India just lured its biggest smartphone maker away from China

Her phone will soon be as Indian as her sari.
Her phone will soon be as Indian as her sari.
Image: AP Photo/Rajesh Kumar Singh
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Micromax, the Indian cellphone-maker that sold its first phone in 2008 and now commands nearly a quarter of the domestic market, behind only Samsung, said today it will start assembling its phones in India. Just two weeks ago, Micromax announced it would start selling its phones in Russia and Romania with a view to entering mainland Europe. That prompted some (okay, maybe just Quartz) to call Micromax the Xiaomi of India: An aspiring Asian giant beating the big boys on home turf before aiming for the world, thanks to cheap phones and smart marketing.

Micromax and Xiaomi could not be more different, except for their rock-bottom prices and the fact that their phones are made in China. Xiaomi sells its phones online, inspires a great deal of customer loyalty and is proudly Chinese. Despite Micromax’s 22% share of the Indian market, it inspires little enthusiasm and Micromax’s advertising campaigns, which feature vaguely European models in “international” settings, seem designed to hide the company’s Indian origins. That may be about to change.

“Made in India” is no longer a bad thing

For decades, Indian companies have used foreign names, models and locations to sell their products in the hope that consumers might take the implicit foreign-ness as a marker of quality. But as India’s economic standing has improved—its current troubles notwithstanding—so too has the belief among consumers that Indian companies can match their foreign counterparts. Moreover, for Micromax to to compete in mature markets, it needs to offer something more than price. There are any number of challengers with cheap phones—a “made in India” tag may could give Micromax the chance to stand out from the “made in China” crowd.

India’s government is pushing hardware manufacturing

More importantly, assembling the devices in India could also allow Micromax to make its phones even cheaper thanks to lower wages than in China and incentives from a government keen to kickstart domestic high-end manufacturing.

The Indian tech blog Medianama suggests that Micromax’s move may be part of India’s National Policy on Electronics, which envisages the creation of “an eco-system for a globally competitive Electronic System Design and Manufacturing (ESDM) sector in the country to achieve a turnover of about $400 billion by 2020 involving investment of about  $100 billion and employment to around 28 million people at various levels.” By manufacturing in India, Micromax stands to benefit from an “industry-friendly” tax regime, “preferential market access” and “promotion of exports,” according to the policy.

Despite India’s enthusiasm for local manufacturing, however, it hasn’t always been kind to those who do make electronics in the country. India’s fickle tax rules, which embroiled everybody from Vodafone to Shell in multi-year disputes, nearly drove Nokia’s manufacturing plant out of India after a spat over taxes boiled over in September.

For now, Micromax will only assemble the phones domestically, because India does not have the capacity to build the components. Yet with two proposals to build semiconductor fabrication plants in India approved in September, India’s hardware-making is set to grow. Micromax is well-placed to be among the first to take advantage of it. If it works out, it will indeed be, as Micromax’s slogan promises, “nothing like anything” an Indian electronics company has achieved before.