Broadband India Forum (BIF), today, organised a summit titled ‘Mobile Telephony in India – Towards a Sustainable Innovation Economy’.
Mobile telephony in the contemporary structure of the world order consists of the wheels on which an economy continues to run and accelerate. It is the backbone of the digital infrastructure—connecting and binding people in the country and beyond its borders. The importance of mobile telephony in the Government’s economic growth plans and in creating social equity can be underscored by recent policy initiatives such as Make in India that has laid a strong emphasis on mobile manufacturing in the country. NITI Aayog points out that OEMs or ODMs or component/accessories suppliers are still in infancy in India and most of it is confined to last mile assembly. The study looks at the key factors that will provide greater push to the Make in India initiative in this sector. Towards this, the report analyses the economic and social potential of the mobile manufacturing sector and assesses its preparedness to support Make in India.
Commenting on the report, Shri T.V. Ramachandran, President, Broadband India Forum, said, “The study takes a much needed and critical look at the mobile telephony sector from the prism of key policy goals that assess whether the Make in India initiative in this sector is a success. With an increasing number of foreign manufacturers, now manufacturing in India, Indian companies must be willing to step up their innovation and R&D efforts to remain competitive in their own market. India’s domestic mobile handset manufacturers remain largely reliant upon the innovations and standards set up by the international players and organisations. By stepping up its innovative framework the Indian mobile industry will be better placed to contribute to the global standardization process. This will also determine its role in the upcoming 5G ecosystem that promises to be truly transformational and one that the government intends to deeply integrate with the flagship Make-In-India programme.”
Shri Kaushik Dutta, Founding Co-Director TARI said, “With an increasing dominance of foreign mobile manufacturers, it is incumbent upon local manufacturers to innovate. The Government of India’s National IPR Policy 2016 is focused not only on Indians recognizing their own IPs but also respecting third-party IPs. But prior to establishing an innovations framework and in contributing to the global standardisation process, India needs to have a business-ready ecosystem that also recognizes the IPs of international patent holders. For the continued use and benefits from new technologies such as 5G, it is imperative that royalty payments are proportionate to investments to enable both patent rights holders and manufacturers thrive in this growing ecosystem. This will allow us to reap the benefits of new standards, increase global competitiveness and at the same time help reduce outflows due to large imports.”
The findings of the report highlight three significant issues affecting India’s indigenous mobile telephony and other telecommunications equipment sector growth and therefore also affecting Make-in-India.
The first issue is that mobile telephony growth in the country is today largely being driven and is dependent upon imports. The share of mobile and other telecommunications equipment in the country’s total import basket is continually increasing and currently stands at 26.4%. The share of Chinese products in this basket is continually rising and its share has increased from 64.3% in 2012-13 to 69.4% in 2016-17.
The second issue is that manufacturing value added (MVA) by Indian manufacturers is relatively small mainly due to high dependence on imported components. Considering increase in mobile penetration from current levels and large dependency on imports, the role of mobile and telecommunications equipment is crucial under the Government of India’s Make in India initiative.
The third issue is that mobile technology innovators, who are also the Standard-Essential Patent (SEP) owners, have often held the view that they do not make sufficient economic gains for their investments in research and development (R&D). On the contrary, mobile manufacturers state that the royalty claims on use of licensed technologies is too high. The study estimated the royalty yield by analysing the IPR revenues (earnings from IPRs in their annual report/filings) of 10 global companies, which includes major mobile technology innovators and licensors as a percentage of the mobile sales in the global settings.
The royalty yield of the 10 selected companies is in the range of 3.35% to 2.64% and shows a declining trend between years 2013 and 2016 suggesting that the royalty revenue of license holders has remained stagnant but smartphone sales in volume and value have increased over the years. R&D expenditure of the mobile license holders is in the range of 10.3% and 35.8% of their total revenue with a median of 21.9%, which is among the highest when compared with other industries.
Standardisation and innovation have been the cornerstones of the sustained growth momentum of the mobile telephony in the last three decades. With the onset of 5G and the rapid growth of Internet of Things (IoT), Machine to Machine Communications, Artificial Intelligence, etc and applications like smart cities on the anvil, the need for sustained industry effort on these fronts is required.
Mobile Telephony’s and Communication Equipment’s Contribution to India’s Economic Prosperity
The total direct economic contribution of the mobile telephony to the Indian economy is estimated to be ₹2,520 billion, which is about 1.75% of the Indian GDP for the year 2015. Linkage with a host of other industries leads to indirect and induced effects on the economy, which we measure by using the ‘Input-Output (I-O) Analysis’ methodology developed by Nobel laureate, economist Wassily Leontief. As per our analysis, the output multiplier results are:
|Input-Output (I-O) Analysis||Mobile and Telecommunication equipment|
Mobile phones with a manufacturing value added (MVA) of 18.3% and corresponding value addition multiplier effect of 5.89 implies that the total value addition to the economy due to increase in demand for mobiles will be significant. Hence, mobile phones require greater attention under “Make in India” to increase the contribution of the manufacturing sector to the GDP.