Samsung Mulls India Factory As Battle With Apple Extends To Subcontinent

Samsung Electronics Co. Ltd., which recently unveiled its Galaxy S6 global flagship to take on Apple Inc.’s iPhone 6, is considering investing between $500 million and $1 billion on a new factory in India, Economic Times reported on Friday, citing unnamed sources.

The new facility, Samsung’s third in the subcontinent, will make consumer electronics goods, including smartphones, the paper said. Samsung already has two plants in India that assemble much of what the company sells in the country. A new plant could help the Korean giant defend its market share in India -- the world’s third-biggest smartphone market -- after it has been eroded by cheaper handsets from local players and online-only Chinese competitors.

“We can confirm that we are in talks” with Indian authorities, a Samsung spokesperson reportedly told Economic Times, declining to give details on the investment. The company has one factory in Noida, near the national capital New Delhi, and another near the southern Indian city of Chennai.

Samsung’s investments will be a welcome development for India’s federal government, which is trying to convince multinational companies to manufacture their products in India in a much publicized ‘Make in India’ campaign led by Prime Minister Narendra Modi. Samsung is widely believed to have declined to set up a semiconductor wafer foundry in India, an invitation that two other groups took up, including one led by IBM Corp.

Nokia Oyj recently shut its cell-phone plant in Chennai, after Microsoft Corp., which bought the Finnish company's mobile handset business, stopped buying from that facility. This also led to Nokia's supplier Foxconn Technology Co. Ltd. deciding to stop its operations in the same campus.

Local manufacturing also gives Samsung an edge over Apple, which is making a transition from being a niche vendor to a more mainstream player in India, and imports all its handsets into the market, even as demand for iPhones grows.

Meanwhile, India’s new federal government is implementing measures such as a hike in excise duty on mobile phones that are imported, to promote local manufacturing. Recent media reports in India have linked increases in the price of the iPhone 5s and the iPhone 6 models in India to this tax hike. In the long run, Samsung may even look to export its mobile phones from its new facility, the paper reported.