Samsung, Foxconn to take part in govt's PLI scheme for phone manufacturing

Leading South Korean mobile device maker Samsung and third party manufacturers of Taiwan — Pegatron, Foxconn and Wistron — have made applications to the ministry of electronics and information technology (MEITY) to participate in the production-linked incentive (PLI) scheme offered to global players.

The scheme aims to make India a manufacturing and export hub for mobile phones.

The deadline to participate in the incentive scheme ended on Friday under which five eligible firms would be chosen. Two separate entities from the same group can also make more than one application.  

The three Taiwanese firms make mobile phones for Apple across the globe. In India, Apple has been using two of them — Foxconn (through its company Hon Hai Precision Industry) and Wistron — to manufacture iPhones in India.  

A separate PLI scheme for home-grown players has also attracted attention: Around eight firms have applied, which includes Lava Mobiles. Others expected to apply in the end of the day are  Micromax, Dixon, Padget, Sojo, and Optimus. 

It is, however, not clear whether Chinese giant BYD which had registered itself has also applied at the time of going to the press.

Under the PLI scheme for foreign firms, global manufacturers are being offered an incentive of 4 per cent to 6 per cent for five years provided they meet certain thresholds in terms of production and investment earmarked for each year beginning FY21.

The foreign firms have to make a staggered investment of Rs 1,000 crore over four years. They would be required to manufacture handsets with an incremental production value of Rs 4,000 crore in the first year and this has to go up to Rs 40,000 crore in the fourth year.

However, incentives will be given only if these foreign companies manufacture phones which have a production value of over $200 apiece.

The government has earmarked $5.3 billion as budgetary outlay for the scheme which is expected to transform India into an export hub.

The incentive scheme is designed to reduce the yawning gap in cost of production disability that global makers face in India compared to manufacturing in China and Vietnam. This gap ranges from 9 per cent in Vietnam to 21 per cent in China.

The PLI scheme for homegrown companies also offers similar incentives, but they have to invest only Rs 200 crore in four years. They need to have a production value of a minimum Rs 100 crore in the first year and that has to go up to Rs 3,000 crore in the fifth year to avail the incentive.

Those privy to discussions point out that Apple Inc, which has been looking at hedging its bets in China, where nearly 85 per cent of its phones are manufactured, has been looking at India for a while.

With three players expected to make handsets for Apple, sources said one could see around 17 per cent of phones (in value) being manufactured in India in the next five years.

The US company can also import second hand machinery from China. It will be calculated as part of its investment in India under the scheme.

Samsung has already invested Rs 5,000 crore in a mobile plant to double its capacity in the country. However, sources say it had objected to the fact that it will not get credit under the scheme for the investment it has already made for a new mobile plant. 

So, it has to put in more money, as required under the PLI scheme, to avail the incentives.

Among home-grown firms, Lava International has decided to shift its manufacturing of mobile phones from China to India for an export boost. 

The company wants to export phones worth less than $200 million across the globe and take advantage of the incentives provided under the PLI scheme.