Lenovo Joins Smartphone Compatriots for ’Make in India’

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Lenovo Group Ltd. started making smartphones in India, becoming the largest Chinese company to produce mobile devices there after the government raised import taxes.

Lenovo will use contract manufacturer Flex’s factory outside the southeastern city of Chennai for its Lenovo and Motorola brands, Amar Babu, chairman of Lenovo India, said Tuesday in a phone interview. The brands will have a combined annual capacity of 6 million units, Lenovo said in a statement.

Foxconn Technology Group this year began producing smartphones in India for China’s Xiaomi Corp. and OnePlus after the Indian government raised taxes on some foreign-made goods to attract investment in manufacturing. Lenovo’s announcement marks the largest Chinese name yet to be lured by Prime Minister Narendra Modi’s Make in India campaign as competitors vie for a share of the world’s third-largest smartphone market.

“Output from the plants is focused mainly on serving the Indian market,” Babu said. Lenovo has no immediate plans to develop phones specifically for India, he said.

Lenovo considered adding smartphone manufacturing to its own personal-computer plant in Puducherry in the southeast before deciding to outsource to Flex’s existing factory in Sriperumbudur, Babu said.

Weaker Economy

Indian production of Lenovo’s Moto E model has already started, with Lenovo expecting to make up to 12 million smartphones in the country across all brands next fiscal year. About 30 percent of components will be sourced locally, he said.

Lenovo fell 5.8 percent to HK$6.81 in Hong Kong on Tuesday, widening its slump in the past week to 21 percent. That compares with the 4.2 percent drop in the same period for the benchmark Hang Seng Index.

Flex’s campus has 1,500 workers dedicated to Lenovo production, including quality assurance and testing, Babu said, declining to say how much his own company spent on equipment installed at the plant. Lenovo isn’t currently considering outsourcing to Foxconn in India, he said.

China, which accounted for 59 percent of Lenovo’s phone shipments in the year through March, experienced its first decline in smartphone shipments in six years during the first quarter, according to researcher International Data Corp. Lenovo, and combined Lenovo-Motorola, lost share in China in the period, IDC said in May.

That comes as China’s economy grows at its weakest pace since 1990.

In contrast, shipment volume in South Asia’s largest economy surged 44 percent in the second quarter to 26.5 million units. Lenovo, Xiaomi, Huawei Technologies Co. and Gionee Communication Equipment Co. doubled their combined India share to 12 percent, according to IDC.

“As China started to slow down, most vendors from the country have targeted India as the next big growth market for smartphones,” IDC analyst Kiranjeet Kaur wrote Aug. 11.

Foxconn, the world’s largest custom electronics manufacturer including for Apple Inc., has announced plans to set up as many as 12 factories in India.

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