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India to up its electronic manufacturing play, sets up USD 6.3 billion fund

Wistron Corp is looking to begin assembly of printed circuit boards (PCBs) for iPhones at its new plant in southern India.

Photo by Louis Reed on Unsplash.

India is setting up new groundwork to propel electronic manufacturing in the country to the next level.

Two days after Indian finance minister Nirmala Sitharaman, in her 2020 budget, revealed that the government is working on a scheme to boost electronics production in the country, local media Economic Times (ET) reported that the government is building a USD 6.3 billion (INR 45,000-crore) fund to offer incentives and subsidies to global device companies and contract manufacturers like Apple, Samsung, Huawei, Oppo, Vivo, Foxconn, and Wistron, to woo them into bringing their global supply chain in the country.

Of the total USD 6.3-billion pool, over 90% would be “disbursed to companies based on a production-linked incentive (PLI) criteria,” while the rest would be “offered under a proposed capital subsidy, or reimbursement scheme,” the report said, adding that an inter-ministerial note (on this) has already been floated.

According to the report, how the incentives will be offered under the PLI scheme would be decided during inter-ministerial consultations, but it would most likely be similar to the duty credit scrip scheme under the current Merchandise Exports from India Scheme (MEIS), which is being replaced by World Trade Organization (WTO)-compliant Remission of Duties or Taxes on Export Products (RoDTEP). A duty credit scrip is a certificate with certain monetary value that can be used to pay customs duty, excise duty, and service tax.

Additionally, Sitharaman, in her budget speech on Saturday, has proposed increasing the import duty on PCBAs (printed circuit board assembly) to 20% from 10% and for chargers to 20% from 15%, to encourage local manufacturing. The government expects this move to shoot up the local production of PCBAs by more than 100 million and chargers by 50 million units.

These moves are in line with the government’s six-year-old flagship initiative, Make In India, which aims to make the country an established electronic manufacturing hub. Moreover, the country’s recent Economic Survey said, similar to China, India should launch a project to assemble electronic equipment in India for the global demand and integrate it with Make in India initiative, which will help the country raise its export market share to about 3.5% by 2025 and 6% by 2030.

The push from the government comes in the wake of the outbreak of coronavirus in China, from where the majority of smartphone companies import components.

Currently, as per the National Policy on Electronics 2019, India has a target of manufacturing 1 billion indigenous mobile handsets, valued at about USD 182 billion (INR 13 lakh crore), of which 600 million units will be for exports. By 2025, the aim is to increase smartphone exports from the country to USD 110 billion from the current USD 3 billion. In the same time frame, the government wants to promote domestic manufacturing in the entire value-chain of ESDM (electronic system design and manufacturing) to achieve a turnover of USD 400 billion (INR 26 lakh crore).

India’s effort to lure component makers that supply to global electronics giants seems to be working.

Citing sources, a Reuters report on Tuesday said, Taiwan’s contract manufacturer Wistron Corp is looking to begin assembly of printed circuit boards (PCBs) for iPhones at its new plant in southern India.

At present, Wistron assembles low-cost iPhone model SE as well as 6S and 7 devices in its facility in Bengaluru. The contract manufacturer’s second plant, also near Bengaluru, is expected to become operational by April and will be able to produce eight million smartphones annually, the report said adding that it will make iPhone 7 and 8 models, some of which will be exported. Taiwanese contract manufacturer Foxconn, which currently makes iPhone XR models in the country, already assembles PCBs for those devices locally.