Foxconn subsidiary FIH Mobile, Flex lead race to bring Chinese smartphones to Indian consumers
The world's largest electronics contract manufacturers are racing to assemble products for China's leading smartphone brands in India, the world's fastest-growing market for mobile phones.
Singapore-based Flex has started making Lenovo and Motorola-branded smartphones in the country, weeks after Taiwan's Foxconn made a splash by supporting Xiaomi's efforts to initiate production in the continent.
Beijing-based Lenovo Group, the world’s biggest supplier of personal computers, snapped up Motorola from Google last autumn for US$2.9 billion.
"Almost all of the major Chinese smartphone brands will soon be made in India," Steven Tseng, an analyst at Daiwa Capital Markets, said on Tuesday.
The country is tipped to replace the US as the world's No 2 smartphone market in 2017 with annual sales of 174 million units, up from an estimated 118 million this year, according to market research company Strategy Analytics.
Data from Counterpoint Technology Market Research showed that Lenovo was the sole Chinese supplier to rank among the top-five smartphone brands in India in the quarter ended June 30.
It clung to the fourth spot with a 7.5 per cent market share – up from 5.2 per cent in the first three months of this year.
South Korea's Samsung Electronics led the market, followed by Indian brands Micromax, Intex and Lava.
But Xiaomi, which ranked as China’s top smartphone vendor in the same quarter, said it aims to be the top-selling brand in India by 2020.
Tseng pointed out that electronics contract manufacturers are helping brands like these speed up assembly in the country in line with New Delhi’s "Make in India" campaign, which is aimed at boosting its domestic manufacturing capabilities.
FIH Mobile, which makes about half of all the smartphones sold by Xiaomi, is also expected to build production capacity in India for other expansion-focused Chinese smartphone brands, including Huawei Technologies, Oppo and OnePlus.
Hong Kong-listed FIH, the world's largest contract manufacturer of mobile phones, is one of the major subsidiaries of Hon Hai Precision Industry, better known under its trade name Foxconn. FIH was formerly called Foxconn International Holdings.
"Progress in India is faster than expected," Jefferies equity analyst Ken Hui said in a report.
"With capacity for the first site already fully booked by existing and new customers, FIH expects India to account for 10 per cent of its revenue in the second half of this year."
FIH is currently operating a factory in the southeastern state of Andhra Pradesh. It plans to open another in the country to support other Chinese and Indian brands that want to outsource smartphone assembly, it said.
Hui forecast FIH will generate revenue of more than US$1 billion in India next year, after the company opens its second smartphone factory in the country.
In December, FIH ceased production at its plant in Chennai, capital of the state of Tamil Nadu, as orders from Nokia, the facility's primary customer, plummeted after the Finnish company was acquired by software giant Microsoft in April last year.
Flex, meanwhile, is serving orders for Lenovo and Motorola-branded smartphones in India through its own plant at an industrial park in the city of Sriperumbudur, near Chennai.
Lenovo’s smartphones will also be assembled there but on separate production lines, the company said. The plant has a combined capacity of six million units a year.
One industry source said capacity will be dedicated to the Indian market. Lenovo, which is also a customer of FIH, will continue to separately source products for mainland China and other markets.
Flex, which trades on the Nasdaq stock exchange, is the second-biggest global electronics contract manufacturer after Hon Hai. The company was previously known as Flextronics International.
Tseng said Lenovo’s quick move to shore up a manufacturing supply chain in India reflected how fast it was restructuring its mobile business.
Yang Yuanqing, the company’s chairman and chief executive, announced a sweeping reorganisation of the company last week amid a drop in quarterly profit and slowing sales, especially in mainland China. That included laying off 3,200 employees in non-manufacturing jobs.
The Motorola team will now be responsible for the design, development and manufacturing of all smartphones from Lenovo.
Amar Babu, chairman at Lenovo India, said the company had considered adding smartphone assembly at the company's PC factory in the southeastern union territory of Puducherry, before deciding on a contract manufacturing deal with Flex, a Bloomberg report on Tuesday said.