India to lose out to Vietnam in smartphone exports race

In its article, Reuters revealed that smartphone manufacturing is a key part of Indian Prime Minister Narendra Modi's ambitions to boost the economy and to create jobs by attracting companies such as Apple, Foxconn, and Samsung.

India is the world's second-largest mobile market where production grew by 16% year on year to US$44 billion last year.

Reuters reports that the Indian Government explained the success is mostly due to financial incentives given to companies to produce more. However, several lawmakers and firms shared that their high tariffs can be viewed as a deterrent for companies de-risking their supply chains beyond China. Indeed, nations such as Vietnam, Thailand, and Mexico have all raced ahead in phone exports by offering lower tariffs on components.

"India has high production cost due to highest tariffs amongst key manufacturing destinations," wrote Chandrasekhar in the documents seen by Reuters.

"The geopolitical realignment is forcing supply chains to shift out of China... We must act now, or they will shift to Vietnam, Mexico, and Thailand," he stressed.

Reuters quoted US Ambassador Eric Garcetti saying foreign investments were not flowing into India at the pace they should be, instead they were going to countries like Vietnam due to tariffs.

In his documents, Chandrasekhar flagged how lower taxes in China and Vietnam have helped to boost their exports. Exports accounted for only 25% of India's smartphone production last year, compared with 63% of China's US$270 billion worth of production and 95% of Vietnam's US$40 billion worth, he said.

India has set a target of accounting for 25% of global electronics manufacturing by 2029, although official documents show its stake is currently at just 4%, even though Apple, Foxconn, and Xiaomi have all recently boosted production.