India's Electronics Industry Seeks $4 Billion PLI Scheme to Boost Mobile Manufacturing

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India's Electronics Industry Seeks $4 Billion PLI Scheme to Boost Mobile Manufacturing

Team Finance Saathi

28/May/2024

Key Points:

The electronics industry proposes a $4 billion PLI scheme to boost mobile phone and electronics exports.
The initiative aims to increase domestic value addition in mobile manufacturing from 18% to 35-40%.
The plan includes an 8-year incentive structure, with 40% capex support and an average 5% incentive for significant investments.

The electronics manufacturing industry in India is advocating for the implementation of a production-linked incentive (PLI) scheme worth between US$ 3.61 billion and US$ 4.21 billion (approximately Rs. 30,000 to Rs. 35,000 crore). This ambitious initiative aims to significantly enhance the production and export of mobile phones and electronic components in India. The India Cellular & Electronics Association (ICEA), which represents major smartphone brands and manufacturers, has highlighted the urgent need for this scheme to address the rising demand for electronic components, projected to reach US$ 75-80 billion by 2026 and an astounding US$ 300 billion by 2032.

Overview of the Proposed PLI Scheme

The ICEA's proposal to the Ministry of Electronics and Information Technology includes several key recommendations designed to bolster the electronics manufacturing ecosystem in India. The proposed PLI scheme would provide a structured incentive of 4-6% for the manufacturing of sub-assemblies, high-end printed circuit boards (PCBs), and other essential components. The scheme is envisioned to span over eight years, with companies having the flexibility to claim incentives over a six-year period.

Capex Support and Investment Incentives

One of the significant highlights of the proposal is the substantial support for capital expenditure (capex). The ICEA suggests that companies investing at least US$ 120.3 million (Rs. 1,000 crore) in critical areas such as Surface Mount Device (SMD) passive components, lithium-ion cells, and high-end PCBs should receive 40% capex support. Additionally, these companies would benefit from an average incentive of 5% over six years, making the investment landscape highly attractive.

Expected Impact on the Electronics Component Ecosystem

The industry anticipates that with adequate support, the component ecosystem would commence commercial production within 2-3 years. This would enable India to meet 5-10% of the global demand for these components within the next 6-7 years. The initiative aims to substantially increase domestic value addition in mobile phone manufacturing from the current 18% to an impressive 35-40%. This leap in local production capacity is expected to position India as a significant player in the global electronics market.

Alignment with Semiconductor Ecosystem Development

A crucial aspect of the proposed PLI scheme is its alignment with the development of the semiconductor ecosystem in India. The ICEA emphasizes that the success of the PLI scheme for components and sub-assemblies is intrinsically linked to the advancement of the semiconductor industry. This holistic approach is essential to create a robust and self-sufficient electronics manufacturing sector in India.

Incentives for Supply Chain Ancillary Units

The ICEA also recommends substantial support for supply chain ancillary units, proposing a 25% capex support for these units. Additionally, the proposal includes a 4-6% incentive for incremental sales of critical sub-assemblies and components. This multi-tiered incentive structure is designed to encourage investment across the entire value chain, fostering a comprehensive growth environment for the electronics manufacturing industry.

Conclusion

The proposed PLI scheme, if implemented, could transform the landscape of electronics manufacturing in India. By offering substantial incentives and capex support, the government can attract significant investments in critical areas, enhance domestic value addition, and position India as a key player in the global electronics market. The alignment with the semiconductor ecosystem development further strengthens the potential for sustainable growth and competitiveness. The industry's proactive approach and the government's support could pave the way for a new era of innovation and economic growth in India's electronics sector.

Also Read : Indian Stock Market Closes Flat Amid Profit Booking After Record Highs

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India's Electronics Industry Seeks $4 Billion PLI Scheme to Boost Mobile Manufacturing

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