Over 24 companies have pledged $1.5 billion of investments to set up mobile-phone factories in India.
Meanwhile, Samsung is already in talks of shifting a major part of its manufacturing unit from Vietnam and other countries to India.
Find out why are companies moving their production lines to India?
Why is Production Linked Incentive (PLI) Program Drawing In So Many Electronic Companies?
With US-China trade tensions rising and the ongoing COVID-19 pandemic, companies are aggressively looking to diversify supply chains.
The move to shift to India can be cited to Prime Minister Narendra Modi’s Production Linked Incentive (PLI) that makes electronic manufacturers eligible for an incentive of 4% to 6% of their incremental sales over the next 5 years.
As a result, these incentives are drawing in many companies moving away from China.
Which Companies Have Showed Interest In PLI?
International Companies like Samsung Electronics Co., Hon Hai Precision Industry Co., known as Foxconn, Wistron Corp., and Pegatron Corp., Apple Inc.’s assembly partners are showing interest in investing in the country.
However, according to a recent survey by Standard Chartered Plc., Vietnam remains the second-largest hub for smartphone manufacturing and exporting in the world after China, followed by Cambodia, Myanmar, Bangladesh, and Thailand.
How Will This Help the Indian Economy?
The Government expects this electronic program could lead to $153 billion worth of manufactured goods over the next 5 years and in turn create about ten lakh jobs directly and indirectly.
According to analysts led by Neelkanth Mishra at Credit Suisse Group AG, this would also add an investment of $55 billion over 5 years this taking up India’s economic output by 0.5%.
Their report dated August 10 states that this could transfer an additional 10% of global smartphone production to India in 5 years, most of it from China.
This move will also go hand in hand with Modi’s ‘Make in India’ initiative which will increase the share of manufacturing in the economy from the current 15% to 25%.
Similar incentives have been extended to pharmaceutical businesses.
Under this incentives program, the government plans to cover segments which may include automobiles, textiles, and food processing to increase the country’s economic output.
Samsung In Final Stages To Shift To India!
Samsung’s Noida facility is the company’s largest manufacturing hub which exports smartphones to other countries. The company currently makes roughly 50% of its phones in Vietnam, as per industry estimates.
The report by ET states that the reason for Samsung to diversify its production lines for making smartphones in India has to be the PLI.
The South Korean smartphone-manufacturer is finalizing the process of production of devices worth over $40 billion (around Rs 3 lakh crore) in India. A majority of the investment, which is estimated to be around $25
billion (around Rs 1.87 lakh crore), will be for smartphones priced over Rs 15,000.
Samsung will also be exporting these smartphones made in India, the report stated.
Apart from expanding its base beyond China and Vietnam the company also got to avail the PLI scheme by localized production of the smartphones.
It will be interesting to see the change in the smartphone prices once the major smartphone manufacturers start producing their components and gadgets in India.