India on track to become the world's smartphone manufacturing hub

India on track to become the world's smartphone manufacturing hub
India launched a $6.7 billion plan last year to boost smartphone exports, as PM Modi stepped up efforts to promote electronics manufacturing and create jobs.Courtesy: Getty Images

Government unveils $1-billion production-linked incentive plan to boost local manufacturing and export of IT products.

The Indian government’s $1-billion plan to boost local manufacturing and export of IT products such as laptops, tablets and personal computers will further propel tech giants like Apple to set up more shops in India.

Announcing the production-linked incentive (PLI) plan, Indian IT & Telecom minister Ravi Shankar Prasad told a news conference on Wednesday that the scheme will provide manufacturers cash-backs and will help India export IT goods worth Rs 2.45 trillion. “The government’s intention is to bring the five largest companies of the world manufacturing laptops or tablets to India and will be offered PLI,” he said.

The move, which is in line with the Indian government’s vision of ‘Aatmanirbhar Bharat’, comes just a week after the Cabinet’s approval for the PLI scheme for telecom equipment. The announcement also comes against the backdrop of Apple Inc angling to participate in the new scheme, part of plans to bring iPad tablet manufacturing to what is fast emerging as the world’s new tech manufacturing hub.

The PLI factor

The Indian government’s $1-billion plan to boost local manufacturing and export of IT products will enable tech giants like Apple to set up more shops in India.
The Indian government’s $1-billion plan to boost local manufacturing and export of IT products will enable tech giants like Apple to set up more shops in India.Courtesy: Getty Images

Last year, India launched a $6.7 billion plan to boost smartphone exports, as Prime Minister Narendra Modi stepped up efforts to promote electronics manufacturing and create jobs. Apple, which has steadily raised production of iPhones in India to lessen its dependence on Chinese manufacturing, took part in that scheme via its contract manufacturers.

Apple contractors such as Wistron and Foxconn are already manufacturing iPhones in India – Wistron set up facilities in Bengaluru and Narasapura in Karnataka, and its new greenfield plant has once again started manufacturing iPhones at Narasapura.

In the run up to Wednesday’s announcement, Apple, along with others, lobbied for a bigger budgetary outlay of Rs 200 billion, as India doesn't yet have the scale or the supply chain for making IT products and competes with duty-free imports of tech products.

Although Apple assembles a bulk of its iPads in China, it is fast diversifying production to markets such as India to minimise the impact of the US-China trade war and the coronavirus crisis.

Apple wants a slice of the Indian pie

Three Apple suppliers have also committed roughly $900 million over five years to make iPhones in India.
Three Apple suppliers have also committed roughly $900 million over five years to make iPhones in India.Courtesy: Getty Images

India last year banned more than 200 Chinese-origin mobile applications, saying they threatened the security of the country, and announced new controls on telecoms gear purchases.

Apple, however, began the assembly of iPhones in India in 2017 and has since ramped up manufacturing operations via the local units of Foxconn and Wistron. A third contractor – Pegatron – also set up a base in India last year, and Foxconn pledged to invest up to $1 billion to expand a factory in southern India where the Taiwanese contract manufacturer assembles iPhones.

The three Apple suppliers have also committed roughly $900 million over five years to make iPhones in India.

Buoyed by the surge in interest from global manufacturers, New Delhi is also planning another PLI at a budget of roughly Rs 50 billion over the five years, to boost domestic manufacturing of wearable devices such as smartwatches, Reuters reported last week.

That plan is likely to be announced within two months – and in conjunction with the consolidation of Apple’s manufacturing base and Tesla’s entry to India, 2021 is shaping up to be the year that heralds the arrival of India as the world’s manufacturing hub.

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