Indian phonemakers dial up fight for volume control

Time of India

2 days ago

New Delhi: Contract manufacturers in India are competing vigorously in the
high-volume smartphone assembly
segment, hoping to capture more orders from Chinese brands looking to expand their manufacturing footprint in the country amid geopolitical shifts.
As Chinese brands grow volumes in India, some even starting exports from the country, they are diversifying their supply chains to stay cost competitive instead of relying on a sole Indian supplier as the production-linked incentive (PLI) scheme for smartphones nears completion.
Lenovo-owned Motorola, which was solely sourcing smartphones from
Dixon Technologies
, has started routing some volumes to Dixon's rival Karbonn, which is also eligible to receive PLI benefits. Motorola is also Dixon's largest customer, accounting for 12 million units in FY25.
Dixon has been the sole Indian company to claim benefits for the first few years of the PLI scheme as others failed to get clients. The scenario, however, changed in the last few years with companies like Karbonn, Micromax, and Lava, also becoming beneficiaries of the PLI scheme. These companies may also claim government benefits along with Dixon if they achieve the required targets.
Dixon's second-largest customer, Chinese ODM (Original Design Manufacturer) Longcheer, contributing 7 million of Dixon's production volume in FY25, has also started routing around 2% volume to Karbonn from Dixon in line with its expansion in India from May.
In a June 24 report, PhillipCapital said Karbonn handled about 5% of Motorola's total production volume in January and February, surging to 25% in April and May. Motorola's supply chain diversification tracks a sharp growth in sales and exports from India to the US after the Donald Trump administration levied steep tariffs on China. "Motorola's monthly run rate has increased from '2,400 crore (which was previously fully handled by Dixon) to '3,000 crore. The entire increment of '600 crore has been allocated to Karbonn," an industry analyst told ET.
Longcheer too is expanding its presence in India to hedge from future action against Chinese exports.
Longcheer's volumes could quickly increase in the coming months, reaching at least 15% of its total volume in India, as the ODM did not have an exclusive agreement with Dixon, said the analyst cite above.
Dixon's volumes are also being poached by Bhagwati Products (Micromax) which has a JV with Huaqin, another Chinese ODM, among the world's largest. The JV also restricts Dixon's potential earnings from its strategic ownership of Vivo's manufacturing unit in India, PhillipCapital said.
"(Dixon's) Management expects the JV to handle two-thirds of Vivo India's mobile phone volumes. Assuming a proportional volume-to-value ratio conversion, the JV would generate a top line of '160 billion at optimal utilisation, of which Dixon's share would be '80 billion," the report said.
Industry executives said the Bhagwati-Huaqin JV has ramped up volumes to 1.6 million smartphones per month, starting afresh from the second half of 2024.
"Bhagwati is one of the fastest-growing EMS players in India. They are projected to close June at 1.6 million units per month, and are aiming for more market share. This rapid ramp-up has occurred within a year, primarily from Oppo and Vivo under the partnership with Huaqin," said an industry executive.
Dixon, Karbonn, Longcheer, Motorola, and Bhagwati did not respond to email queries.
Both Longcheer and Huaqin manufacture entry-level smartphones for major Chinese brands. Longcheer currently manufactures phones for Vivo and Realme through Dixon, and Vivo and Oppo from Karbonn, while Huaqin relies on Bhagwati for Vivo and Oppo models, and DBG for Xiaomi's volumes, the analyst said.
However, with the Indian smartphone market stagnant at 150-160 million units annually, escalating competition is expected to limit growth of local firms, with Dixon facing the highest risk of losing volumes to rivals, market trackers said.
Excluding Apple and Samsung, which have their own supply chains in India, the addressable market for contract manufacturers is 80-90 million units per year, which is expected to be split between three-four major manufacturers eventually.
"I foresee the market having space for at least 3-4 players in the coming years, instead of just one. The volumes will be commanded by players which can offer the desired quality of service. Cost comes secondary," one of the executives said.