India is still the second largest smartphone market in the world. Interestingly, the country has been able to overcome the decline in smartphone sales in recent years. However, due to the ongoing COVID-19 pandemic, it faces one of its greatest challenges this year. The country is now stepping up efforts to persuade smartphone manufacturers to expand local production. On May 29, the country's PLI (Production Linked Incentive Scheme) met and decided to remove and change some key clauses in the market.
Efforts are clearly aimed at making more US investments, mainly by making India more attractive than a partner in the so-called "China plus a strategy". In other words, many companies have been trying to leave China in the past few months as the country has steadily made its workforce more expensive. Many smartphone manufacturers are moving parts of their production to other, more competitive Asian countries such as Cambodia, Vietnam and Thailand. That is the plus in the long-standing Chinese production. The trade war is certainly one of the reasons for the recent changes in the market.
India relaxes the rules and extends the advantages.
The empowered committee voted to repeal a rule that values the machinery and equipment brought into the country at only 40% of its value. Other ceilings for government PLI incentives have also been changed. This includes some potentially worrying clauses that could previously allow the local government not to provide incentives to businesses. The Committee also made some changes to the PLI rules to reduce the excessive amount of business information that beneficiaries had to send to the government. It has also changed some of the rules of the investor.
Currently, the PLI is an incentive of around 4% to 6% for the additional sale of goods manufacturing in India. It covers the under target segments for eligible companies for a period of five years. If a company wants to benefit from the incentive, it has to manufacture high-end smartphones. In the first year it has to exceed INR 4,000 crore. In the second case, the requirement for the next four years is 8,000 crore, 15,000 crore, 20,000 crore and 25,000 crore. If you are not aware, 1 crore is equivalent to INR 10,000,000, which is approximately $ 132.409.
One of the first companies to benefit from the new PLI terms could be Apple. One of the main catalysts of the new rules are negotiations with the Cupertino-based company. Contract manufacturers Wistron and Foxconn are currently relocating a significant part of their iPhone production to India. The same situation applies to Pegatron, a third Apple partner. The iPhone maker could be an important element to reinforce the new Indian strategy.
After Apple, we could easily see that Samsung was doing the same.