Govt cuts import duty on mobile phones, components; Apple to be biggest beneficiary: Experts

NEW DELHI: iPhone maker Apple is believed to be the biggest beneficiary of a 5 per cent reduction in import duty on mobile phones and the move could lead to savings of as much as USD 35 to 50 million for the tech titan, market experts said on Tuesday.

Industry watchers also believe that the latest proposals could result in Rs 2,000-4,000 reduction in prices of some of the premium handsets, including iPhone Pro and Google Pixel, if the companies indeed decide to pass on the benefit of cut in levy to customers.

Apple imports all the high-end iPhone Pro models that it sells in India, while some other companies import their flagship devices for some period in small quantities and then make them locally.

An e-mail sent to Apple seeking comments did not elicit any response.

Finance Minister Nirmala Sitharaman, while presenting the Union Budget for fiscal year 2024-25 on Tuesday, proposed slashing import duty on mobile phones, chargers and some components that are used for manufacturing of handsets.

She said with a three-fold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured.

"In the interest of consumers, I now propose to reduce the BCD (basic customs duty) on mobile phone, mobile PCBA and mobile charger to 15 per cent," Sitharaman said.

Earlier BCD on mobile phones, chargers and motherboards was 20 per cent.

"For BCD on mobile and charger the 5 per cent saving will be mostly applicable to players which are still importing completely built units (CBU) or populated PCBA or chargers. For example, Apple imports Pro series models and Apple could save almost 5 per cent on the import price which could translate to savings of USD 35-50 million (Rs 250-418 crore) until Apple starts manufacturing the Pro models completely," said Neil Shah, VP for Research, Counterpoint Research.

He said with this, Apple will have an opportunity to use this extra cushion to either pass on to the consumers or channels.

"The 5 per cent duty savings will benefit vendors which have been importing phones from Apple with Pro series models to some newer vendors such as Honor or brands such as Google or OnePlus importing premium devices initially at launch," Shah said.

He further said that iPhone Pro price can be lower by Rs 3,000 to 4,000 and that of Google Pixel can come down by Rs 2,000-Rs 3,000 if these companies decide to pass on the benefit of tax cut to customers.

CyberMedia Research (CMR) VP - Industry Research Group (IRG) Prabhu Ram said that Apple is expected to be a prime beneficiary of the reduced customs duty on smartphone parts in India.

He said that reduction in duty on PCBA (printed circuit board assembly) and other components can lead to rationalisation of price in 5G phones priced between Rs 7,000-24,000 apiece.

"While premiumization continues to be a key trend in the smartphone market, expanding access to affordable and value for money smartphones is equally crucial for market growth. Today's budgetary move could potentially contribute to rationalising prices, particularly in the value-for-money 5G smartphone segment of Rs 7,000-24,000 price band," Ram said.

Techarc chief analyst and Founder Faisal Kawoosa said the proposal to reduce the BCD on mobile charges and mobile PCBA will further allow the smartphone value chain to work collaboratively towards making affordable 5G smartphones.

"We need to now look at interventions that could help in making affordable 5G smartphones. While reducing to 15 per cent is great, I was expecting to have a slab wise approach, where 5G smartphones up to 15,000 would have a higher reduction to further help affordability," he said.

Kawoosa said that reducing BCD for imported category of phones neither aligns with any customer demand and they are happily paying even more than Rs 1 Lakh.

"No consumer in that segment was really complaining about them being over taxed," he said.

Industry body ICEA said that it made the recommendation to reduce BCD on mobile phones, its PCBA and charger and adapter, which has been accepted.

"The mobile and electronics industry is elated with the announcements and will go a long way to enhance manufacturing, exports and our competitiveness," ICEA chairman Pankaj Mohindroo said.

He expects a reduction of 5 to 5.5 per cent in the price of imported mobile phones due to the reduction in customs duty.