ICRA, Telecom News, ET Telecom

NEW DELHI: The Production Linked Incentive (PLI) program will drive the manufacturing of mobile phones at a compound annual growth rate (CAGR) of 15-20% at Rs 5-5.5 lakh crore (in value) d here FY2026, according to the rating agency ICRA.

“The PLI program is estimated to increase domestic sourcing or localization from the current 15-20% to 35-40% in the case of mobile phones, aided by economies of scale supporting local manufacturing of certain components, starting with chargers, batteries, cameras, displays, PCB design and assembly,” Sheetal Sharad, vice president and business leader, ICRA, said in a statement on Tuesday.

Investments in manufacturing infrastructure are also expected to generate considerable employment opportunities, Sharad said.

The government had launched the PLI scheme for large-scale electronics manufacturing in April 2020 mainly targeting mobile phones and specified electronic components as product categories with a cumulative expenditure of Rs. 38,601 crores. The program aims to offer incentives of 4-6% on incremental sales over a 5-year period, provided that shortlisted players meet defined thresholds of incremental revenue and investment after the baseline year.

Following this, the government launched the second cycle of the PLI program in March 2021 focusing only on electronic components such as active semiconductor components, passive components, PCB assemblies, etc. relaxed threshold criteria and incentives of 3 to 5% of additional sales.

For the second cycle of the program, eligible companies can choose any 4-year period between fiscal year 2021 and fiscal year 2026 for additional sales incentives.

With the iPhone 13, the company now manufactures all of its best-selling models locally through its two contract manufacturing partners Foxconn and Wistron. Pegatron, its third partner, is also expected to start production this month, initially with the iPhone 12. Apple started manufacturing iPhones in India in 2017 with the iPhone SE, and currently produces the iPhone 11, the iPhone 12 and now iPhone 13 locally. None of the Pro models are currently made in India.

ICRA believes that healthy participation in the second round of the program would help improve “India’s electronic components ecosystem by reducing import dependency and improving value addition.” “New waves of Covid-19 in China and the Russia-Ukraine conflict are expected to exacerbate component shortages In the near term. In addition to supply chain challenges, higher tariffs on imported components could have an impact on the cost competitiveness of mobile phone manufacturers from an export perspective,” Sharad warned.

She said that from a demand perspective, the rollout of 5G in 2022 and easy financing would create replacement demand for mobile phones while the government, through its skills development programs and supporting policies, would support capacity building in the medium term.

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