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As MNCs brace for supply squeeze, local players eye more deals

Even as laptop and tablet brands including Apple, Lenovo and Dell are bracing for a squeeze in supply during the upcoming festival season, the Centre’s plans to impose an import licence on IT hardware will provide a boost to local contract manufacturers such as Lava, Dixon and Optiemus Electronics Ltd.

SN Rai, Co-Founder and Director, Lava, told businessline, “Import curbs will compel big multinational players into manufacturing in the country, which will shift parts of the supply chain related to battery and display here. This will help the ecosystem and indigenous companies like Lava, which are already making products in India.

The import curb will also benefit Indian contract manufacturers, who can enter into JVs with these global players to facilitate the manufacturing of laptops, tablets, etc.”

Caught by surprise
But the sudden policy decision has caught multinational brands by surprise. Many companies, including Dell and Acer, have been manufacturing in India, but a significant part of the overall laptop and tablet requirements continue to be imported.

Navkendar Singh, Associate Vice President, Devices Research, IDC, said: “The objective of the move is to push local manufacturing. However, our ecosystem isn’t ready for an assembly of this magnitude. Vendors ship in close to 2 million notebooks every quarter, with around three-fourths of these imported as completely built units (CBU). Also, almost the entire volume of premium notebooks are imported.”

“Moreover, the timing isn’t the best as the PC market has been struggling for the last two-to-three quarters, and this will further dampen market sentiment during the upcoming festival season,” he added.

Faisal Kawoosa, Founder and Chief Analyst at techARC, said the government can’t allow supplies of laptops to get affected. “The government will have to approve or allow requests to import from OEMs to meet domestic demand. We can’t afford to let supplies get hampered, as that will affect businesses and productivity work across organisations,” Kawoosa said.

Halting imports
While many global players have decided to halt imports to India until they get clarity on the import licence, they have chosen to play down the immediate impact.

A Dell spokesperson said, “We are aware of the new regulations. Dell has been manufacturing in India for 15 years, and we continue to work with the Indian Government on our plan.”

“We understand that the notice to restrict imports of laptops, tablets, and other related products is the start of the process to accelerate Make in India. Acer, as one of the leading computer and tablet brands in the country, has been manufacturing laptops, all-in-ones, and tablets in India over the past few years, while desktops have been manufactured in India for over 20 years at our factory in Pondicherry,” Acer said in a statement.

The Electronic Industries Association of India (ELCINA) said, “This move will provide impetus to Indian and global companies to consider establishing local manufacturing facilities and assembly lines, thereby boosting the overall electronics manufacturing ecosystem in the country.”

ELCINA acknowledged the implementation of the licensing requirement may pose initial short-term challenges for global companies, but it is committed to supporting them in streamlining their supply chains and benefiting from this opportunity, it added. The Hindu BusinessLine

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