LG Electronics India Ltd is planning to increase its local sourcing of components for its made-in-India GSM handsets from the current 20 per cent to 50 per cent by the end of this year with component manufacturers from Korea, Taiwan and Europe setting up plants near its Ranjangaon plant in Pune.
Till about a month ago, a company official admits, the company was simply assembling GSM handsets as all components were being imported from Korea. It started sourcing chargers and packing from domestic vendors one month ago which took its local sourcing of components to 20 per cent.
The company has set its eyes on atleast 50 per cent local sourcing of components in value terms, if not units terms, by the end of this year, said H S Bhatia, product group head, GSM mobile phones, LGEIL.
This, he said, would provide the real benefits of local manufacturing as it would save the company the freight costs, the customs duty and the various taxes. It also reduces the lead time and helps us respond faster to the market, Bhatia added.
About 8-10 component makers from Korea, Taiwan and Europe producing batteries, keypad domes, printed circuit boards, body shells and packing are in the process of setting up plants in India.
LG, Bhatia said, is also talking to other vendors to source the remaining components. "Key components like integrated circuits/ chips, TFT and LCD screens will continue to be imported for some time," he added.
The component makers will start production towards the end of this year. "It will give us better adaptation to the Indian market and there will be no need to stock much with the component suppliers based near us," he added.
On the impact on prices, Bhatia said that the benefit of local sourcing would be eventually passed on to the consumer.
Our target is to save 20 per cent of the component cost by local sourcing and components usually make up 40 per cent of the cost of the finished product. However, until significant sourcing takes place, it is difficult to put a figure on the impact on prices, he said.
LG Electronics India Ltd started manufacturing GSM handsets last year and is currently producing 40,000-50,000 units per month and by March 31 this year, it would have produced 500,000 units.
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