With an outlay of Rs 10,000-12,000 crore, the central government may launch a Production-Linked Incentive (PLI) scheme for high-end components for electronic products such as smartphones, servers, and computers by the next financial year.
This move is expected to attract tech giants such as Apple, as well as companies from Taiwan, Korea, and Japan to establish new units here.
‘Two pillars’
News18 spoke to Pankaj Mohindroo, who is the chairman of the India Cellular & Electronics Association to understand how this upcoming PLI would help the ecosystem in India.
The ICEA chairman said: “Two pillars of our future growth are the companies with Global Value Chain and the Indian component manufacturers. Both the existing one and the one which we are trying to rope in to enter the industry, and also get into joint ventures with overseas companies.” So the PLI will benefit both segments because it will make India more competitive in terms of component manufacturing, he added.
While explaining why the big companies will consider India instead of the rivals like China, Mohindroo said: “If you take any particular company, these are global value chains. The supply comes from all over the world for example a lot of supply comes out of China and Vietnam. But the subassemblies and components are both made in China, Taiwan, Japan, Korea, Germany and the US and then supply to the country where the final assembling is done.”
For example, China’s import of electronics is $650 billion, while the export is worth more than $900 billion; so whichever geography offers the most competitive positioning the manufacturing shifts to that place, he added.
So according to him, the objective of the PLI is to make India more competitive so that some manufacturing shifts here and new capacities can be established in India rather than in other countries.
However, in 2021, India announced the PLI scheme to encourage semiconductor and display manufacturing in the country. It was thought that big giants like Intel and Taiwan Semiconductor Manufacturing Company Limited (TSMC) would set up units in India but as of now, there is no confirmation regarding this. But recently after the US’ CHIPS and Science Act was signed into law, the opening of TSMC’s second chip plant in Arizona was announced, with a massive investment worth billions.
Though it may look like that despite the announcement of a PLI for the high-end components for electronic products may also take years to attract big players from other countries, ICEA’s chairman explained why we can’t make assumptions at this moment.
“Semiconductor is a different ball game because it requires very high investments, like billions of dollars. So that decision [establishing a semiconductor chip manufacturing unit in India] is far more difficult than the decision to invest in component manufacturing as they can be in the range of $50 million or $300 million depending on the capacity of which product we are talking about,” he said.
So as per Mohindroo, only after the new PLI scheme is finalised and discussions begin with the companies, there will be a clear picture of how this scheme is functioning and how successful the scheme is.
What others see
Anurag Awasthi, Vice President of India Electronics and Semiconductor Association (IESA), believes that data localisation and 5G deployment will augment the overall demand for servers, increasing digitisation and the rolling out of the pathbreaking national education policy (NEP) will accrue an increased demand for computers, laptops and peripherals, as well as 5G network connectivity, will auger deployment of additional citizen services and portals on the digital media and this will have a direct impact on creating additional demand for mobile devices.
So according to him: “If we look at these aspects, incentivising domestic manufacturing and homegrown value addition will definitely spur domestic innovation and investments.”
Industry expert Sagar Gupta, director of Ekkaa Electronics, also believes that the scheme can provide financial assistance for establishing production facilities as well as incentives for producing components.
“The scheme’s full details are still being worked out, but the industry’s hope is to get assistance to deepen manufacturing capabilities within the country, thereby reducing the overall dependency on imports,” he noted.
According to another industry insider, Sunil Grewal, director, GIGABYTE Technology India Pvt Ltd, there is no doubt that this upcoming PLI will further boost the Make in India initiative. Additionally, he said: “This initiative is definitely a step forward towards growth in manufacturing especially in the electronics segment thereby attracting more foreign investments. As one of the leading IT hardware brands in India, we are also closely monitoring the market and have started testing the waters in line with this initiative.”
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