It was Diwali 2015, and demand for Micromax phones had shot through the roof across the country. The Gurgaon-based handset manufacturer was launching a new model every week and its primary factory in Rudrapur, Uttarakhand, was struggling to keep up with the festival demand. At one point, there was no space inside the factory, which had a built-up area of 2 lakh sq ft, to store phones. So Ashutosh Singh, Deputy Manager (Development), of Micromax’s manufacturing arm Bhagwati Products Ltd, set up a makeshift canopy to temporarily store large cartons. Singh oversees operations at the Micromax factory,

In FY15, Micromax Informatics earned a consolidated revenue of ₹10,948 crore and a profit of ₹336 crore, according to documents the company filed with the Registrar of Companies. The corresponding figures for FY16, when a bumper Diwali season propelled it to the No 2 position in the country’s mobile handset market, have not been filed.

But Rahul Sharma, Co-Founder and the public face of Micromax, had in the past indicated that revenue for FY16 touched $2 billion (roughly ₹13,400 crore). The Rudrapur facility would be responsible for the bulk of this number.

The Pantnagar industrial zone in Rudrapur is home to manufacturing powerhouses like Tata Motors, Ashok Leyland, Voltas, Emami and Bajaj Auto. Micromax came here in 2012, moving into premises vacated by the confectioner Dukes. It started manufacturing tablets but gauged market sentiment soon enough to switch to smartphones and TVs.

“We started with 5,000 pieces in a mobile lot, and it took us 15 days to do it. The performance and life cycle of a phone is different from the tablet. We also had to learn Android quickly, because our engineers were only familiar with Windows till then. We had to learn what to look out for, ask the Chinese ODMs (original design manufacturers) and put best practices in place,” Singh said, explaining the early days of setting up the Micromax phone assembly line. Today the factory runs 12 assembly lines, each has two shifts and produces 4,000 handsets every day.

That’s an installed capacity of 48,000 handsets a day, or about 1.5 crore units a year. In just four years after starting operations here, the factory has the highest sales turnover in Pantnagar’s industrial zone, Singh says.

There are over a billion mobile phone users in the country who buy about 250 million new phones a year. According to research firm IDC, 27.5 million units of smartphones and 33.7 million units of feature phones were shipped in CY Q2 2016. More than two-thirds of the smartphones sold in the market are assembled within the country.

But the value that manufacturers add to the end product is still minimal. Because of a loophole in the law that charges no tax on imported phone components, home-grown handset makers bring in phones as semi-knocked down (SKD) units, in which all the key high-value components are already soldered to the main printed circuit-board. This circuit board, and the microscopic chips on it, accounts for over half of the value of the phone.

A typical mobile phone assembly line begins with the hand-kit, which includes plastic volume and power buttons and the proximity sensor sleeve (which makes your screen go blank during a call). The radio frequency is tested and the circuit board is screened; Wi-Fi antenna and cameras are added and the battery is pasted, the front housing of the phone (the touch screen, panel) is added, the LED and mic are tested, the OS is loaded and a dummy SIM is inserted to check if everything is synchronised. After this, the battery is charged, and a sample from each lot is tested for durability and pressure resistance. The rest of the units head to the packaging line, where the phone is placed in its gift box with the accessories and the instruction manual.

Through this process, Micromax makes the chargers and the USB cables for its phones while the packaging is sourced locally. The rest of the pieces come as part of the imported SKD and are screwed into place at the factory here.

To be fair, manufacturers are trying to locally source more of the parts. But the cost advantages, and the lack of capability to make the big-ticket components in India, hinders this. For instance, Micromax plans to introduce a new battery assembly line at Rudrapur; they’ve just completed a pilot of 5,000 pieces and the feasibility analysis is under-way. The battery cell, however, will be imported. With smartphones being used for a number of applications, battery life is one of the most important factor from a consumer point of view. From a manufacturing point of view, batteries are not the most expensive component but are highly complex.

“A huge set-up is needed to manufacture the battery cell,” Singh said, describing the facility available in China. “It’ll take us at least two years just to set up everything here to make the cell. But we’re doing other things. We’ll soon start moulding and welding of cabinets and the battery cover.”

SK Shelgaonkar got his first job 23 years ago, assembling colour TVs at Videocon’s mother factory in Aurangabad. Today, he is the General Manager and Head of Operations at the 30-year-old Aurangabad factory, a sprawling 450-acre facility.

This is where the dry run for manufacturing every single product that Videocon sells is first carried out. In addition to the range of consumer electronics products, Videocon manufactures about 12 lakh mobile phones every year.

There are over a 100 different models of feature phones and smartphones that come out from 12 assembly lines. Plans are on to expand this to 18 lines by the end of this year, increasing production to 25 lakh units.

“At Videocon, we have always believed in backward integration,” Shelgaonkar said, implying that the company will slowly reduce its dependence on imported components and produce more locally. The company tries to innovate, based on local feedback.

The batteries for phones have a SMPS (switched-mode power supply) application, so they don’t spoil even when there are wide fluctuations in voltage.

With one particular feature phone model, developed by Videocon, you can plug in your mosquito repellent to your phone; in another, you could plug in your light bulb, during load shedding hours.

Even with the manufacturing process, Videocon is trying to do what it can in-house. It has a fully functional paint shop, that designs and paints the back panels of phones and a 3-D printing facility for printed designs. It plans to introduce a battery assembly line at its new facility in Manamadurai, Tamil Nadu.

These manufacturing units are creating jobs. The Videocon factory employs about 6,000 people, and will add 2,000 more jobs as its mobile assembly units expand.

At the Micromax factory, just five of the roughly 4,000 workers are over 40-years-old. Most of them are fresh-faced graduate hires in their first jobs, with degrees or diplomas from engineering colleges or industrial training institutes.

The local economy around these facilities have boomed, especially for local paper and plastic product makers, and for local transporters and conveyor belt-makers.

But there is scope for more job creation, the ultimate objective of the Government’s Make in India campaign. Of the final value of a phone, Singh of Micromax says about 10-15 per cent of the value addition happens in India. Shelgaonkar, of Videocon, quotes a similar figure.

Rajesh Aggarwal, Co-Founder, Micromax, draws a parallel with the evolution of auto manufacturing in India. When we started making cars in the 1980s, he says, a lot of the components were imported and only assembling was done in India.

“I think that’s where we are with mobile phones right now. Just like we fully manufacture cars in India now, I think in the next five-six years, we’ll be making phones, and other smart electronics, entirely in India.”