R&D on Manufacture & Assembly of components of Smartphones & Computers

Local Market Study Report

Bangladesh will be one of the emerging economies to keep an eye on in the coming years, given
its remarkable track record over the last decade in economic and social progress. What makes the
economic growth in Bangladesh even more exciting is the young population the median age is 27
years. Majority of the population will be composed of young individuals, who will enjoy rising
disposable incomes and higher standards of living as the economy grows.

The digital ecosystem in Bangladesh is booming due to the rising income of the millennial
population and implementation of state policies that are designed to bolster growth in the ICT
sector. Internet-enabled devices such as smartphones and laptops have gone from being luxury
consumer durables to necessities for a high percentage of the population. Young tech-savvy
individuals are integrating the internet into all aspects of their lives, from commuting to
purchasing items on e-commerce platforms. As a result, there is a surge in demand for high-
quality and affordable internet-enabled devices, especially smartphones.

A surge in demand for affordable smartphones has unveiled local manufacturing of such
products as a lucrative business opportunity in Bangladesh. Both government policy makers and
manufacturers have realized the attractiveness of locally manufacturing and assembling
smartphones. Trade regulations have been revised to encourage local assembling and highly
incentivize manufacturing.

Local and foreign mobile phone manufacturers are setting up or eager to set up onshore
manufacturing. The boom in onshore manufacturing and assembling will be crucial in
transforming Bangladesh into a gadget-making hub.

As incomes rise and poverty rates drop across rural and urban areas, the smartphone penetration
rate will more than double to 75% by 2025. 40 million phones have been imported into the
country in 2018, with 30 million imported legally and the rest through grey channels. About 8.1
million smartphones were shipped in the same year, and one third of these smartphones was 4-G
enabled. Local manufacturing and assembling of phones will further bolster replacement of
feature phones by smartphones. Many of the locally manufactured and assembled phones are
much cheaper compared to the imported counterparts, and therefore accessible by low-income
individuals.
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The rise of local manufacturing and assembling of smartphones and subsequent availability of
cheaper alternatives is reducing Bangladesh’s dependency on imports. Imports of smartphones
fell for the first time in 2018. According to members from Bangladesh Mobile Phone Importers
Association (BMPIA), the import of low-end smartphones (below $80) declined the most in
2018. Imports of high-end smartphones (costing more than $120) increased but were not enough
to compensate for the loss in total imports. This suggests that imposition of high taxes on
imported smartphones causes a decline in the low-end segment. Consumers of low-end
smartphones can either purchase smartphones through informal markets or switch to locally
manufactured sets once high taxes are imposed. Consumers of high-end smartphones might
choose to spend an extra amount to buy an original product imported through a formal channel.
This is an interesting phenomenon because while the imposition of high taxes on imported
handsets have led to a fall in imports, the effect might subside in the future once incomes rise.
Trade policies must therefore be adjusted accordingly to stimulate local manufacturing without
having too much of an adverse effect on the smartphone market.

In order to leverage the rising demand for high-quality consumer durables, the government has
revised tax structures to encourage local manufacturing and assembling of smartphones. The
cumulative taxes on imported handsets stand at 34%. Local assemblers, who follow a Semi-
Knock Down (SKD) Process, can take advantage of a 17% cumulative tax. Cumulative tax for
phones which are locally manufactured using a Complete Knock-Down (CKD) process is the
lowest at a rate of 1%. The duty structure for local manufacturing and assembling is therefore
very conducive.

Given the economic and digital ecosystem and favorable government policy, it is not surprising
that both foreign and local electronics manufacturers have rolled out local manufacturing of
mobile phones. In 2018, 23,00,000 mobile phones were manufactured in Bangladesh by five
local and foreign manufacturers. More foreign manufacturers have plans to set up plants in the
coming years.1 Some like Samsung assemble the phones in Bangladesh, while others like
 R&D on Manufacture & Assembly of components of Smartphones & Computers

Walton claim to manufacture every single component of the mobile phones. Local
manufacturing and assembling success stories of brands like Walton, Symphony and Samsung
have inspired others to follow.

Local Phone Manufacturing in Bangladesh

SOURCE: Bangladesh Mobile Phone Importers Association (BMPIA)

Manufacturer Capacity Smartphone Feature Assembly/Manufactured in

2018 (%) Phones (%) Bangladesh

Walton 1,100,000 30 70 Manufactured (Phones and

Chargers)

Samsung 600,000 100 (all 4G 0 Assembly (Components

enabled) manufactured in China)

Symphony 350,000 N/A N/A Assembly

Itel 300,000 33 66 Assembly

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5Star Mobile 35,000 0 100 Assembly

However, potential manufacturers and assemblers must carefully design market entry and pricing
strategy. A few local brands face stiff competition from both affordable Chinese brands and
high-value brands. A common obstacle to growth in local manufacturing/assembling is also the
absence of a robust backward linkage.

