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How tax on mobile phone parts might mean additional trouble for Lava, Micromax, and others

Handset makers of India will take the major hit after the government charged a 10% import tax on main parts for mobile phone such as populated PCBs (printed circuit boards).

Most of handset makers, comprising Micromax, Lava, and Intex, might be obliged to absorb the elevated price of imported elements and take an additional hit on their already ice-thin margins owing to concentrated rivalry. Simultaneously, they will require scaling up investments in domestic manufacturing of these elements.

On the basis of the latest tax on PCBs, connectors, and camera modules, experts claimed that handset costs might elevate by almost 6% for firms that import PCBs. This make up almost 50% of the price for making a handset.

“Those who are not ready, comprising ourselves, will suffer in the near term,” claimed chairman of Lava International, Hari Om Rai, to the media in an interview. He claimed that the firm will have to soak up the fiscal hit. “But that is okay since we will advantage in the future as we are developing the country and firms will grow together,” he claimed.

Lava has begun making PCBs in India but is still to expand processes to get the complete advantage of its investments of roughly Rs 100 Crore. “It will not be simple for us to lift our costs instantly with the rivalry in the sector,” claimed co-founder of Micromax, Rajesh Jain, to the media in an interview. “We can accumulate the PCB domestically and have begun trialing in Rudrapur,” he further added.

Associate director at Hong Kong-located Counterpoint Technology Market Research, Tarun Pathak, claimed that most handset firms of India will get wounded since they will not increase costs owing to rivalry from other rivals including those from Chinese.

He claimed that Indian firms will have to spend in developing capacity to make elements or source them domestically.