As China is the epicenter of the COVID-19, many global hardware and technology companies are rethinking their business plans and thinking of shifting their manufacturing outside China. Countries like Thailand, India, and Vietnam are trying to grab the opportunity. To cash in the opportunity, central and state governments of India are coming up with lucrative incentives to attract them.
In order to attract companies, the government has relaxed rules that previously hampered local production. According to a report by ET, the government has dropped certain contentious clauses that included the evaluation of plant and machinery to be brought into India at 40% of its value from China and South Korea.
Increased production of Samsung and Apple in India
Currently, Apple sells iPhones worth $1.5 Bn in India, of which less than a third are locally manufactured.
Apple is examining a proposal to shift nearly one-fifth of its production capacity from China to India and with this move, Apple is planning to produce iPhones worth $40 Bn through its contractors Foxconn and Wistron and set India as a base for manufacturing and export. But Apple has also raised some concerns about some problems, one is the valuation of the plant with the government and the Central government is trying to sort the issues. Officials revealed that the iPhone maker is also under discussions to get a third Apple manufacturer, Pegatron to start manufacturing in India.
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In 2018, Samsung opened a factory in Noida and now Samsung is the second-largest smartphone player in India with 500 million smartphone users. In 2017 it announced to invest $620 million to double its production in India. Now, Samsung is investing $500 million in its Indian operations to set up a manufacturing plant on the outskirts of New Delhi to produce displays.
Changes in PLI and Easing the Norms
The Indian government has eased the norms and made changes in the PLI. This time the government also include the smartphone industry in any discussions before making changes to the PLI once these companies have invested and started manufacturing in India as previously it was not.
Besides removing the Evaluation Clause, Other changes made by authorities include the removal of multiple caps including the clause which states that the government would issue the incentive for meeting the targets, only if it had the money to do so. Instead of an added clause that permits them to seek relief when they are not able to meet targets due to unforeseen circumstances such as the ongoing COVID-19 pandemic.
Another change includes the revision of benefits with respect to the production targets achieved by the companies as well as the performance in India. The graded incentives will range from 4% to 6% over a five-year period.
Another clause that sought excessive business information from the companies has also been altered and reduced on investor’s requests.
Government Plans with Changed PLI
With these changes, the Indian government wants to attract large scale smartphone manufacturing to India and make a bid to increase exports of the same from India.
Under the new scheme, the government is hoping to increase the export capacity of smartphones from under $3 billion to $100 billion by 2025.
According to the reports, on 28 December 2019 Prime Minister Narendra Modi has also met top executives from tech Giant like Apple, Samsung, homegrown phone maker Lava to start the process. They also believe that other giant manufacturers like Vivo and Oppo may also start applying once the guidelines are out. The scheme will start on 1 August.
Besides Apple, Samsung, and Lava many other companies have shown their interest in the PLI Scheme and boost phone production in India.