Home-bred handset maker Micromax will invest Rs 500 crore towards manufacturing and Research and development (R&D) as it plots a comeback in India's smartphone market, backed by the government's incentive scheme.

Home-bred handset maker Micromax will invest Rs 500 crore towards manufacturing and Research and development (R&D) as it plots a comeback in India's smartphone market, backed by the government's incentive scheme.

Speaking to ET, co-founder Rahul Sharma said that the government's incentives will help the home-bred handset maker compete effectively with Chinese rivals who dominate the market now.

Micromax, which at its peak in 2014 rose to No. 2 in smartphones, has practically been wiped out of the market by the Chinese onslaught, which began to take shape in 2016.

"The new PLI scheme balances out foreign and Indian players. The support of 6% is a big support. With the government support, we will be able to fight Chinese brands fiercely on the pricing front. PLI is a solid backing," Sharma said. "Internal accruals are good for the plan...I will raise money at the right time."

Micromax decided to exit the smartphone space two years ago because it couldn't compete on pricing front with Chinese handset brands that flooded the market with affordable handsets backed by fat marketing budgets. "PLI is going to solve the pricing for us and is allowing us to make a grand comeback," Sharma said.

Micromax has been selling feature phones in India since its exit from the smartphone market. It, however, makes mobile handsets for other brands as a contract manufacturer.

Sharma said that handset brands can already source 60% material locally for mobile handsets as the phased manufacturing program helped the ecosystem to grow in the country.

"The idea is to involve local MSMEs to further increase the local sourcing of components for smartphones," he said, adding that the company will work with other local handset brands to bring component ecosystem players to India and there will be more synergies.

The company will match the smartphone specifications and pricing offered by Chinese brand, he said, adding that Micromax will not be required to spend marketing dollars like Oppo and Vivo. "I know how to make a product...that's my expertise...once I give competing products and at the same pricing then the customer will buy."

Micromax is planning to build a complete ecosystem of products across categories, a strategy being executed by its bigger Chinese rivals. "Among Indian brands, we are positioned to do that. We have TV and AC manufacturing already. we have the power of some ecosystems already. This will enable us to play and compete," he said, adding that his smart mobility startups Revolt will also play a role in the connected ecosystem by Micromax.

Sharma said that Indian brands need support from Indian citizens to help grow local brands as the local market can offer scale and it needs to bring the complete mobile handset ecosystem.

The entire world is looking for options outside China, and India is emerging as the most suitable country since it offers scale and has the government support, he said. Micromax's investment coupled with the PLI scheme benefits will help it grow its export business as well. It provided smartphones from US telecom operators in 2019. "We have identified global markets."

The co-founder also called for stricter data localisation saying that merely storing data locally doesn't solve the problem as companies can still use this data to train Artificial Intelligence and Bots in China. "All this data is going to China despite them saying we have local servers. The US has realised that all data is going to China thereby the recent steps..everything needs to be in India and that should be the priority," he added.

He also said that Micromax and other Indian brands were deliberately labeled as mere traders after Chinese brands entered. "The ecosystem used to run on a partner model back then. We brought many industry firsts, including a dual SIM phone and Canvas series...all these were developed in India. Now for all new phones, we will do R&D locally. The work has started already," he explained.