Samsung India outsources production of some phones

New Delhi: Samsung India has outsourced production of some of its smartphone models to an Indo-Chinese contract manufacturing joint venture, as part of plans to make the South Asian nation a hub for servicing its local and global needs.

The move, a first since 2007, when the South Korean behemoth began making mobile phones in the country, comes close on the heels of the smartphone maker shutting down its mobile phone manufacturing in China, and the recent visit of Samsung Group’s vice chairman Lee Jae-Yong to India.

People familiar with the development said that the No 2 smartphone maker has already begun exporting India-made phones to Middle East, Africa and Vietnam, almost three years ahead of schedule. The South Korean company was in talks with other contract manufacturers as well to expand local production, since its existing capacity is running at full and contract manufacturing route would help it meet the high demand that some of its popular models such as A and M series, they added.

“Among the first contracts given out, DBG Technology India Pvt Ltd is making about 1.5 million smartphones a month of a model,” said one of the persons aware of the details. The person added that the contract manufacturer has invested Rs 400 crore in beefing up the factory which is likely to produce more models for Samsung, going forward.

DBG Technology India Pvt Ltd is a joint venture between parent company DBG Holdings Ltd of Hong Kong and Karbonn Mobiles chairman Pardeep Jain, where the DBG Holdings holds 51%.

“Samsung Electronics global supply chain executives have recently visited the factory in Bawal and have made agreements for additional contracts in the future, which means increasing the contract manufacturing capacity,” said another person aware of the details, asking not to be identified.

India allows 100% foreign direct investment through the automatic route in contract manufacturing to attract more players – on the lines of Foxconn, Wistron, Flex and others – to set up bases in India to make for the domestic market and export from here. New Delhi recently also slashed base corporate tax rates to 15% for new manufacturing plants in a bid to attract companies looking to migrate production out of China.

The development comes even as Samsung continues to expand capacity at its own plant at Greater Noida, which is expected to be completed by next year.

Emails to Samsung India, DBG Holdings, DBG Technology India and Jain did not elicit a response as of Tuesday evening.

The move assumes significance as it comes weeks after Samsung ended mobile phone production in China, where its market share had reduced to 1% from 15% in mid-2013. It had, in turn, expanded smartphone production in lower-cost countries like India and Vietnam, in the past few years.

Currently, Samsung India is in the process of investing Rs 4,915 crore to double capacity in its Noida facility from 68 million units a year to 120 million units a year to be completed by 2020. The company had said previously that the plant is expected to cater to markets like Europe, Middle East and Africa by 2022.

The company has also lined up fresh investments of Rs 2,500 crore to turn its India operations into a hub for components business.