Chinese electronics maker Lenovo announced to build a smartphone production facility with Flextronics in Chennai, India, with a plan to hire 1,500 workers and an estimated capacity of 6 million units to start off in the current fiscal year.
Lenovo and Flextronics will build an assembly line in Chennai and import modules into India. Amar Babu, chairman of Lenovo India, said the company decided to build a production plant in India due to the tax changes. He said the plant will be among the lowest cost manufacturing units for Lenovo.
Lenovo became the latest smartphone manufacturer to invest in a production facility in India following the Indian government’s announcement of the “Make in India” national program, which is designed to elevate India into a major manufacturing hub. Starting in March, the Indian government raised the import taxes on mobile devices from 6.5 percent to 12.5 percent, prompting overseas smartphone makers that are optimistic about the Indian market to build a facility in the country to reduce tariffs and labor costs.
In addition to cost control, the other reason that prompted phone makers like Xiaomi and Lenovo to build facilities in India is the market prospects. According to IDC, smartphone shipments to India in the second quarter of 2015 were up 44 percent from the same period a year ago. The market research firm forecast that India will become the second largest smartphone market by 2017, overtaking the U.S. Meanwhile, smartphone sales in China have been stagnant. In Q1, smartphone shipments to China fell the first time in six years. As smartphone makers turn to the fast-growing Indian market, Lenovo, Xiaomi, Huawei and Gionee now account for 12 percent of the Indian market, twice as large as in 2014.