US telecom companies dial Indian smartphone makers

Top US telecom operators are turning to India to supply low-cost cell phones because the US ratchets up national-security scrutiny of Chinese firms, handing Indian handset makers corresponding to Micromax and Lava a possibility to win thousands and thousands of {dollars} value of contract-manufacturing orders.

Verizon, T-Mobile, AT&T and Cricket Wireless (a sub-brand of AT&T) have initiated talks with Indian smartphone makers, together with Micromax and Lava, to obtain unbranded handsets that will probably be bundled with information subscription contracts within the US, three folks conscious of the event mentioned on situation of anonymity.

The US telcos’ transfer to chop their dependence on China comes amid broader commerce and geopolitical tensions between Washington and Beijing. The US can also be persuading its allies to keep away from utilizing Chinese telecom gear because the world’s largest financial system resists China’s domination within the strategic business.

So far, telecom service suppliers within the US have sometimes procured virtually all the low to mid-end cell gadgets from Chinese firms corresponding to TCL and ZTE. The rising scrutiny on Chinese telecom gear has, nonetheless, prompted them to have a look at different choices, business executives mentioned.

Rahul Sharma, co-founder of Micromax, mentioned Vietnam and India are rising as contract-manufacturing hubs exterior China, and Indian firms are properly positioned to provide such gadgets for the American market.

“This is a trickle, which can soon turn into a tide for the domestic electronics industry,” mentioned one of many three folks cited above. “Till some time ago, Indian companies weren’t even allowed to participate in the bidding process,” the individual mentioned.

Responding to a question, smartphone maker Lava mentioned it has submitted its proposal final week and is awaiting a response from the US procurement companies. The firm already makes smartphones for AT&T within the US. “While the shift started some time ago, the trend has become far more prominent in the past few months with the volume of enquiries steadily picking up,’’ said S.N. Rai, co-founder of Lava. “If the deals work out, it could be nearly Rs. 2,000 crore per year opportunity for the company in the near term,” Rai mentioned. “We have relevance in the entry-level segment because we have good confidence in the supply chain. Brands like Samsung and LG are making a killing in the high-end segment because of the ban on Chinese smartphone maker Huawei,” mentioned Rai.

While US telecom corporations nonetheless proceed to import key {hardware} components from China, they’re more and more counting on India to develop software program options to make sure information privateness, the business executives mentioned.

According to an August report by telecom business researcher Canalys, round 70% of all smartphones shipped within the US within the quarter ended 30 June was made in China, up from 60% within the quarter earlier than. The nation noticed 31.9 million smartphone shipments within the quarter, however the quantity ought to rise within the coming quarters as provide chains stabilize from pandemic-induced lockdowns.

About 30% of the US smartphone market is within the sub-$200 or low-end phase, in response to analysts. “Tensions between the US and China have escalated in recent years, creating a perpetual state of uncertainty for all smartphone vendors except Samsung and LG,” mentioned Vincent Thielke, an analyst at Canalys.

Micromax and Lava are two of the 5 home smartphone makers who’ve been authorized by the Indian authorities to obtain advantages from its new production-linked incentive (PLI) scheme. The scheme provides a 4-6% incentive to smartphone makers for making telephones in India.

Domestic handset makers are allowed to avail the advantages for gadgets with bill worth under Rs. 15,000, whereas overseas producers corresponding to Foxconn can get advantages for telephones with bill worth exceeding that quantity. Unbranded telephones bought by US telcos often fall within the sub-$200 worth bracket and can profit from the PLI scheme.

If the Indian firms win the contracts, it will likely be a shot within the arm for the Indian authorities’s plan to export smartphones value Rs. 6.5 trillion from India within the subsequent 5 years. It may even assist Indian firms enhance pricing for their very own gadgets within the home market, one thing they’ve did not do since Chinese firms entered India. European and different telcos may additionally observe their US counterparts in sourcing smartphones from Indian firms, business executives mentioned.