HMD Global, the Finnish start-up that owns the rights to use the Nokia brand on mobile phones, is ringing in the new year with two key focus points, while staying true to its primary focus, which is to offer competitive devices with pure, secure and up to date software.
The first being, it is looking at India as a very important market, both from sourcing as well as sales point of view. Second, it is looking to launch more affordable 5G devices after having secured $230 million of investment from partners including Google, Qualcomm and Nokia Technologies last year.
At the same time, HMD Global is seeking more clarity on certain laws and provisions from the government, while hoping for a balanced approach on custom duties for various electronics components in the upcoming budget.
In an exclusive interview with Financial Express Online, HMD Global vice president Sanmeet Kochhar shares insights on the challenging, yet noteworthy year that was 2020, and all that lies ahead in 2021. Excerpts.
The year 2020 was unprecedented. No one saw the pandemic coming. How did your brand adapt to it?
We have factories around the world including India (we are already manufacturing 100% of our devices in India). We looked at different options including how we can leverage India as a country and as a market, not only for our fans but also for our sourcing needs and we took some concrete steps on what we are going to do in terms of manufacturing our devices in India.
We are now back at 100% capacity. When we moved into quarter three, as soon as we moved out of the lockdown, we started to ramp up our capacity and we knew very well that, the mobile phone segment is very resilient from a demand point of view. We were very proactive in terms of managing our supply chain within India, during the lockdown and we worked with our partners to see how we can create an atmosphere of safety inside the factory. We worked with our partners to see how we can arrange transport to get them from different locations. We also arranged for regular testing and social distancing, and sometimes dorm facility where they would be staying.
In terms of our partners, we expanded our distribution in India with 700 plus distribution partner strengthening our offline presence.
Can you elaborate on your ‘make in India’ aspect?
We are completely aligned to the Make in India initiative. The PLI scheme is also a great initiative. Foxconn has a subsidiary called RSMI which manufactures a significant number of devices that we sell in India. Their manufacturing facility is located near Chennai. In addition, there are multiple other partners and locations that we leverage for our device production.
There has been concrete progress in terms of the number of components that we have been sourcing in India. The quantity of components that we are procuring from India or rather, our partners are procuring from India, has gone up. We work through our partners at manufacturing locations. For the launch of Nokia C3, we worked with an Indian partner. Similarly, you will see more and more devices coming in, which are getting manufactured with our Indian partners.
What are some of the challenges involved?
India is becoming very important from a sourcing point of view, but we also must understand that making a mobile phone involves a lot of steps, from the design of the product to component procurement, to then making the device, packaging and shipping it. This is not something that can happen overnight. And this is something that China has been able to build over a period.
We need massive programs, including training and upgradation of skills and technology to get to that level. I think we have made the right start and are very closely looking at how we can leverage India, as a country for driving our supply chain and sourcing.
Most importantly, how long before you see India becoming an export hub?
India as a source for our exports is something that we are evaluating very closely. It is difficult to give a timeframe, but as I said, India is an important market for us, and we will continue to evaluate India, not only for our domestic consumption, but also from an export point of view.
Are you looking to set up your own factories, and take manufacturing in your own hands?
As a part of our overall company strategy, we work closely with our partners. We have different partners, including Google, Qualcomm, Nokia, and others in the ecosystem and we work closely with our partners to see how we can offer the best products to our fans. So, the answer is no.
What does 2021 look like for HMD Global, and by extension, for Nokia mobile phones?
We are looking at India as an important market and the first thing that we are going to do is look at products which are customized for the Indian market. Second is 5G, which is an important space that we have decided to play in, and we are looking at how we can launch more affordable 5G devices this year.
Our overall focus will be on communicating our differentiation from competitors. Our differentiation lies in terms of having a better, future-proof software. When you are buying a Nokia phone, you are getting software which is going to last for much longer and then you will not be forced to change your device (as frequently).
And then, finally the enterprise space. This is an important one for us, and we will continue to see how we can focus on this space to provide the right kind of proposition for our fans.
What are your expectations from the Union Budget 2021?
It would be especially good to see how we can get the domestic demand back on track, create momentum in the economy for more and faster job creation, and how spending can be increased without raising inflation levels.
Considering the growing importance of ‘Make in India’ and ‘Self-Reliant India’, there may be a rise in custom duties for various electronics components. I believe the government needs to consider a balanced approach and pace the country through this change, as price increase could hurt the industry during the pandemic and possibly, the end-consumer.
As an industry, we are also hoping for more clarity on certain laws and provisions. For example, the law relating to TDS on e-commerce transactions for third parties selling their products on a brand’s e-commerce portal, especially when there is no commission/revenue earned by the brand. Another clarity needed is regarding the scope of ‘significant economic presence’ (‘SEP’), which in its present form is quite wide and includes any activity with respect to sales of goods, services, download of data/software beyond a threshold.
Finally, the government should consider abolishing or restricting the Dividend Distribution tax (‘DDT’) that increases the effective tax rate on distributed profits and should consider providing a refund of accumulated input GST credit to assesses where the accumulation is beyond a period of 2 years.