Scheme for phone makers finds no takers amid coronavirus lockdown
With production units shut and sales halted owing to the coronavirus (Covid-19) outbreak, the country’s leading electronics and handset manufacturers are postponing new investments to boost local manufacturing.
Despite the government recently announcing two ambitious schemes for the sector to attract new investment, none of the companies is planning to avail them any time soon.
For instance, Samsung had announced a long-term plan to invest Rs 5,000 crore in its Noida facility that it aimed to make the largest handset production unit in the world. But now, it is yet to take a final call on the plan.
Sources said the firm will only review the new investment scheme after demand peaks beyond the pre-crisis levels.
However, with its volume sales remaining nearly flat in 2019, and it losing market share to Chinese rivals, plans on the new investment have been put in the back burner.
Top smartphone player by volume – Xiaomi India — is not considering investing through the new scheme despite a healthy surge in sales volume in 2019, said sources.
Currently, Xiaomi sources its handsets from six manufacturing units operated by Foxconn in India.
“The lockdown has brought the market to a halt, and it is difficult to predict when sales will normalise. Further, the growth projections for the economy suggest lower demand in the coming months. Thus, it is hard to expect that manufacturers will invest in boosting production capacity in the near future,” said Kamal Nandi, president of industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA) and executive vice-president, Godrej Appliances.
Other leading manufacturers like LG, Panasonic, Vivo, Oppo and Realme, are yet to gauge the full impact of the lockdown on their businesses. These companies are not ready to take a call on investing in manufacturing as sales have fallen flat. Most are anticipating a spill over of the ongoing crisis to the July-September quarter.
B Thiagarajan, managing director (MD), Blue Star, said, safety of the company’s staff will be the key focus once production begins. “Everything other than life and livelihood is down, below the priority list now,” he said.
The unwillingness of manufacturers in availing an incentive scheme that is long-awaited is unusual. Since expiry of the primary investment incentivising scheme — the Modified Special Incentive Package Scheme (M-SIPS) last year, there were no holistic schemes for manufacturers of electronic items in the country.
The industry has been demanding a concrete plan from the government that will incentivise any investment to boost local manufacturing — in line with its stated objective of ‘Make in India’.
After taking industry demand into consideration, the government came up with two schemes. The Scheme for Promotion of manufacturing of Electronic Components and Semiconductors or SPECS is aimed at incentivising any investment above Rs 5 crore in manufacturing of electronic components and semiconductors. The production-linked incentive scheme (PLI) has been launched to attract large investments in the mobile handsets segment.
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