Samsung stopped television production in India in the last quarter following the Indian Government's decision to impose 5% duty on open cell LED panels. And it appears another government order may now force the company to reduce mobile phone manufacturing in the country.
The Indian government recently advanced the Phased Manufacturing Programme (PMP) timetable for production of components such as display and touch panels. Instead of starting local manufacturing of these components by 2019-20, the government now wants companies to begin in February 2019 or face import duty, which is nearly 11% with a surcharge.
Samsung may stop producing flagship models in India
The Indian government's Make in India initiative, which encourages companies to produce locally, has been successful in getting companies like Samsung to produce more products in the country. However, the decision to advance the PMP timetable hasn't gone down well with the companies.
Samsung has written to the Indian government saying it had planned investments according to the earlier PMP timetable, which asked companies to start manufacturing the above-cited components anytime by March 31, 2020. Now a sudden change in the timetable means the company will have to import these components and face import duty.
The display panel, for instance, accounts for 25-30% of a mobile phone’s production cost. If import duties are levied on display panels, the cost of manufacturing will go up and “we will have to stop the manufacturing of Samsung flagship products (Note 9 and S9) in India,” Samsung India Electronics told the government in a letter, according to The Economic Times.
Samsung also said that it'll have to re-consider its plans to increase exports of mobile phones from India. The company was reportedly planning to increase exports from 15% to 40% of the total production in 2019. “India-made mobiles will not be able to compete with the costs of low-cost manufacturing economies like Vietnam,” Samsung said.
Samsung is reportedly in the process of setting up a display assembly plant to produce AMOLED panels for mobile phones. The plant will be operational by April, 2020. Samsung already has its biggest mobile factory, and the largest mobile experience center in the country.
The Indian Government is said to be thinking of scrapping the 5% duty on the LED panels for TVs. It remains to be seen if the government will retract the recent order.
