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India scales up indigenous manufacturing

Electronics permeate all sectors of the economy and the electronics industry has cross-cutting economic and strategic importance. In India, electronics manufacturing has grown rapidly with a CAGR of around 25 percent during the last 4 years. However, this pales in comparison to the actual potential for growth which is curtailed by specific constraints such as large capital investments and rapid changes in technology. In a decision that will encourage electronics manufacturing by indigenous companies, the government is planning to expand the list of domestic manufacturers targeted for the production linked incentive (PLI) scheme for mobile phones to seven against the five that is currently estimated. The scheme has drawn huge interest from global and local OEMs.

Few of the 22 international players that have applied for the Rs 41,000-crore scheme, which aims to generate additional production of nearly Rs 12 lakh crore over the next 5 years, consist of Apple (Foxconn Hon Hai, Rising Star, Wistron and Pegatron), besides Samsung. The homegrown companies that have applied for the scheme include two companies each from Lava group (Lava and Sojo) and Dixon Technologies (Dixon and Padget Electronics), Bhagwati (Micromax), Optiemus Infra and United Tele (Karbonn group).

With this move, the government expects to attract fresh investments of Rs 11,000 crore through the scheme. Domestic value addition in mobile phones will increase from current 15–20 percent to 35–40 percent. However, Chinese players like Oppo, Realme, OnePlus, and Vivo have not applied for the scheme.

In  June, the government began to invite applications for the 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. These schemes focus on the entire supply chain not limited to electronics component/mobile phone manufacturers and bring plastics and other metal component players within its ambit.

The scheme has been followed by the Uttar Pradesh government unveiling a new electronics manufacturing policy to become a global electronics hub and attract international investors looking to shift their base to India in the post COVID-19 scenario. The policy aims at inviting investments of Rs 40,000 crore in 5 years.

Pankaj Mohindroo Chairman, Indian Cellular & Electronics Association (ICEA)
“ICEA welcomes the new UP Electronics Manufacturing Policy 2020 which is aligned toward the fulfillment of the NPE 2019 goals. On the basis of such forward-looking policy interventions, India should be able to focus its efforts to capture the investment opportunities originating from various global as well as domestic stakeholders to establish India as world’s number one mobile phone manufacturing destination. Such progressive policy interventions would also definitely boost the government’s current efforts to remain relevant to the alignments and re-alignments happening in the global mobile and electronics hardware manufacturing ecosystem in the post-COVID-19 scenario. UP is already home to approximately 60 percent of the total manufacturing units relating to mobile phones and components, and with such incentivization/policy support the state would further witness the accelerated establishment of units in short to medium term periods. Cumulatively these policy interventions would definitely pave the way for shifting of base from China and elsewhere to UP and India.”

To further accelerate the electronics ecosystem, the coverage of the new electronics manufacturing policy 2020 has been extended to the entire state from the current electronics manufacturing zones (EMZ) of Noida, Greater Noida and Yamuna Expressway regions.

The PLI scheme comes at a time when global supply chains are being redrawn, giving a small window of opportunity to reshape the supply of manufactured goods to the world. However, it is also estimated that the scheme can act as a catalyst in the government’s efforts to promote India as an alternative to China in becoming a global manufacturing hub for electronics manufacturing. TVJ Bureau 

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