India's Ambitious Plan to Attract Global Electronics Component Players for a $300 Billion Industry

In an endeavor to fortify its electronics manufacturing landscape, India is rolling out a production-linked incentive (PLI) scheme for electronics components, setting its sights on key players from China, South Korea, Taiwan, and the US. The scheme, currently in development, aims to steer these manufacturers away from China, Thailand, and Vietnam, mitigating dependency risks.

India's Vision and PLI Scheme:

India is strategically positioning itself to secure its electronics manufacturing ecosystem from the shadows of China, Thailand, and Vietnam. The upcoming PLI scheme is designed to entice major component manufacturers, predominantly based in China, to establish manufacturing units within India. The initiative, revealed by officials on February 19, seeks to catalyze the development of a robust component ecosystem on Indian soil.

Global Outreach:

A senior IT ministry official affirms, "There are companies from South Korea, Taiwan, and the US. We want to bring them to India to develop a decent component ecosystem here." With a vision to achieve electronics manufacturing worth $300 billion by 2026, India is eyeing a substantial $18 billion for components, catalyzing economic growth.

Targeting Mobile Handsets Components:

The government's primary objective is to enhance domestic value in the Bills of Material (BoM), particularly in mobile handset components. The proposed PLI scheme, expected to have an outlay of around Rs 20,000 crore, aims to incentivize manufacturers to include a significant portion of components in the BoM, elevating domestic value from the existing 15%. The scheme's exact outlay will be determined post-consultations with industry stakeholders.

Meity's Directive and Industry Collaboration:

The Ministry of Electronics and IT (Meity) has called upon the industry to furnish a comprehensive list of electronics components, emphasizing the need to diversify the components manufacturing ecosystem. The government is keen to identify challenges and barriers to facilitate local manufacturing of these components, fostering a collaborative approach.

Protecting the Ecosystem:

Acknowledging the pivotal role played by the electronics manufacturing ecosystem in job creation, a senior ministry official underscores the importance of competitiveness. "Protection happens if you have competitiveness, which comes not just from the labor part but also from increasing the supply of components from India," he adds.

Challenges and Xiaomi's Concerns:

Responding to challenges and concerns, especially regarding the scrutiny of Chinese companies, the government aims to grow the domestic component ecosystem. In a letter dated February 6, Xiaomi emphasized the need for "confidence-building" measures to encourage local operations by component suppliers. The government acknowledges the complexities but assures a mechanism for swifter visa approvals for manufacturers from China.

Homegrown Capacity and Balancing Act

The government aims to support both domestic and foreign players. Existing Indian companies in the component manufacturing sector are also expected to benefit from the PLI scheme.

Conclusion:

India's new PLI scheme represents a strategic move to diversify its electronics component supply chain and reduce dependence on China. While challenges exist, addressing industry concerns and creating a conducive environment will be crucial for the scheme's success.