Consumer electronics makers Samsung, LG, Sony and Panasonic are reviewing their ‘Make in India’ strategy for televisions — which may lead to scaling down of local assembling operations — following the government decision to tax imports of ‘open cell’ LED TV panels.
According to Economic Times, two senior industry officials said that these companies, among others, are now evaluating imports of finished LED TV panels from countries with whom India has free trade agreements (FTAs) with, such as the Asean bloc of Malaysia, Vietnam, Thailand and South Korea, which will provide 7-8% cost benefit.
The Union Budget presented by finance minister Arun Jaitley last week proposed 10% duty on open cell LED TV panels imported by companies for final assembling by placing top glass of the screen on them at local facilities.
“The 10% duty on open cell LED panels has been shocker since it was against the consultation we had with the government and goes against the spirit of make in India,” said Manish Sharma, CEO at Panasonic India and president of industry body Consumer Electronics and Appliances Manufacturers Association.
Till now, there were no duties on panels imported in open cell format.
“We will request the government to review the decision, otherwise the industry may explore importing panels from FTA countries,” Sharma said. Such a move would impact investments and jobs in the country.
“Full-fledged fab manufacturing of LED panels will take time, and India is still few years away for this,” he said.
A Samsung India spokesman said the recent Budget proposal to increase basic custom duty on TV panels will open better business opportunity for importers rather than manufacturers. “We are carefully reviewing consequences of the recent change,” he said.
Sony India’s sales head Satish Padmanabhan and a spokesperson at LG India, too, said their companies are evaluating various options post the duty hike and will decide accordingly. The companies said as of now they have no option but to increase prices by around 5-6% at a point when consumers are holding back their discretionary spending.
These brands and top contract manufacturers had expanded the open cell LED TV panel imports and set up specialised assembling facilities after the government imposed 7.5% duty on finished LED TV panel in December.
Duty on finished LED panel is being increased to 15% in the Budget while import duty on completely-built television units is 20%.
The TV panel account for 80-85% of a LED TV’s price.
Sunil Vachani, chairman at contract manufacturer Dixon Technologies, said the imposition of the duty on open cell panels is against the government’s phased manufacturing programme, which serves as an investment roadmap for the industry.
“The duties were supposed to be levied much later when open cell fab production starts in the country,” he said. “Since there is no domestic manufacturer of panels in India, this duty serves no purpose and instead will burden consumers with prices going up,” Vachani said.
As per market tracker GfK, television sales declined by 8% in October-December and by around 5-6% in January.
Sharma of Panasonic said the demand will take a further hit due to increase in prices prompting many consumers to downtrade.