Phone Manufacturers Ditches Nigerian Factory Plans

There are reports that some foreign original equipment manufacturers of mobile phones have abandoned their plans to establish factories in Nigeria citing entry barriers into the market as the problem.

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Having experienced market acceptability for their products and having growth prospects in Africa’s largest market for mobile devices before now , some of them have developed cold feet towards the establishment of the production centres in the country.

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Major mobile phones makers such as Tecno, Samsung, Nokia, Motorola, and Blackberry had in the past showed interest in establishing production plants and had promised to create millions of jobs. But findings by our correspondent showed that siting manufacturing facilities in Nigeria was no longer on the table for the OEMs.

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Also further Findings revealed that the market shares of some of the OEMs had been eroded by the emergence of cheaper phone brands.

The Chief Executive Officer, Samsung Electronics Africa, Mr Sung Yoon, during a visit to Lagos last year, stated that the company would not establish a factory in Nigeria due to its low market share, infrastructural deficit and grey market in the country.

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Mr Sung Yoon said the company had manufacturing plants in Vietnam, China, South Africa and Korea, adding that producing mobile devices required over 400 components that had to be imported.

Also James Rutherfoord, who was the vice-president /managing director, Nokia West and Central Africa at the time, had reportedly said in 2013 that the idea of establishing a phone factory in the country did not make any economic sense, though Nigeria was its strategic market on the continent.

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James said: “At this point in time, it is a difficult one because most of our component suppliers, all the people that make chips, batteries and all the other components of the devices are not around here. They are all in the Far East. So it’s very difficult to create a factory very far away from them.”

“It goes beyond Nokia just waking up and deciding to open a factory in Nigeria. We need the whole ecosystem of people producing the components to be very close, otherwise, we will have products that cost higher.”

While Transsion Holdings are yet to respond to media enquiries as of press time on Sunday, information gathered from reliable sources that the company still had plans to set up a factory but the unfavourable business environment was delaying its plans.

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The President, Association of Telecommunications Operators of Nigeria, Mr Olusola Teniola who spoke on the barriers to entry into the Nigerian market, identified some barriers to market entry as import duties, stamp duties, taxes and levies that were imposed on imported components of mobile phones.

He stated that the removal of the barriers will encourage investment by phone manufacturers in the country.

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Teniola further said that the infiltration of counterfeit mobile devices that offered lower prices through the porous borders of the country was creating unfavourable competition for manufacturers that had to bear a lot of costs to produce phones.

Teni said, “The issue of fake phones, which represents 10 per cent of the phones that are readily available in the market, also acts as a barrier and a dissuader for manufacturers to come in.

“When you have smugglers bringing in substandard products, they can now under-price those that have actually had to take on the costs of running their businesses in Nigeria plus the cost of manufacturing in Nigeria.

“You cannot go below a certain price because it will be below your cost. So, smugglers of fake phones come in and go below your cost because they are not registered; they do not pay taxes in Nigeria and they don’t pay import duties because they smuggle their phones into the country. So, their prices are way below. That is a threat.

“This will kill the manufacturing industry, especially when the government is trying to encourage OEMs to come into the country. The government needs to remove and give incentives because there’s literally a high cost to OEMs. We need the government to assist by giving the concessions for a period of time. We need the Standards Organisation of Nigeria, the Nigerian Communications Commission and the Nigeria Customs Service to collaborate to fight the menace of fake phones that are smuggled across the borders of Nigeria.”

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