PLI scheme has provided OEM businesses the requisite impetus

The government’s PLI scheme 2.0 for IT hardware, covering laptops, tablets, all-in-one PCs, servers, and ultra small form factor devices, had approved applications of 27 IT hardware manufacturers in November 2023. This prompted leading brands to knock on the doors of OEM manufacturers.

HP India has been negotiating with VVDN Technologies and Dixon Technologies to assemble its laptops. HP has an assembly plant and a partnership with Flex for laptop assembly. VVDN has already partnered with HP to assemble high-end servers at its Manesar plant over the next five years. Dixon is investing Rs 250 crore in a laptop plant in Noida.

Intel, too, has collaborated with Dixon and VVDN and with Bhagwati Products Ltd, Kaynes Technology India Ltd, Optiemus Electronics Ltd, Panache Digilife Ltd, Smile Electronics Ltd, and Syrma SGS Technology Ltd. Under this collaboration, Intel will share its expertise to facilitate the production of complete entry-level laptops in India, including utilizing state-of-the-art surface mount technology lines, setting up a quality control process for components, and even benchmarking finished products. Intel also supports ODMs, spanning semi-knocked-down and completely knocked-down processes.

Dixon Electro Appliances Private Limited is also set to manufacture telecom products for Nokia Solutions and Networks OY.

Backgrounder
In May 2023, the Cabinet approved the new version of the PLI scheme 2.0 for IT hardware. Doubling the outlay to ₹17,000 crore from the initial corpus of Rs 7370 crore, the revised scheme tenure was six years (as opposed to four years earlier), and a more attractive incentive package.

It extended an average incentive of around 5 percent, compared to the 2 percent incentive offered in the previous version. An additional optional incentive of up to 3 percent is offered for companies that use locally manufactured components. Overall, if a company completes localization, as envisaged in the new scheme, the total incentive it stands to get is in the range of 8-9 percent.

For global applicants, the maximum incentive is Rs 4,500 crore over the duration of the scheme, while for hybrid companies, a mix of domestic and global firms, the incentives have been capped at Rs 2,250 crore. Domestic companies will be eligible for a maximum incentive of Rs 500 crore.

Flexibilities in the tenure and investments for participants, such as allowing applicants to choose between 2023, 2024, and 2025 as the base year, were also added.

All the leading vendors, except Apple and Samsung, have started their local assembly of PCs in India under PLI 2.0. This includes Dell, HP, and Lenovo. Expected to reduce the dependency on imports from China and set the base for large-scale manufacturing of PCs, this might eventually lead to exports to other countries, given that the traditional PC market de-grew in India by 6.6 percent at 13.9 million shipments in 2023.

The PLI scheme 2.0 for IT hardware is expected to result in the broadening and deepening of the manufacturing ecosystem by encouraging the localization of components and sub-assemblies and allowing for a longer duration of development of the supply chain within the country. The additional incremental production is expected to be Rs 3.35 lakh crore.

The companies are expected to invest Rs 3060 crore collectively and create about 200,000 jobs, comprising 50,000 direct employment opportunities and 150,000 indirect employment opportunities. The Indian IT hardware market is expected to grow to Rs 1.93 lakh crore in 2027 from Rs 1.32 lakh crore in 2022.