The recent actions of the Indian government might stop Samsung from producing flagship phones like the Galaxy S9 and Note 9 in India and this might lead to a reduction in local smartphone manufacturing and exporting in India.
Indian’s Phased Manufacturing Programme
The issue here is the Indian’s Phased Manufacturing Programme (PMP). The PMP plans to promote the manufacturing of local components in India and this agenda is expected to take effect from March 2020. But the latest news coming online has revealed that India has decided to speed up things. They now demand that the production of the said components should start in February next month or it will impose a 10% duty tax (that could end up being 11%) on any of the imported components.
One of the imported products is the display and Samsung is yet to produce it locally and still needs to import it. Over 25% – 30% of the phone cost is been accounted for by the display and this might lead to an increase in the manufacturing cost if taxed.
In a letter written by Samsung to the Indian government, Samsung told the Indian government that if the new import duty is enforced, it will stop the manufacturing of its flagship phones in the country and also reduce the manufacturing of mid-range and entry-level smartphones.
Currently, Samsung is setting up a local factory that would be able to produce AMOLED displays but it won’t be operational until April 2020.
A new 5% duty tax on open cell LED panels have already forced Samsung from making TV’s in India in the last quarter and they now import finished sets from Vietnam. Although the India government is currently considering making a U-turn and remove the duty tax.