Smartphones have become very expensive compared to what they used to cost two years back. This is because of the supply chain issues that were created by the pandemic. It is very unlikely that the costs for consumers would roll down to an older price point, but the costs should go down to some extent. The demand for semiconductors is also too high, and that has also led to an overall increase in the manufacturing of smartphones. There is still a shortage of semiconductors, and governments across the world are inviting big manufacturers to make chips locally to boost production and also bring down the costs of electronics.
On February 1, 2023, the finance minister, Nirmala Sitharaman, announced measures that would bring down the manufacturing cost of smartphones in the country. During her budget speech, Sitharaman said, "to further deepen the domestic value addition in the manufacturing of mobile phones, a proposal to provide relief in customs duty on importing certain parts and inputs".
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This would ensure that the costs of manufacturing smartphones would go down. It would be an incentive for the global players to manufacture devices within India that is already providing huge benefits under the Production Linked Incentive (PLI) scheme for smartphones. Companies such as Apple, Samsung and more are already manufacturing devices in India. This move from the government would further encourage global smartphone players to make devices locally.
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As more companies would set up production shops in India, it would present more opportunities for the youth and the local talent to get jobs and contribute to the economy of the country. The PLI scheme has already been appreciated by industry players and economists. This is something that even the telcos want to happen.
The more 5G phones are produced locally and made available to the public at a lower cost, the faster telcos can also scale their 5G network business. Overall, India stands to benefit from this decision of the government. The more affordable the smartphones will be, the faster the business of the telcos will grow. It would also enable digital application players to sell and upsell services to a larger market.
But as mentioned, the prices wouldn't go down dramatically. The flagships would still be priced in the premium and ultra-premium segments. It wouldn't make sense for businesses to lower the price from a point that the customers have already become slightly comfortable with.