India - China: India Ahead of China in Wearables Production
STORIES, ANALYSES, EXPERT VIEWS
The surge in wearables manufacturing in India is impacting Chinese assembly lines adversely, with many factories in that country facing a sharply reduced order book, according to several industry executives.
Top wearables brands such as Boat and Gizmore are making most products locally in key categories audio and smartwatch through electronics contract manufacturers such as Dixon Technologies and Optiemus Electronics.
"Because wearables assembly as a whole has shifted from China to India, most of the factories (in China) that were assembling truly wireless earbuds, neck bands and smartwatches are sitting without orders," said Sanjay Kalirona, chief executive at Noida-based Gizmore. "Earlier, we used to import completely built-up units (CBUs). But after the government imposed duties on wearables, we started importing them in semi knocked-down format, which is getting assembled here," he said. "So, most (Chinese) factories that had been supplying to India are now sitting empty."
Domestic shipments
Domestic shipments of wearables jumped 81% on-year in the first quarter of calendar year 2023 to 25 million units, with India surpassing China to become the largest market in the world, according to IDC India.
Beijing's shipments fell 4% to 24.7 million. The market tracker expects India to ship 131 million units in 2023 - the most in the world - versus 100 million in 2022.
Audio products
In contrast to the smartphone market, the wearables industry is dominated by homegrown brands such as market leader Boat, Noise and Fire-Boltt that have captured almost 75% of the share by volumes, as per IDC.
By the end of 2022, 40% of total wearables sold were locally manufactured. This figure has swiftly climbed to 65% currently and is expected to rise to 80% by the end of 2023.
Sameer Mehta, chief executive of Boat, said almost 75% of its audio products and around 95% of its smartwatches are being made in India, from 20-25% of its annual volumes from last year. “The capacities of Chinese factories that we worked with are now down 50% because we have shifted that capacity to India,” he said.
“Since India has been consuming the highest number of wearables in the past one and half years, the shift towards local manufacturing here has led to a lot of factories in China working with reduced capacities, while some have shut down," Mehta said.
Phased Manufacturing Programme (PMP)
The push for wearables manufacturing came after the government notified the Phased Manufacturing Programme (PMP) from April 2022, with India manufacturing Rs 8,000 crore of electronic wearables as of FY23, from negligible levels a year before.
Experts said the low average selling price (ASP) is also being maintained by ramping up local assembly after a 20% basic customs duty was imposed on CBU imports from April 2023. IDC expects ASP is expected to decline further to $23-25 by the end of 2023, from $27 in 2022.
Two wearables manufacturing executives who asked not to be identified said the dependence on Chinese factories was declining month-on-month. They said the fall in manufacturing has largely affected small and medium wearables manufacturers, mostly based out of Shenzhen in China. They have seen a significant order book decline after they expanded capabilities in anticipation of a surge.
