Huawei begins making phones in India to tap local market boom

[BANGALORE] Huawei Technologies Co will begin assembling phones in India with manufacturing partner Flextronics International Ltd, establishing a beachhead in the world's fastest-growing smartphone arena.

The Chinese company expects to have Flex put together its first gadgets starting October, Jay Chen, the chief executive for Huawei's Indian business, told reporters at a news conference.

Huawei, the world's third largest smartphone maker, joins rivals from Samsung Electronics Co and Apple Inc in targeting one of the few markets still rapidly expandingas global demand stagnates.

But intense competition between market leader Samsung and Chinese names such as Xiaomi Corp and Lenovo Group Ltd has begun to depress margins. Grabbing a solid share of India however could further Huawei's stated ambition of displacing Apple and Samsung to become the world's top maker of phones.

India, the world's second-largest smartphone market, is on the cusp of a phone manufacturing boom spurred by the government's "Make in India" drive.

Huawei joins a growing list of foreign names, from Xiaomi to Lenovo, now getting their phones put together in the country. For now however, that mainly consists of assembling semi-knocked-down phone kits rather than the end-to-end manufacturing China's known for.

Chinese companies in particular have been keen to set up shop in India, as growth at home slows. Before Huawei, LeEco was the most recent to get in on the act, contracting a facility to assemble 60,000 phones a month, rising eventually to 200,000.

More than two-thirds of the smartphones shipped in the first quarter of 2016 were assembled in India, said Jaipal Singh, a market analyst for client devices at researcher IDC. Vendors who are currently assembling phones are likely to start manufacturing components like batteries, chargers and data cables with tax incentives offered by the federal and regional governments, IDC said in a report.

Huawei has emerged in past years as China's leader in high-end phones, eschewing the lower-end models that rivals like Oppo and Vivo favour. Founded in 1987 by former army engineer Ren Zhengfei, Huawei used its business of selling networking gear to bankroll its initial foray into premium phones.

It's among a crop of Chinese smartphone vendors now steadily draining market share from Samsung and Apple globally.

The company's devices unit grew sales 73 per cent to US$20 billion last year, out of total revenue of about US$61 billion.

Huawei now plans to sustain its pace of investment in research - to the tune of US$9.2 billion last year -as carriers prepare to build fifth-generation broadband networks in coming years.

BLOOMBERG