US telecom operators turn to India for low-cost mobile phones

Telecom operators in the US have turned to India for low-cost mobile phones following the national security risk and concerns surrounding Chinese manufactured mobile phones. There have been speculations that Chinese-made smartphones are sending sensitive data to their country or origin.

The US Federal Communications Commission (FCC), on June 30, formally designated Huawei Technologies and ZTE Corporation, and all their parent and subsidiaries as well as affiliate firms, as national security threats. The FCC order alleged both companies of having close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services. Analysts said about 30 per cent of the US smartphone market is in the sub-$200 or low-end segment, with an expert highlighting that tensions between the US and China have created a perpetual state of uncertainty for all smartphone vendors except Samsung and LG.

Sources said Verizon, T-Mobile, AT&T and Cricket Wireless have initiated talks with Indian smartphone makers, including Lava and Micromax, to procure unbranded handsets, that would be bundled with data subscription contracts in the US. Rahul Sharma, co-founder of Micromax, said Vietnam and India are emerging as contract-manufacturing hubs outside China. He said Indian companies are well placed to produce such devices for the American market. SN Rai, co-founder of Lava, said the shift started some time ago, and the trend has become far more prominent in the past few months with the volume of enquiries steadily picking up. “If the deals work out, it could be nearly Rs 2,000 crore per year opportunity for the company in the near term,” he said. “We have relevance in the entry-level segment because we have good confidence in the supply chain.” Rai said brands like Samsung and LG are making a killing in the high-end segment because of the ban on Chinese smartphone maker Huawei.

Micromax and Lava, as per reports, are two of the five domestic smartphone makers approved by the Indian government to receive benefits from its new production-linked incentive (PLI) scheme, which offers a four to six per cent incentive to smartphone makers for making phones in India.