For most local manufacturers and assemblers in Bangladesh, the backward linkage starts with
importing different components of the smartphone from China, and the method of sourcing
differs by manufacturer. Fair Distribution Ltd. assembles the Samsung phones in Bangladesh,
and the different components are selected and supplied by Samsung. Aamra imports finished
smartphones from China. Walton, which follows a CKD process for manufacturing smartphones,
imports some raw materials from China. For most manufacturers and assemblers, the backward
linkage begins in China and is susceptible to currency volatility.

A dynamic backward linkage which commences in Bangladesh would easily reduce dependency
on imports and vulnerability to political and currency instability. However, unlike China and
Taiwan, Bangladesh lacks the necessary technical skills for innovation in the technology sector.
As a result, manufacturing parts of the phone, such as the processor, might be too taxing in terms
of skills required.

An alternative to manufacturing high-technology components of a smartphone might be

producing low-technology parts like chargers and batteries. Walton, for example, imports
lithium-cells for batteries from China. A local lithium-ion battery producer could supply to
Walton and consumers of smartphones. Since the market for smartphones is expanding at a
robust pace, the demand for chargers and batteries will also grow at a fast pace. Our economic
forecasts suggest that the demand for smartphone batteries will be more than 3X of that in 2018.

Therefore, while Bangladesh might not have the infrastructure and technical skills to
manufacture high-technology component parts, it has a lucrative landscape to produce low-
technology components such as chargers and batteries. The smartphone manufacturing and
assembling industry is making its mark as a rewarding line of business in Bangladesh. The
country should derive inspiration from the manufacturing practices of countries such as Vietnam
and Malaysia to support onshore manufacturing. According to many local manufacturers,
improvements in infrastructure, such as construction of separate lanes from the airport to
 R&D on Manufacture & Assembly of components of Smartphones & Computers

economic zones, would be highly desirable. Key players in the industry should also closely
monitor the US-China trade war. As the relationship between the two countries continue to stay
tense, companies such as Foxconn will consider opening factories in countries such as Vietnam.2
Manufacturers and policy makers in Bangladesh should attempt to take advantage of this
situation and attract companies to Bangladesh. The smartphone market in Bangladesh will grow
in both volume and value, and the government needs to carefully implement policy to utilize the
growth in consumption and leverage opportunities in the international trade.
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Market Research of the Smartphone Game in India.

Note - This market analysis plays a key role as both Bangladesh & India operate & expand
industrially in a similar manner.
This research paper will provide a great insight into the possible scope of growth in this
respective business.

According to a recent report released by ResearchAndMarkets, the Indian mobile components

manufacturing and assembly market was worth US$ 20.7 Billion in 2017 and is projected to reach a
value of US$ 62.8 Billion by 2023, at a CAGR of 19.9% during 2018-2023.

India is currently the second-largest manufacturer for mobile phones in the world, on account of
rapid internet penetration, mounting disposable incomes and a large base of tech-savvy consumers.
The large and growing demand for mobile phones has led to the rapid development of the domestic
manufacturing and assembly units in India.

Mobile phones are made with a combination of different parts and components including a circuit
board, microphone, display, speaker, sim card holder, buzzer, vibrator, monitor battery, antenna, etc.
Amongst these, circuit board acts as the brain of the device as it helps in the overall functioning of
the phone by converting digital signals to analog and vice versa. In recent years, India has made
significant progress in terms of manufacturing mobile phone components.

With growing government efforts under the Make in India' movement, manufacturers have started to
adopt new technologies so as to provide innovative mobile phone components.

Some of the leading players operating in the market are including Samsung, Xiaomi, Lenovo,
Micromax , Oppo, Vivo, Lava, Karbonn and Intex.

Indian Mobile Components Manufacturing and Assembly Market Trends:

While the launch of feature phones during the last decade of the 20th century established strong
penetration, introduction of smartphones stimulated the market further. Driven by the growth in
Internet services, smartphones found high penetration among the urban/Internet savvy population,
thereby driving the demand for mobile phone components.

India’s demographic profile has experienced a characteristic evolution, which is highly favorable to
the mobile phone adoption. Factors such as a large young population, strong working-age
population, rising number of working women, and the growth of the Indian middle class have
evolved to represent the most influential segments of the population generating new social,
technological, and economic trends.
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India has a large pool of unskilled, semi-skilled and skilled labor in the major manufacturing states.
The easy availability and low cost of labor has encouraged investors to enter the Indian smartphone
manufacturing industry.

Continuous technological advancements are pushing mobile phone manufacturers to shorten the
product lifecycle and launch new products frequently, for both first-time and replacement
consumers. This is fueling the demand for basic mobile phone components such as PCB (Printed
Circuit Board), connectors, plastics, metals and acoustics.

Due to the favorable business initiatives by the government, India is expected to witness swift inflow
of foreign investments in the next few years. For instance, Samsung has recently inaugurated world’s
largest mobile phone factory in Noida, Uttar Pradesh, giving huge boost to the mobile phone
manufacturing industry in the country. Apart from Samsung, several other Chinese phone
manufacturers are expected to expand their manufacturing capacity or set up a new plant in the
country during the forecast period.

Although most of the mobile phone manufacturers in India are involved in assembly applications, the
growing number of favorable governments schemes are prompting the manufacturers to invest in
local value addition and indigenous research.