Connect with us


Heralding a new era in electronic manufacturing

Creation of domestic champion companies in electronics manufacturing under the PLI scheme will give fillip to vocal for local while aiming for global scale. At the same time, government’s push in form of incentives has set a challenge for domestic companies to become globally competitive.

Through the initiatives like the Digital India and Make in India programs, India has witnessed an unprecedented growth in electronics manufacturing in the last five years. The National Policy on Electronics 2019 envisioned positioning India as a global hub for electronics system design and manufacturing (ESDM) by focusing on size and scale, promoting exports, and enhancing domestic value addition by creating an enabling environment for the industry to compete globally.

In a recent development, the Ministry of Electronics and Information and Technology (MeitY) has approved 16 eligible applicants under the Production Linked Incentive (PLI) Scheme. PLI for Large Scale Electronics Manufacturing notified on April 1, 2020, extends an incentive of 4-6 percent on incremental sales (over base year) of goods under target segments that are manufactured in India to eligible companies, for a period of five years subsequent to the base year (FY2019-20).

Ravi Shankar Prasad Union Minister for Electronics & IT, Communications, Law and Justice,GOI
“The PLI scheme has seen huge success in terms of the applications received from global as well as domestic mobile phone manufacturing companies and electronic components manufacturers. The industry has reposed its faith in India’s stellar progress as a world class manufacturing destination and this resonates strongly with Prime Minister’s clarion call of Atmanirbhar Bharat. We are optimistic and looking forward to building a strong ecosystem across the value chain and integrating with the global value chains, thereby strengthening electronics manufacturing ecosystem in the country.”

Over the next five years, the approved companies under the PLI Scheme are expected to lead to total production of more than Rs 10.5 lakh crore. Out of the total production, the approved companies under mobile phone (retailed at Rs 15,000 and above) segment have proposed a production of over Rs 9 lakh crore. The approved companies under mobile phone (domestic companies) segment have proposed a production of about Rs 1.25 lakh crore and those under specified electronic components segment have proposed a production of over Rs 15,000 crore.

The companies approved under the scheme are expected to promote exports significantly. Out of the total production of Rs 10.5 lakh crore in the next five years, around 60 percent will be contributed by exports of Rs 6.5 lakh crore. The companies approved under the scheme will bring additional investment in electronics manufacturing to the tune of Rs 11,000 crore.

The companies approved under the scheme will generate more than 200,000 direct employment opportunities in next five years along with creation of additional indirect employment of nearly 3x the direct employment. Domestic value addition is expected to grow from the current 15-20 percent to 35-40 percent in case of mobile phones and 45-50 percent for electronic components.

Pankaj Mohindroo Chairman,ICEA
“The approval for Indian companies is a very fair hand dealt and each company has got one approval. Now the challenge begins, i.e., can these future Indian champions build core design and brand capabilities and also scale up to become globally competitive or some of them use it tactically and fade out with the PLI incentive. A leap in mindset is required and I am sure once bitten twice shy—they have learnt their lessons.”

The international mobile phone manufacturing companies that are approved under mobile phone (retailed at Rs 15,000 and above) segment are Samsung, Foxconn Hon Hai, Rising Star, Wistron, and Pegatron. Out of these, three companies, Foxconn Hon Hai, Wistron, and Pegatron, contract manufacturers for Apple iPhones, plan to invest an incremental Rs 3000 crore in manufacturing. Along with Rising Star (which currently manufactures for Xiaomi), they are committed to producing over Rs 6.8 lakh crore worth of mobile devices, above the price tag of Rs 15,000 in five years.

Rajoo Goel Secretary-General, ELCINA
“We hope that the companies approved will achieve their targets and support the creation of a self-sustaining ESDM ecosystem in the country. However, to help the country’s MSMEs also effectively reap the benefits of the said scheme, we request the government to either introduce a new PLI Scheme or widen the ambit of the existing scheme to support investments in components which require lower capital investment thresholds and production targets. Components require higher value addition and are capital intensive due to which their capital output ratio is lower. This will also enable more Indian MSMEs to invest in electronic component manufacturing and create more job opportunities in the sector. Such a PLI scheme could be operated with a much smaller budget compared to the existing PLI scheme and will give a major boost to establish an Atmanirbhar electronics manufacturing value chain.”

Apple (37%) and Samsung (22%) together account for nearly 60 percent of global sales revenue of mobile phones and this scheme is expected to increase their manufacturing base manifold in the country.

Nitin Kunkolienker President, MAIT
“New strategy of export-led growth will help create expansion of manufacturing in India and will help to achieve scale. This will also help in expanding the value chain of components etc. Further, this will also enable Indian manufacturers of both finished products and components to participate in global value chains.”

Under domestic mobile phone companies Lava, Bhagwati (Micromax), Padget Electronics, UTL Neolyncs, and Optiemus Electronics are approved by MeitY. These companies are expected to expand their manufacturing operations in a significant manner and grow into national champion companies in mobile phone production. UTL Neolyncs, the maker of Karbonn brand phones, will invest Rs 100 crore to expand its manufacturing facilities at Noida and Tirupati, and Padget Electronics, a wholly owned subsidiary of Dixon Technologies, has committed Rs 75 crore to set up third plant in Noida. Optiemus Electronics will set aside Rs 300 crore to manufacture items including display assemblies and back covers. Meanwhile, Lava has plans to invest Rs 800 crore over the next five years in the country, of which Rs 100 crore will be invested in the first year itself.

None of the Chinese smartphone makers like Xiaomi, Vivo, Oppo, OnePlus, or Realme figure in the list, even though together they command a major percentage of the smartphones market in India.

Six companies are approved under the specified electronic components segment, which include AT&S, Ascent Circuits, Visicon, Walsin, Sahasra, and Neolync.

Satya Gupta Chairman, IESA
“I think the scheme has been conceptualized very well and the commercial benefits which come out of it are of much higher value for India than those that are produced by any similar scheme elsewhere. It would be one of the best incentive schemes if we can execute it well.”

This move is expected to take on the might of Vietnam and China, which control 85 percent of the global export market. The incentives are aimed primarily at narrowing the gap between the cost of manufacturing in India and that of China and Vietnam. Hence, the scheme deliberately favors local brands. Overall, this is a much-needed boost and the government’s intent are clear – to make India not only an alternative to China, when it comes to electronics manufacturing, but also an export hub in the coming years. This also ensures that manufacturing of higher value components like displays, among other items.

Moving up the global value chain in manufacturing is critical for India’s positioning as a serious and viable alternative hub for global electronics players. 

Click to comment

Notice: Undefined variable: user_ID in /home/cloudpanel/htdocs/ on line 49

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2021 TV Veopar Journal

error: Content is protected !!