South Korean giant Samsung recently announced it is establishing a laptop manufacturing unit in Greater Noida, aligning with the Indian government’s initiative to promote domestic production and reduce imports of laptops. This is the latest industry move seen as a strategic alignment with the government’s initiatives to curb imports.
India’s target for the manufacturing of laptops and tablets currently stands near a mere $3 billion, which is less than half of India imports of the same products in a quarter if the imports worth $7 billion in April-June are considered. Moreover, 70-80% of India’s laptops and tablets are imported from China.
India has defined a target of achieving $300 billion electronics manufacturing annually by 2026 against the total of about $75 billion currently. The target for laptops and tablets has been marked $25 billion by 2026.
The domestic electronics market in India is anticipated to grow from $65 billion to $180 billion within the next five years, positioning electronics as one of India’s top 2-3 exports by 2026. Out of the total $300 billion market size, exports are predicted to surge from an estimated $15 billion in 2021-22 to reach $120 billion by 2026.”
Push for IT Hardware Manufacturing
India has been making a strong push for increasing heft in the laptop and tablets manufacturing sector. While the first version of PLI scheme launched in 2021 was not successful in luring major companies such as Apple, Acer, HP and more, PLI 2.0 came out in 2023 with higher hopes.
With a Rs 17,000 crore outlay as opposed to Rs 7,350 crore in 2021, PLI 2.0 offered better subsidies and other financial incentives for a period of six years. However, the response to this offer was also lukewarm until the government sent a serious message to the industry.
In August, the government announced curbs on imports of tablets and laptops by imposing a licensing requirement on each product starting August 31, a day after the August 30 deadline for signing up for PLI 2.0 for IT hardware. The objectives cited by the government were to boost domestic manufacturing, increase India’s share in the global electronics supply chains, and to address a long-standing concern regarding security risks associated with Chinese manufactured products.
This sweeping measure shook the industry after which the date for the implementation of the ban was extended to October 31. Since the announcement, however, the industry has since responded positively to the PLI 2.0 scheme, with most major players signing up.
By the end of August, the government said that 58 companies, including top global players, have registered for the Rs 17,000-crore production-linked incentive scheme for IT hardware. The estimated incremental production could be worth $55 billion during the scheme period.
Samsung, a relatively smaller player in the field of laptop manufacturing, has not signed up for the PLI scheme, but has announced an investment of Rs 100-200 crore on production of laptops in India at the Noida facility. But bigger players like Taiwan’s Asus and Acer, American HP and Dell, China’s Lenovo (paired with a local manufacturer) have also announced bigger plans.
Asus is relocating critical component suppliers from China to India. The company is collaborating with contract manufacturer Flex to set up a factory in Chennai, aiming to expand Asus’s production operations in India due to the country’s growing market potential.
In another significant development, HP and Google have partnered to manufacture affordable Chromebooks in India. This collaboration is aimed at providing cost-effective laptop options to the Indian market.
Foxconn and domestic companies, including Dixon Technologies, VVDN Technologies and Netweb Technologies, have also signed up as the scheme also covers manufacturers of specific components to further indigenous production.
“We have received an excellent response for the production of laptops and PCs under the IT hardware PLI scheme,” said Communications and IT minister Ashwini Vaishnaw. The minister added that the number of expected direct jobs created as a result will be around 75,000.
The Turnaround Success of PLI 2.0
PLI 2.0 seems to have outperformed its predecessor, which was introduced in 2021 and failed to attract many global players. In May this year, the government significantly increased the budget for the IT hardware PLI scheme, raising it to Rs 17,000 crore from its initial allocation of Rs 7,350 crore in 2021.
The initial version of the program didn’t perform well, with only Dell and Bhagwati Products meeting their targets for the first year (FY22). This prompted the industry to call for a revamped scheme with a higher budget.
Under PLI 2.0, companies are offered an average incentive of around 5% of their net incremental sales over a six-year period, as opposed to the previous scheme, which offered 2% over four years. Additionally, companies that locally manufacture specific components like memory modules, solid-state drives, and display panels will receive extra incentives under the revised scheme.
The new scheme also allows flexibility in choosing the base year for calculations. Moreover, it includes penalties for companies that fall short of production targets, with potential deductions of up to 10% from their subsidies.
IT minister Ashwini Vaishnaw says the scheme will interplay the semiconductor scheme of the government, with chips made by India by the likes of Micron Technology, potentially being used by laptop manufacturers.
