India’s mobile handset manufacturing ecosystem continues to grow as smartphone makers are ramping up capacity even without government incentives, according to Credit Suisse.
Besides 10 local and foreign mobile manufacturers that India has selected under its production-linked incentive scheme, other smartphone makers have also plans to raise capacity, Credit Suisse said in a research note.
Several firms like Flex, BYD, Oppo and DBG that assemble phones of brands, including Xiaomi, OnePlus, Huawei, Nokia and Motorola, are actively looking to increase their footprint in India, Credit Suisse said. Oppo, in fact, plans to double output from its Noida facility to 10 crore handsets a year—about 6% of global smartphone volume.
“This suggests that ex-PLI as well assembling phones in India is now a viable business.”
Prime Minister Narendra Modi’s administration had last year set up an incentive program worth Rs 1.46 lakh crore as it sweetens the deal for companies to set up factories in India. Attracting investments is key for Modi to create jobs and revive an economy headed for one of its worst economic slump in a fiscal.
Of the 13 sectors where the government is offering incentives, handset manufacturing is the first, and the only one in execution right now. Global majors like Apple’s contract manufacturers Foxconn, Wistron and Pegatron; Samsung and local players Lava, Optiemus, Dixon have been selected in the first round, committing investments of over Rs 11,000 crore.
It’s not just the smartphone makers that are planning to increase output. Other component manufacturers in the supply chain will are also likely to benefit, according to Credit Suisse.
“One parameter of success of the PLI schemes will be the shift of upstream component production to India: not just for local value addition, but also persistence of assembly in India,” the note said.
While India’s production capabilities for components like displays and cameras are weak, at least in the near future, it has potential to grow in assembly of printed circuit boards. As production of smartphones rises, so will the market size of PCB Assembly, which are a large part of the mobile phone components, Credit Suisse said.
It said that several component firms have either moved production to India or have expansions. The government is targetting about 35-40% of value addition in the smartphone assembly line to happen from India. Credit Suisse, however, has a more moderate estimate of 25%.
State Governments Chip in
Perks from the central government aside, state governments are also offering meaningful incentives to attract investments. States including Andhra Pradesh, Uttar Pradesh, Telangana, Maharashtra, Tamil Nadu and Karnataka are all offering subsidies on capital, power, land and other tax rebates.
Delay in Other Sectors
While PLI for handset manufacturing is gathering steam, progress in other sectors has lagged.
In November, the government had extended the incentive scheme to include 10 new sectors. Of these, only three—telecom, pharmaceuticals and electronics—have received cabinet approval so far. For these too, guidelines and operational details haven’t been published yet. Bloomberg