India is reducing import taxes on several mobile-device components to boost smartphone production, a boon for companies such as Apple that are increasingly considering the country as a global manufacturing base.

Prime Minister Narendra Modi’s government announced late on Tuesday (Jan 30) that it is lowering tariffs on components including plastic and metal mechanical parts, SIM sockets and screws.

The import duty on parts – such as battery covers, main camera lenses, back covers, other mechanical items of plastic and metal – has been reduced to 10 per cent, said the finance ministry. It added that he import duty on inputs used to manufacture these components has been cut to zero.

An industry group welcomed the move as a step in the right direction.

Modi is trying to make India an electronics manufacturing powerhouse, luring global brands such as Apple away from China.

At the same time, he is trying to build an ecosystem of domestic suppliers to ensure India grabs a larger part of the value chain, instead of being just an assembly location.

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“This is a critical and welcome policy intervention by the government towards making mobile manufacturing competitive in India,” said Pankaj Mohindroo, chairman of India Cellular and Electronics Association.

“Building scale, riding on low input tariffs, is key to transforming India into a global hub for electronics manufacturing and exports,” he added.

The lobby group, which counts Apple, its Taiwanese suppliers Foxconn Technology Group and Pegatron, as well as home-grown contract manufacturer Dixon Technologies India among its members, said last month that higher duties hurt India’s cost-competitiveness by up to 7 per cent.

Modi’s project has had some early successes, with Apple among companies that have boosted production in the country. India now accounts for more than 7 per cent of the iPhone’s global output.

Apple is exploring ways to reduce its reliance on China as tensions between Washington and Beijing continue to escalate. Its long-time partners, who make most of the world’s iPhones from sprawling factories in China, have added assembly lines in India at a rapid pace over the past years.

Lower import tariffs will make assembly more cost-effective, and could encourage manufacturers to increasingly build devices for exporting as domestic smartphone consumption slows down.

India’s smartphone exports doubled in the fiscal year through March 2023, to about US$11 billion.

“That scale will help strengthen India’s ambition to become the factory of the world by pushing more component makers to set up local factories,” said Navkendar Singh, an analyst at tech researcher IDC. BLOOMBERG, REUTERS