India aims to protect its electronics manufacturing ecosystem from China, Thailand and Vietnam with the help of a new Production-Linked Incentive (PLI) scheme for electronic components currently in the pipeline.
The plan is aimed at attracting key component companies primarily from China, South Korea, Taiwan and the US, which have manufacturing facilities in China, to set up manufacturing units in India, officials told Moneycontrol.
“It is true that a significant portion of component manufacturers are in China. There are also Korean, Taiwanese and American companies. We want to bring them to India and develop a decent component ecosystem here. ,” said a senior IT ministry official.
India is reportedly targeting $300 billion worth of electronics manufacturing by 2026, of which $18 billion could be for components.
The government's aim is to bring a significant portion of mobile phone components to India with the help of the new PLI scheme, which is expected to cost around Rs 20,000 crore. Indeed, the exact amount of expenditure for this scheme will be determined after consultation with industry stakeholders.
“We want to bring critical components into the Bill of Materials (BoM). We want domestic value to increase significantly from the current 15%. We want to put together a scheme to do that. “We are seeking proposals from the industry through consultations,” the official said.
A BoM is a complete list of raw materials, assemblies, subassemblies, parts, components, and the quantities of each needed to manufacture a product.
Another senior ministry official said the government wants to protect the electronics manufacturing ecosystem, enabled by two PLI schemes for mobile phones and IT hardware.
“We know that electronics manufacturing makes a huge difference to the ecosystem and the jobs it creates. That's huge. If we want it to continue, we have to protect it. . And with competitiveness comes protection, but that comes not only on the part of the workforce, but by increasing the supply of components from India,” he added.
The Ministry of Electronics and IT (Meity) had asked the industry to submit a comprehensive list of electronic components with a focus on expanding the component manufacturing ecosystem.
It also aims to identify challenges and barriers to promoting local manufacturing of these components.
“Strict surveillance of Chinese companies is an obstacle”
The first official said the government wants to attract foreign companies as well as grow the ecosystem for the domestic component. “We also have homegrown capabilities. We have an industry that is doing this… We want it to grow as well.”
In a letter to the ministry on February 6, Xiaomi said the Indian government needs to work on “confidence-building” measures to encourage component suppliers to start operations locally.
He also told the ministry that smart phone component suppliers are becoming cautious about setting up operations in India due to strict government scrutiny of Chinese companies.
“There are definitely challenges at the moment. There is also a process of wiping out investment from neighboring countries, particularly Chinese companies. There have been cases of Chinese investment being arrested. We know it will be a difficult road. “The government has real concerns and we need to consider them,” the first official said in response to Xiaomi's concerns.
The official added that the government has introduced a mechanism to provide faster visa approvals for manufacturers from China.
