Microsoft is not keen about ‘Make in India’ yet?

Microsoft is not keen to set up a manufacturing unit in India for now, but is ready to source its handsets from the country, company senior official in the country told the Economic Times.

Manufacturing phones in India based on a change in duty structure is an unsustainable strategy, Microsoft India chairman Bhaskar Pramanik told the financial daily in an interview, just over a year after the company completed its acquisition of Nokia's devices business globally.

A firm can set up a manufacturing unit in India only if it is strategically important and the company can actually make profit or money, he said.

"A function of duty differentiation can change overnight, leaving you with huge capital investment," Pramanik said.

However, he did not specify what Microsoft would source from India. But experts are view that components and accessories such as batteries and chargers made locally by third-party vendors could be sourced by the company.

Most of the key components of phones aren't made in India. Sourcing locally is considered a pre-cursor to contract manufacturing, where a third party's facility may be used for assembling instead of the company setting up its own plant.

Imported phones have become more costly than locally produced ones after their duty structure was changed in this year's budget, prompting South Korea's Samsung Electronics to talk about expanding its manufacturing unit in India and Xiaomi, Micromax, HTC and Lenovo to plan for producing handsets locally.

"I don't think there's anything under active consideration for the moment," Pramanik said, referring to local manufacturing.

Microsoft has a very low share of the smartphone market in India, mainly due to intense competition from both international and local companies.

"From an operating system perspective, we are No. 2 — we sell more units than Apple. But from a vendor perspective, our share is small. There are a few companies in the 20s and 30s (market share) and then everybody else is in the 5% or 6%. We are in the undifferentiated latter category, but it's an opportunity," he said.

Microsoft's strength lies in mid-segment, where it has a 16% to 17% market share and the company is looking at opportunities to extend its smartphone offerings to both higher and lower price points, alluding to the premium and affordable segments.

"We believe that in India, a lot of the applications and services will be 'mobile only'. That's the opportunity. The three data centres in India at the time of launch, which will be some time in the last quarter of this calendar year, will have more server storage networks capacity than the entire central and state governments put together," Pramanik said.

He expects Microsoft's growth to leapfrog after the recent global restructuring where devices have been merged with the engineering group under Terry Myerson.

Part of the opportunity also comes from the Windows 10 operating system, free upgrades of which will kick into effect July 29 onwards globally and in India — first for tablets and personal computers, followed by smartphones — except for those whose operating systems are towards end of life or pirated. On issues hurting the IT sector, Pramanik said the government's stand to make open source mandatory for IT companies was 'challenging' and 'incorrect'.
(Image: Reuters)