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IT hardware manufacturing sector set for boost with PLI 2.0

Pankaj Mohindroo, Chairman, India Cellular & Electronics Association (ICEA) in a LinkedIn post said that India’s IT hardware manufacturing sector is poised for a significant boost with the launch of the government’s Production Linked Incentive (PLI) 2.0 scheme.

The post said “ The IT hardware vertical in electronics is the second largest after mobile phones – around USD 225 Billion globally. This sector was languishing for the last 2 decades in manufacturing and Bharat was essentially an importer of CBU’s (completely built units) as far as Laptops, Tablets, Servers and Tablets are concerned. We imported about USD 5.9 billion of laptops and tablets in 2022-23.

Bharat’s vision to be the global electronics manufacturing destination cannot be fulfilled on a single leg of mobile phones wherein we have as a nation achieved scale upwards of USD 44 billion of manufacturing annually. Bharat has to fire on all cylinders!

The first attempt to boost IT Hardware manufacturing was made with PLI 1.0 which failed to excite the industry. ICEA took up the challenge and was not daunted by the failure. In an incredible display of all of government and industry led by the Ministry of Electronics and Information Technology (MeitY), a revised PLI 2.0 was crafted.

This PLI 2.0 stands on 3 fundamentals:

  1. Lead firms of GVC’s move their domestic demand at least to Bharat—replacing imports.
  2. A slew of companies from Bharat supports this effort along with global EMS companies and brands like Flex, Bharat FIH, HP, Dell, etc. There will be some exports from these companies. (See table 1)
  3. The structure of the PLI enables development of sub-assemblies and components as a necessary ingredient. This initiative will facilitate the development of key components like Bare PCBs, Add-on Controllers, Memory Modules, Display Panels, Power Adapters, and Batteries in India, thus creating a robust domestic supply chain.

This remarkable initiative, guided by the visionary leadership of Hon’ble Prime Minister Shri Narendra Modi, reflects our nation’s commitment to advancing in the global electronics sector. The process was astutely managed by Union Minister Shri Ashwini Vaishnaw. He put in a significant personal effort into leveraging GVC’s to catapult domestic ODM’s into a different orbit.

What will this PLI 2.0 achieve?

  • Firstly, it will lift the pall of gloom on the prospects for manufacturing in this vertical. The excitement and hope in the announcement with all 27 companies present was palpable.
  • It will give some scale to many ODM’s and EMS which can possibly take them into a new orbit of scale and competitiveness.
  • A robust supply chain will be established alongside. The PLI 2.0 scheme incentivizes domestic sourcing of components like Bare PCB, Add-on Controllers, and Memory Modules, etc. offering incentives ranging from 13.5% to 19% on a standalone basis. For example, domestic procurement of Bare PCBs, which account for 3% of a computer’s BoM, grants a 0.57% incentive on the final product i.e., laptops or tablets, equivalent to 19% on the Bare PCB’s standalone value. At least 30-40 companies will participate other than the 27 allottees –the structure will incentivise the allottees to develop the supply domestically.”

CT Bureau

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