One of the largest Indian conglomerate Reliance Jio Infocomm is in talks with US contract manufacturer Flex for locally producing about 100 million mobile phone handsets as the Mukesh Ambani-owned telco seeks to rapidly enhance its market share by signing on the majority of those users now using feature phones.
“Jio is in advanced discussions for a large order and that has caused a stir in the market, even prompting Flex to negotiate some tax benefits with the government in the SEZ where its factory is located,” a person familiar with the matter said.
Another person said that Flex currently has the capacity to manufacture around 4-5 million devices per month at its factory in the special economic zone (SEZ) near Chennai.
Any move by the government to allow selling goods produced in the SEZ in DTAs without attracting duties would allow the handsets to be priced affordably, making it attractive for the first-time smartphone buyers as stated by the experts.
It is only natural that Jio is targeting the next low-hanging fruit, the bulk of India’s 500 million featurephone users who would switch to smartphones if the bundled price points for the service and handsets were attractive.
Jio’s objective of rapidly gaining market share is clear from the size of the imminent order. Data from Counterpoint Research showed that 118 million and 134 million smartphones were sold in 2016 and 2017, respectively, in India. The agency expects the number to be around 150 million in 2018.