India to Become an Electronic Manufacturing Hub
Aimed at attracting large investments in the country that includes manufacturing of electronic components, semiconductors and mobile segments
India’s cabinet has approved a $6.37 billion (Rs 637 crore) plan to boost electronics manufacturing. The new measures that come at a time the world is battling the coronavirus epidemic and halting global supply chains is aimed at attracting large investments in the country that includes manufacturing of electronic components, semiconductors and mobile segments.
The Scheme shall extend an incentive of 4% to 6% on incremental sales of goods manufactured in India and covered under target segments, to eligible companies, for a period of five subsequent years.
According to the Electronic Industries Association of India (ELCINA), the electronic components market in India has increased from Rs 68,342 crore in 2015-16 to Rs 1,31,832 crore in 2018-19.
India’s aspiration to become a major global hub for electronics manufacturing is twofold. Firstly, boost export led electronic manufacturing strategy at a global scale and make India manufacturing globally competitive. Further, the PLI scheme is proposed to offer a production-linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including assembly, testing, marking and packaging (ATMP) units, an official statement said.
The move is likely to give an aggressive push to ensure big companies such as Apple, Samsung, Huawei, Oppo and Vivo, besides contract manufacturers like Foxconn and Wistron bring their global supply chains to India and make the country an electronics hub.
Nitin Kunkolienker, President, MAIT said that the series of steps taken by the GoI, beginning with reducing Corporate Income Tax to 15% followed by the Production Linked Incentive scheme is a major step by India in this direction.
“India should now see large scale manufacturing happening in the country, translating into progressive increase in value addition from approximately 20% to 40%. This will boost the growth of ancillary units, engineering expertise, product engineering and software,” he said.
Kunkolienker however noted, the EMS & ODM’s are the companies that will lead the thrust and they make all kinds of electronic products. Thus, a framework that is product agnostic will see India emerge as a leader in multiple product categories, including those where much higher levels of value addition can be achieved. “The industry hopes this exercise will also get extended to other electronic products such as IT, Datacom, medical, industrial etc.,” he said.
According to him, “The implementation of this framework is a new path the country is walking and a learning process for all stake holders. It is extremely critical to keep it simple by ensuring annual signoff with no retrospective claims on industry on incentives disbursed.
Welcoming the Cabinet approval of schemes, Manish Sharma, Chairman, FICCI Electronics Manufacturing and President and CEO, Panasonic India and South Asia, said, “Electronics manufacturing industry, both domestic and foreign has been eagerly awaiting the initiatives to boost their production and also to integrate in the global value chain. These schemes would not only neutralize cost disadvantages in manufacturing to a great extent but also help India to be part of global value chain.”
“It is a very important move in the journey of ‘Make in India’ for electronics. The schemes announced by the government including the ‘Production linked incentive’, will not only boost the investor sentiment but is a big enabler for the development of the component ecosystem,” said Sharma.
To promote high-value local manufacturing, India plans to provide a financial incentive of 25% on capital expenditure for some electronic components, semiconductors and display fabrication units. Companies investing in new plants or expanding existing facilities will be eligible for this benefit.
“We are confident that the government’s assurance of providing a financial incentive of 25% on capital expenditure for the identified list of electronic goods and components, will not only enable India to become the electronics manufacturing hub of the world but also provide a fillip to its ‘Make in India’ program. All of these steps are going to provide a much needed boost to the sector and help homegrown companies to expand their business capabilities further,” Kishan Jain, Director at Goldmedal Electricals said.
As part of the plan, the Government of India also aims to create manufacturing clusters – with a minimum area of 200 acres – that have common facility centers, ready-built factory sheds and plug-and-play facilities.
With over a billion wireless connections and just about 480 million smartphones, India offers device-makers huge room for growth and its massive labor force provides companies a cost-effective alternative than neighboring China.