On reducing tariffs for smartphone components | Explained

The story so far: The India Cellular and Electronics Association, an industry body representing mobile and other electronics assembly and manufacturing units, has called for a reduction of tariffs on certain components for smartphones. In addition, the ICEA said in a report last year, “the overall aggregate demand necessary for domestic investment in some inputs is much larger than the demand created by the prevailing production level.” This effectively means that current tariff levels on PCBs and other inputs are not resulting in increased domestic production of these components; rather, they are increasing the costs of assembly, as the components have to be assembled anyway. The tariffs are also leading to a strange consequence: domestic component makers are jacking up prices they quote to assembly units to a “just noticeable difference” below the net cost of an imported component. Vietnam’s “bonded zones,” which have special exemptions on duties, allow assembly and manufacturing units based there to enjoy much lower tariffs on component imports. “They should use the best available technologies to make their phones, regardless of the fact the technologies are made in India or not.” “When China started to assemble smartphones 15 years ago, Chinese firms’ only contribution was labour intensive assembly, accounting for about 3.6% of the total manufacturing value addition,” the ICEA report says.