United Telelinks Ltd, the maker of Karbonn mobile phones, is looking to build a Rs.200 crore assembly unit in India, following domestic rivals such as Micromax Informatics Ltd and Lava International Ltd. Currently, Karbonn phones are designed in India but made in China. Assembling the imported semi-knocked down (SKD) units in India will help the company, which sells 2.2 million handsets a month, to save on higher duties that take effect next financial year. “We are in talks with state governments and figuring out where we get a better deal; in the next 10 days we should know,” said Sudhir Hasija, chairman of United Telelinks, in an interview on 25 March.

The company hopes to acquire land or an existing facility in Uttar Pradesh or Andhra Pradesh by June. The factory, which will employ close to 1,000 people, will help the company reduce its reliance on Chinese imports. The duty on imported handsets went up to roughly 12.5% in the Union budget. “We were paying 6%; however, duty on local manufacturing is only 2%. So, local production will help boost margins,” Hasija said. The Bengaluru-based, family-owned company that generated Rs.4,400-crore revenue last financial year expects to increase sales to Rs.5,500 crore this financial year.

More and more domestic companies are shifting assembly or manufacturing closer home to reduce cost of production, even as India lacks quality component manufacturers. Last year, Micromax started making handsets at its Rudrapur plant in Uttarakhand, while Lava Mobiles said it would spend Rs.500 crore over four years to shift manufacturing from China to India, starting with an assembly unit in Noida. “Assembling is the step in the right direction,” said Karan Thakkar, senior market analyst at the local arm of technology research firm International Data Corp. (IDC), especially after the duty hike. Even though mobile-phone sellers remain dependent on imported components, local assembly could eventually spur demand for local component manufacturers in the long run, Thakkar said. Karbonn, which was initially keen on acquiring Nokia’s shuttered plant at Chennai in Tamil Nadu, is no longer interested in it, because “other (state) governments are giving better deals”, Hasija said. After a Rs.21,153 crore tax dispute with the state government, the Nokia plant was excluded from a $7.2-billion deal in 2013, in which Microsoft Corp. acquired the Finnish company’s mobile phone assets. The plant was closed soon thereafter. Its contract manufacturer Foxconn closed the Chennai plant earlier this year. Domestic handset makers sold fewer phones in the three months ended December as Chinese rivals such as Xiaomi flooded the market with cheaper smartphones. Sales of mobile phones stood at 64.3 million units in October-December 2014, according to a February 2015 report by IDC.

The overall mobile-phone market shrank 11% quarter-on-quarter during the December quarter, with the largest decline seen in the feature phone category, the report said. Samsung and Micromax continued to hold the top slots in India, the report said. “Growth has been stagnant over the past three months; smartphones have taken good share of the business while online business has hit general trade; so, some share has been impacted overall,” Hasija said. While Karbonn did not make it to the list of top five vendors in the smartphone category, it continues to remain strong in the feature-phone segment, the IDC report added. For companies such as Karbonn where Rs.5000-8,000 feature phones still account for the bulk of total handsets sold, the move to smartphones is an urgent one. “Our focus will be on more smartphones going forward,” said Hasija, who plans to concentrate on selling more low-cost smartphones in international markets such as Europe and Africa. Currently, international markets account for 3% of its handset sales. The company, which sells Karbonn mobile phones in Spain, Nepal, Sri Lanka, Rwanda and Romania is planning to enter four countries next month.

Source:- livemint.com