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India heading to be a hub for mobile phones

With the July 31 deadline for applications over, specific manufacturing plan from manufacturers is awaited.

The government had in June started inviting applications for three schemes, PLI, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and Modified Electronics Manufacturing Clusters (EMC 2.0) scheme–offering a total of Rs 50,000 crore worth of incentives to attract global mobile device makers and boost local companies for electronics manufacturing. The expected incentive outlay for PLI under the scheme is Rs 40,951 crore, SPECS is Rs 3285 crore and EMC 2.0 Rs 3762.25 crore. MeitY maintains that the electronics hardware manufacturing sector faces lack of a level playing field vis-à-vis competing nations. The manufacturing sector suffers from a disability of around 8.5 percent to 11 percent on account of lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.

Ravi Shankar Prasad  Minister for Electronics and Information Technology and Communications, Government of India
“Over the next 5 years, the scheme is expected to lead to production of mobiles and components worth `11.5 lakh crore. Of these, over `7 lakh crore worth of products will be exported. The scheme is also expected to generate three lakh direct jobs and over nine lakh indirect jobs in the country.”

Global manufacturers-mobile phones. Twenty-two companies have applied for the Ministry of Electronics and Information Technology’s (MeitY) production- linked incentive (PLI) scheme that seeks to boost domestic electronics manufacturing and make India a manufacturing and export hub for mobile phones.

The incentive scheme is designed to reduce the yawning gap in cost of production disability that global makers face in India compared to manufacturing in China and Vietnam. This gap ranges from 9 percent in Vietnam to 21 percent in China.

The deadline to participate in the incentive scheme ended on July 31. Five eligible firms will be selected.

South Korean mobile device maker-Samsung, third party manufacturers of Taiwan-Pegatron, Foxconn, Wistron, and Rising Star have submitted applications. The three Taiwanese firms make mobile phones for Apple across the globe. In India, Apple has been using two of them–Foxconn (through its company Hon Hai Precision Industry) and Wistron  to manufacture iPhones. As expected the Chinese companies as Oppo, Vivo, Realme, and OnePlus have not evinced any interest.

Ajay Prakash Sawhney Secretary (Electronics & Information Technology), MeitY
“Electronics manufacturing in India has been growing quite significantly. We have registered 23 percent cumulative annual rate of growth over past 5 years. Now in this journey the growth is expected to be 30 percent year-on-year for the next 5 years. Mobile manufacturing in the country has grown from six crore handsets 5 years ago to 33 crore at present, and over 90 percent of country’s mobile phone requirements are met through domestic production. Last year, we have seen spurt of 25 percent. In next 5 years, growth in exports could be 40–50 percent at a bare minimum.”

Global manufacturers are being offered an incentive of 4 percent to 6 percent for 5 years provided they meet certain thresholds in terms of production and investment earmarked for each year beginning FY21. They can import second-hand machinery from China. It will be calculated as part of its investment in India under the scheme.

Indian manufacturers-mobile phones. A separate PLI scheme for home-grown players has also attracted attention. Manufacturers who have applied, include Lava, Dixon Technologies, Micromax, Padget Electronics, Sojo Manufacturing Services, and Optiemus Electronics.

EMCs. Over 40 applications are also received for the Electronics Manufacturing Clusters (EMC) scheme aimed at boosting manufacturing of electronics components. Companies which have applied, include Austria-based AT&S and China-based Avary (for printed circuit boards), US-based Visicon (for assembly, testing, marking, and packaging), Taiwanese Walsin (for passives), German company Vitesco (for power electronics sensors), and Israeli Neolync (for actives).

For the first year, the total incentive to be given has been capped at Rs 5334 crore, while for the second and third year it has been kept at Rs 8064 crore and Rs 8425 crore, respectively. In the fourth year, the incentive will be hiked substantially to Rs 11,488 crore; while in the fifth and final year, the incentive to be distributed has been capped at Rs 7640 crore. TVJ Bureau

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