Budget 2025: Not all LED TV makers are thrilled about duty exemption on open cell parts

While abolishing duties on parts, finance minister Nirmala Sitharaman has retained 5% duty on fully built open cells.  (HT)
While abolishing duties on parts, finance minister Nirmala Sitharaman has retained 5% duty on fully built open cells. (HT)

Summary

  • A section of manufacturers sees the budget announcement as a big boost, but others say the relief will only benefit specific companies like China's TCL and India's Dixon.

New Delhi: The exemption of import duties on components required for making open cells—a key part of LED televisions—has divided India’s nearly-$10-billion TV industry. A section of manufacturers sees the budget announcement as a big boost, but others say the relief will only benefit specific companies, not the entire sector.

“The duty abolition will only benefit select brands with the technology to set up direct shops in India, instead of encouraging local brands to participate in an open manufacturing industry," Avneet Singh Marwah, chief executive at Super Plastronics, a contract manufacturer of electronics, told Mint.

“Open cell manufacturing can only be set-up in partnership with one company at a time, which is the rule that these companies work on," Marwah said. “The reduction of duties will only bring more profits to foreign firms, rather than adding value to India’s electronics ecosystem."

China’s TCL Technology is the only firm in India that currently has the capacity for open-cell manufacturing. It is reportedly setting up a $3-billion display fabrication unit with Noida-based Dixon Technologies Ltd.

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Critical components

An open cell is one of the four most critical components of a television, accounting for the highest value of about $1 billion in the nation’s TV market that market researcher IDC sees reaching over $10 billion by the end of this fiscal

While the other three key parts—printed circuit boards, backlights and the chassis —are being manufactured in India due to need for lesser sophistication, open cells have so far been imported as fully manufactured units. The abolition of duty on parts seeks to encourage local production of the component as part of the government’s plan to develop a $500-billion electronics sector by 2030.

While TCL is expected to become the first to “make" open cells in India, China’s Skyworth and America’s Radiant Vision Systems are also in line to consider India as both a market for consumers as well as exports, Marwah said.

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Queries emailed to the three companies did not elicit a response until press time.

The duty revision “will require careful evaluation", said Jasbir Singh Gujral, managing director of electronics manufacturing services provider Syrma SGS.

Arjun Bajaj, director of Videotex International, an Indian smart TV manufacturer for Realme, Toshiba, Havells (Lloyd), Reliance Group (BPL & Reconnect), Compaq, Hyundai and several other brands, also flagged that “only one facility in India with limited capacity to process open cells of television displays" or those sourcing from it stand to benefit.

A “more substantial reduction in duty, perhaps on more components, could have better supported the sector's growth", Bajaj said. “While this adjustment can be seen as a long-term strategy to attract more key players and build local facilities, the challenges of significant investments and resource tie-ups for localization persist."

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'TV prices won't be affected'

Retailers and companies said the move will not impact TV prices for end consumers. “We don't see any major change in prices in the market immediately," said Bajaj. However, it will take a while and sufficient investment for India to develop its own open cell capabilities with current capacity to service the 17 million to 18 million units per annum TV industry, he said.

While abolishing duties on parts, finance minister Nirmala Sitharaman has retained 5% duty on fully built open cells.

This will further drive local production of display modules for LED TVs, according to Sunil Vachani, chairman of Dixon Technologies, who underscored that the company is reaping the benefits of “deeper investments in mobiles and consumer electronics".

“Dixon is investing ₹250 crore in setting up a state-of-the-art display module plant, with operations expected to commence by December this year," Vachani said. However, he did not confirm TCL’s participation in its plans.

Manish Sharma, chairman, Panasonic Life Solutions India & SA, which works with Dixon for its TV business, expects the duty relief to benefit the industry in the long run. “In order to backward integrate, the logical steps are to lower the duty on bill of material items in the first step. Once the assembly happens in scale then a potential duty increase enables the manufacturing of those components in the country," he said. “This will require investment for certain operations which will let these components assemble."

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Union IT minister Ashwini Vaishnaw in his post-budget press briefing stressed that the move is designed to bring the technology from a component level to India and help component makers set up shop in the country.

“The duty rationalization addresses three of the biggest issues in the electronics component ecosystem—warehousing, the issue with custom duty structure rising out of so many different duty slabs, and challenges with supply chain vendors setting up permanent establishments," the minister said. “Today’s announcements have ensured the removal of eight duty slabs to simplify the structure, which will draw more component supply chain stakeholders to India."

According to Ashok Chandak, president of industry body India Electronics and Semiconductor Association (Iesa), the abolition of duty on open cell parts is a “strong value addition opportunity for India, which is why this is also the right time for India to subsidise component manufacturing".

“Not all companies may evenly benefit, but there is clearly a strong case to be made for open cells in India—especially given that the rest of all TV components are already being made in the country," he said.

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