Smartphone manufacturing in India is being seen as a big avenue going forward, and the government of India is making a few changes to enable that. At the top of the charts is a revision of the existing production-linked incentive scheme for smartphone manufacturers, where an empowered committee has decided that it will no longer evaluate manufacturing plant and machinery brought into India by a brand at just 40 percent of its value. Revealed in a report by The Economic Times, this was one of the clauses to which Apple had raised an objection to. Now, the government is reportedly in discussion with manufacturers such as Foxconn, Wistron and Pegatron to attempt to move some of their manufacturing activities over to India.
Interestingly, the government committee that made the above change on Friday also voted to begin involving industry players in meetings and discussions, before making any further changes to this PLI scheme. To be involved in the decision making process, companies will need to have invested and setup some scale of manufacturing processes in India already. To further ease the rules and make local manufacturing of smartphones in India seem attractive, the committee has chosen to remove certain valuation caps from the production process, and also de-link the payout of the local manufacturing incentive from the government’s financial condition. In other words, companies manufacturing in India will have an assurance of earning its PLI, therefore making India seem like a viable alternate manufacturing destination after China.
The PLI scheme will lay out a graded target of 4 percent to 6 percent incentives for companies manufacturing in India, over a five-year period. According to reports, the scheme demands companies to manufacture ‘high end’ phones (above $200, ~Rs 15,000) in India worth Rs 4,000 in the first year, followed by Rs 8,000 crore, Rs 15,000 crore, Rs 20,000 crore and Rs 25,000 crore between the second and fifth years of making in India. The government has reportedly earmarked a total of Rs 40,951 crore to be paid out as incentives to smartphone companies, and according to ET, the benefits may even be altered depending on the performance of companies. A new part of the PLI scheme has also added that these companies may also seek relief from the government’s set targets, in case of unforeseen circumstances disrupting flow of business in the future, such as the present Covid-19 pandemic.
Going forward, it remains to be seen if this encourages manufacturers to shift more of their production to India. Apple, which may be one of the prime targets of this move, already manufactures a select range of older generation iPhones in India. Other companies, such as the Korean Samsung, already has a bigger assembly setup in India. In recent times, Chinese players such as Xiaomi, and the BBK Electronics-backed brands of Oppo, Vivo and OnePlus have also contributed to the Make in India ventures. However, local manufacturing and exports of smartphones only account for less than $3 billion right now, which the government hopes will grow to over $100 billion by 2025, marking a big move that can shape the future of India’s local smartphone manufacturing ventures.