India’s number two smartphone maker Micromax plans to produce all its devices locally within the next two years, co-founder Rahul Sharma said.

Sharma said almost two-thirds of its products are already assembled in India, which is a big shift from just a couple of years ago when the country had no ecosystem for manufacturing handsets, Reuters reported.

The shift away from China production is being driving by increasing demand in India and rising labour costs in the mainland.

India is the third largest smartphone market after China and the US and is forecast to surpass the US in 2017. Strong demand for affordable 4G handsets in India helped fuel a 21 per cent increase in smartphone shipments in Q3. Shipments rose to 28.3 million units year-on-year, with 4G devices accounting for a third of units shipped after expanding almost threefold from the previous quarter, according to IDC.

Micromax was the second largest smartphone vendor in India in Q3, with a 16.7 per cent share, behind Samsung with 24 per cent, according to IDG.

The company announced earlier it plans to invest INR3 billion ($44.8 million) to build new handset factories in India.

The country’s ‘Made In India’ drive has pushed five major handset makers to start domestic assembly last quarter. These firms are looking to expand their capacity in coming years not only for domestic consumption but also to export beyond the domestic markets, said Tarun Pathak, Counterpoint senior analyst.

Back in April, Chinese e-commerce giant Alibaba reportedly was looking to acquire a 20 per cent stake in Micromax after discussions with investors led by Japan’s SoftBank broke down over differences in valuations. Sharma, however, told Reuters the company was not looking to raise fresh capital.