PLI 2.0 for IT hardware to attract global players to India

The Union Cabinet approved a six-year production linked incentive (PLI) scheme for IT hardware including laptops, tablets, personal computers, servers and edge computing devices, with an outlay of ₹17,000 crore. Telecom minister Ashwini Vaishnaw said that the scheme would attract all major players including HP, Dell and even Macbook-maker Apple, to India.

“HP, Dell, Acer and others already have high volumes (market) in India. Apple is niche, the market is attractive, they’re also very seriously evaluating,” he said in response to a question during a press briefing on Wednesday, after the announcement of the scheme. The scheme was welcomed by the industry with some saying that they were already evaluating availing the scheme.

The revised scheme will offer an incentive of 5% on net incremental sales over the base year, of goods manufactured in India, compared to 2% earlier, where the base year can be chosen starting from will be FY23. The scheme also provides for flexibility as the investments can be done over six years, instead of four years earlier.

Companies opting for the scheme will get additional optional incentive – of another 3% – if they use India-made and designed components, sub-system or inputs. Also, the companies can take Indian contract manufacturers on board, and avail incentives if the contractors are producing for a single company.

“We’re confident that the changes made in the revised scheme will attract all the major IT hardware players to set up shop in India,” telecom and IT minister Ashwini Vaishnaw said. He added that the revised PLI scheme was a result of extensive consultations with the industry over the past several months, from which the government is expecting incremental production worth ₹3.35 trillion, incremental investment is ₹2,430 crore, which will generate direct employment of 75,000.

The minister added that investments from Chinese manufacturers would also be allowed in accordance with existing regulations.

“There is a significant change in mindset. About 10 years back, the mindset was of import substitution, now the mindset is export led growth, which means you’re setting up a plant in India to not only cater to Indian demand but also cater to global demand,” he added. He also noted that the local production will lead to lower costing products for Indian consumers.

Vaishnaw said that the government had used its experience from the telecom and mobile phone PLIs, which have brought in investments of more than ₹3,600 crore and created millions of jobs over the past two years. India has become the world’s second largest manufacturer of mobile phones and exports of mobile phones crossed $11 billion USD this year. Electronics manufacturing in India witnessed consistent growth with 17% CAGR in last eight years, he said, and noted that in FY23, it crossed production of $105 billion.

Industry players such as Qualcomm, industry associations and contract manufacturers such as Optiemus Electronics welcomed the scheme, with some of them saying that they will avail it.

“The PLI Scheme 2.0 will accelerate the domestic IT Hardware manufacturing ecosystem in India and enable businesses to grow beyond regional markets. It will enhance India’s position as a global technology hub for companies to drive India-designed IP and explore new growth avenues,” said Rajen Vagadia, VP, Qualcomm India Pvt Ltd & President, Qualcomm India and SAARC.

“We’re manufacturing IT hardware for many reputed brands under the current PLI and now with the PLI 2.0, we are actively considering and evaluating our options to participate in this new phase of growth in electronics manufacturing,” said A Gururaj, MD of Optiemus Electronics Limited.

Pankaj Mohindroo, Chairman, Indian Cellular and Electronics Association said that the scheme would foster domestic manufacturing and benefit major global manufacturers of IT hardware products such as laptops and tablets, a significant portions of which were currently being imported for consumption. “This is an opportune moment to shift IT hardware manufacturing towards India,” he said.

“The scheme covers all aspects of semiconductor manufacturing, PCBs, ATMPs, component manufacturing, contract manufacturing, display panels,memory devices, power adapters etc astutely and comprehensively. The policy is valid for 6 years with clear incentives, thresholds, domestic, hybrid and global categorisation, selection criterion and timelines,” said Anurag Awasthi, Vice President of India Electronics and Semiconductor Association. Livemint