South Korean consumer electronics company Samsung has opened the world’s largest mobile phone factory at Noida near New Delhi, India. Indian Prime Minister Narendra Modi and South Korean President Moon Jae-in attended the factory’s official opening on Monday.
Mobile phone demand is expected to surge in the coming years, and Samsung, the maker of the well-known Galaxy line of smartphones, recently posted a 5.2% rise in profit.
The Indian factory will help supply the Indian market with smartphones. There are currently just 425 million users in a country of 1.3 billion people.
At the opening, Modi said: ‘India is going through a digital revolution. Today’s event is a big step towards making India a manufacturing hub. There is hardly a family in India which wouldn’t have a Korean-made product at home.’
Last year, the Indian smartphone market grew 14% with 127 million phones sold, the fastest growth rate among the top 20 world markets. The demand for new mobile phones is high in India, which is partly due to billionaire Mukesh Ambani promoting 4G phones for $23 along with cheap data plans.
The factory will have the capability to manufacture various smartphones, from low-priced units costing under $100 each to Samsung’s flagship Galaxy S9 model.
Indian consumers tend to favor lower-priced phone units costing under $250 because the average income is relatively low. This means that competitor Apple has struggled to gain a customer base in India, as most models of iPhones cost upward of $500, according to data provider Bloomberg Intelligence.
India overtook the US in 2017 to take its place behind China as the second-largest market for smartphones in the world. By 2021, there should be 780 million connected phones, more than double the figure of 359 million from 2016.
Jaipal Singh, Senior Market Analyst at market intelligence company International Data Corporation, said: ‘For Samsung, India is among the top five smartphone markets globally. The US is saturated, and Korea and Brazil are not growing significantly. India is a big opportunity across price segments, including 2G feature phones. It makes sense for Samsung to build a bigger manufacturing base here.’
Samsung has more than 10% of its smartphone manufacturing operations based in India, and it plans to increase this figure to 50% within the next three years.
The uptick in manufacturing in India is an outcome of Modi’s 2014 ‘Make in India’ campaign, which encouraged foreign production operations to set up in India while also attempting to boost domestic operations. Over the past year, India has attracted its largest-ever level of foreign investment with inflows of $62bn.
Chinese manufacturers are following Samsung’s lead, with Xiaomi, maker of the Mi range of electronics, saying in April that it has plans for three more factories in India. Xiaomi kicked off its IPO last week with lower demand than expected, leading the company to revise its target downward to $6.1bn from $10bn. The lower outcome was partly due to differing views over the company’s business model.