Cabinet approves ₹17,000 crore PLI scheme for IT hardware
The PLI will be cover the production of high-tech electronics such as laptops, PCs, all-in-one computers, servers and ultra-small form factor devices.
The Union Cabinet on Wednesday approved the second phase of the Production Linked Incentive or PLI scheme for IT hardware, in order to accelerate domestic manufacturing of hi-tech electronics, building on efforts that catapulted India to become the second-largest mobile phone manufacturer in the world.
With ₹17,000 crore to be offered over six years, the PLI will be cover the production of high-tech electronics such as laptops, personal computers (PCs), all-in-one computers, servers and ultra-small form factor devices, Union minister Ashwini Vaishnaw said following a meeting of the Cabinet led by Prime Minister Narendra Modi.
A few years back, the mindset was of import substitution,” Vaishnaw said. “Now the mindset has shifted. It is about catering to the global demand.”
According to a government statement, the scheme is expected to add production worth ₹3.35 lakh crore, draw in new investments worth ₹2,430 crore, and lead to 75,000 new jobs over the six-year period.
“The Cabinet decision on Production Linked Incentive Scheme – 2.0 for IT Hardware will transform the sector,” Prime Minister Narenda Modi said on Twitter. “This scheme will boost employment, strengthen our eco-system for innovation and lead to greater investments.”
Electronics manufacturing in India has witnessed consistent growth with 17% compound annual growth rate in last 8 years. This year it crossed a major benchmark in production, about ₹9 lakh crore, the statement said, adding that “the global electronics manufacturing ecosystem is coming to India, and India is emerging as a major electronics manufacturing country.”
Over the past three years, India has attempted to capitalise on a global disillusionment with China’s manufacturing industry, which for decades has been a production powerhouse but was hobbled by Beijing’s harsh Covid control measures and growing geopolitical tensions with western countries. The first PLI scheme helped sweeten the deal for a number of tech giants, including companies such as Apple, and its contractors (such as Foxconn and Wistron), who have since significantly expanded their Indian businesses.
The government’s efforts are a timely follow-up to the first incentive mechanism, especially for its attempts to create more employment over the longer term. The industry, domestic and foreign, must now seize on the opportunities that the world’s largest population presents not just for sales but also operations.
Under the new scheme, companies will get an incentive of up to 5% and an optional incentive of 4%if they use domestically-produced components, compared to 2% incentive offered under the old scheme.
To a question about which companies are interested in the scheme, Vaishnaw said at the briefing: “Those who have high volumes, you know their names -- HP, Dell, Acer, Asus have high volumes. Apple is niche. They are also very seriously evaluating it.”
“We are currently evaluating details along with its potential benefits,” an HP India spokesperson, tells HT.
In February 2021, the government approved the PLI scheme for IT hardware, covering the production of laptops, tablets, All-in-One PCs and servers with an outlay of ₹7,350 crore.
“The PLI scheme 2.0 will accelerate the domestic IT hardware manufacturing ecosystem in India and enable businesses to grow beyond regional markets,” said Rajen Vagadia, vice president, Qualcomm India, and president of Qualcomm India and SAARC. Qualcomm is among the world’s largest microchip makers.
“This initiative will specifically enable India to expand its production capacity and enhance its global presence in the value chains of IT hardware, servers, and laptops,” said Prabhu Ram, Head- Industry Intelligence Group (IIG) at Cyber Media Research.
This week, the Tata Group began manufacturing the Apple iPhones at a factory near Bengaluru, as part of a larger deal to acquire the manufacturing facility from Taiwanese electronics manufacturer Wistron.
Foxconn, another Taiwanese manufacturing giant and partner for Apple as well as other tech companies including Xiaomi, is investing $500 million in a new facility in Telangana. It is expected to create as many as 25,000 new jobs, and manufacturing will start by the end of 2023.
The PLI 2.0 scheme for IT hardware is essentially the third chapter in the government push to incentivise manufacturing in India. “This is an excellent step for the comprehensive growth of the Indian electronics manufacturing industry,” says A. Gururaj, MD, Optiemus Electronics Limited, a tech manufacturing company.
The PLI scheme, first announced in October 2020, focused exclusively on pushing manufacturing of smartphones in India for a period of five years. Manufacturers approved at the time included Samsung, Foxconn, Wistron, Pegatron, Optiemus Electronics, as well as Indian phone manufacturers Lava and Micromax.
The results were evident earlier this year when India crossed the $11 billion mark (that is around ₹90,000 crore) for smartphone exports . This, up from ₹45,000 crore in FY 2022, according to the India Cellular and Electronics Association (ICEA).
“Following the PLI Scheme’s success in establishing a robust, globally recognized foundation for smartphone manufacture, PLI 2.0 will strengthen India’s electronic and IT hardware industry further and its presence in the global value chain,” added Qualcomm’s Vagadia.
The 2020 scheme was followed by a PLI scheme for IT hardware in February 2021, with a budgetary outlay of ₹7,350 crore over a period of four years. The contours were similar – focus on manufacturing laptops, all-in-one PCs, tablets and servers, in India.
Tech companies in India responded almost immediately at the time. For instance, Xiaomi added new partners for manufacturing smartphones and Smart TVs in India – DBG and BYD joined Foxconn and Flex.
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