With the smartphone production-linked incentive (PLI) scheme clicking with both manufacturing and exports achieving scale, the government now wants device makers to focus on the design aspect of mobile phones as well to increase the local value addition.
The industry on its part, has urged the government to consider extending the PLI by five years once its current five year tenure ends in 2026. Analysts said that it seems even if the government considers the industry’s demand favourably, it would come with some riders.
“Given the kind of design strength we have, the kind of capacity we have to make these products, we cannot ignore the elements of design,” S Krishnan, secretary ministry of electronics and IT (MeitY) said at an event on India’s mobile manufacturing ecosystem by Broadband India Forum (BIF) on Wednesday.
“We need to design phones in India and that is truly where the value addition comes,” Krishnan said, adding that designing of mobile phones will also make India capable of answering questions about devices of the future.
While smartphone makers like Apple and Samsung have increased their manufacturing and exports from India, the design part still happens overseas.
Once they also start to design the devices here, it would pave the way for end-to-end creation and production in the country, which would contribute to domestic value addition. The design ecosystem will also get a boost with the new components scheme in the works.
Currently, overall in the electronics industry, India has a domestic value addition of 18-20% compared to 40% of China. The government’s plan is to increase the domestic value addition to 35-40% and make India as a competitive destination for manufacturing of both finished goods and components.
The smartphone PLI scheme, which has been the most successful one among all PLIs, will end in 2026 and the government is exploring options to extend the scheme.
In a report on India’s Mobile Manufacturing Ecosystem: Challenges and Opportunities by BIF and Koan Advisory, the industry also urged the government to simplify input tariffs structure by reducing the slabs and rates on mobile phone components. For example, India has a high tariff of over 10% on 35 such components, compared to countries like Vietnam and China which have a cap of 10%.
Further, India has a seven-tiered complex tariff structure, with tariffs for some components going up to 25%, according to the report.
Lately, the government reduced the custom duty on mobile phones and some parts to 15% from 20%.
In response, Krishnan said, there were suggestions on the tariffs and the recent Budgets have addressed the demand. “This will not be a jerky movement but a slow progress. This can’t be a sudden movement, but the direction is clear and that’s what the Budget has talked about,” Krishnan said.
Among other key things, the report also highlighted that India also maintains higher tariffs on capital goods, which raises machinery costs for mobile manufacturing, replaced every 12-36 months.
Notably, high tariffs and complex slabs lead to 7-9% higher cost of manufacturing mobile phones.
The industry wants the government to streamline visa processes for foreign professionals and expand visa provisions to include suppliers to those participating in PLI schemes. Lately, there have been delays from the government on approving Visa applications especially for Chinese professionals.
Krishnan said the government has streamlined the process and is looking at areas where it needs to issue visas faster.
As part of the recommendations, industry has urged the government to have an inter-ministerial committee to provide a single window clearance for approvals like export-import licenses, tax exemptions, customs procedure, and strengthen global linkages.