Stop Production?

The primary issue here is high import duties on some critical components of smartphones, manufactured by Samsung in India. Since India doesn’t have the facility to manufacturer these critical components, manufacturers were allowed to import them.

And the import duty was less, as without these components, smartphones cannot be manufacturerd. Under Make in India plan, this arrangement was planned under Phased Manufacturing Programme (PMP).

Now, here comes the issue.

Initially, Govt. had told that PMP can be implemented anytime in the fiscal year 2019-20.

But now, Govt. has preponed the timetable by 2 months, and have said that if manufacturers are not able to manufacture these critical components which are being imported right now, Govt. will hike import duties to 10%.

Samsung had told the Govt. that they time till March 2020 for starting production of these critical components, but now, as the date has been preponed to February, 2019, things have become complex.

If Samsung pays import duty of 10% for these critical components, then there will be no profits left. And the whole Make in India plan becomes infeasible.

For the same issue, Samsung had stopped making TVs in India last year.

Samsung’s Massive Production Line in India Can Stop?

Samsung entered India in 1995, and from 1996, they started manufacturing in India since 1996.

Right now, they have two factories in Noida and Sriperumbudur, near Chennai, five R&D centers and one design center. Last year, they expanded their Noida factory to make it their biggest factory in the world with a production capacity of 120 million smartphones a year.

But now, the issue of import duty can force Samsung to lookout any other venue for their manufacturing.

We will keep you updated, as more details come in.

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