PLI boost: India’s mobile phone imports dip 33% in FY22

The country’s mobile imports decreased 33% year-on-year in fiscal 2022, thanks to the government's Phased Manufacturing Programme (PMP) and the Production Linked Incentive (PLI) scheme, credit rating firm CRISIL says in its latest report. This has resulted in reduced dependency on China, which reduced to 60% from 64% in fiscal 2021 and is expected to fall further in the medium term.

But as imports dropped and a major push was being given to domestic production, imports of electronic components essential for mobile assembling or manufacturing also increased by 27% on year.

After logging a 33% compound annual growth rate (CAGR) between fiscal 2016 and 2021, domestic mobile production is estimated to have grown 24-26% in fiscal 2022. Despite the ongoing chip shortage, three of the global manufacturers met PLI production targets during the fiscal, says the report.

CRISIL Research says the growth momentum in production is to sustain, with an expected CAGR of 22-26% between fiscals 2022 and 2024 to ₹4-4.5 lakh crore in value terms. The growth will be led by the PLI scheme, which is in the second year for most players.

As domestic output rises, India has become largely self-sufficient on the consumption front. "In fiscal 2022, the country saw a 15-20% increase in mobile consumption to Rs 2.5 lakh crore," the report finds.

A fall in the lifecycle of the mobile, increasing digitalisation, and easy financing terms are the major factors that are contributing to this growth. "We expect the momentum to continue this fiscal and in fiscal 2024, boosting consumption to Rs 3.5-4 lakh crore by fiscal 2024," says the ratings agency.

On the export front, the last fiscal was significant for the country as "mobile exports" surged 56% on year, with support from PMP and PLI. The exports are expected to reach ₹1-1.2 lakh crore over 2023 and 2024.

India’s exports largely comprise low-end mobile phones, priced below Rs 10,000. But major markets, such as the US, Hong Kong and Japan, import mobile phones priced upwards of Rs 15,000. This is because of their high per capita income, which boosts affordability and established coverage of 5G services, which lags in India, finds the report.

However, the exports could receive a leg-up in the medium-term as companies like Samsung and Apple and domestic players are ramping up manufacturing and assembling in India.

Share in global exports insignificant, but rising

India’s share was negligible in global exports at 0-1%. Its share in the mobile import basket of the top five countries remains low, too. The CRISIL report shows the top 5 mobile importing countries accounted for 50% of global handset imports in calendar 2021, with China and Vietnam meeting the bulk of their demand. The US was the largest importer of mobile phones, accounting for 20%, followed by Hong Kong at 15% and Japan at 6%. China alone met 79% of the mobile import demand of the US and Vietnam 16%.

"While free trade agreements and geopolitical agreements play a huge role in import/export dynamics, India’s share, though on the rise sequentially, has remained minuscule compared with neighbouring nations," it says.

It also says that the share of 5G smartphones in overall handset sales, which was low at 15-20% in fiscal 2022, is expected to pick up substantially only by late fiscal 2023 due to affordability issues. The chip shortage and the Russia-Ukraine conflict remain the key monitorable, it adds.