Apple wants to make India iPhone export hub, charmed by Modi’s scheme for mobile phone companies

Apple’s global contract manufacturers, Foxconn and Wistron, have applied for Modi government’s production-linked incentive (PLI) scheme to make India its next hub for production and exports of iPhones.

India is set to become a major production hub for exporting mobile phones going by the way global major Apple has reacted to the government’s Rs 41,000-crore production-linked incentive (PLI) scheme, applications for which were invited from beginning this month.

Sources said that both Foxconn and Wistron, the global contract manufacturers for Apple have applied for the scheme. Among the local players, Lava, Dixon Technologies, and Karbonn have applied so far. South Korean major, Samsung and Flextronics are also expected to submit their applications shortly. Firms can apply till July 31 and by early August, the selected companies will be announced. Initially, five global and five local companies will be selected to avail of the scheme.

Both Foxconn and Wistron are already present in India, with the former’s factory in Chennai and the latter’s in Bangalore. While Foxconn makes phones for Apple as well as several other firms also, Wistron makes exclusively for Apple. Foxconn’s Indian plant’s turnover in FY19 was around Rs 35,000 crore.

Industry sources said that the potential of job creation as a result of the PLI scheme is 15 lakh over a five year period. Around 90% of the jobs would be at the worker level where average salary levels would be around Rs 22,000. The remaining 10% jobs would be of supervisor level.

However, currently both these companies make Apple phones only for the Indian market. Under PLI scheme they would make phones here for the export market as the scheme is designed to promote India as a global manufacturing hub for electronics. For global players like Apple, the incentive is therefore for phones above $200 as they have a market outside India. In India, phones above $200 have a market share of only 2%.

According to sources, Taiwanese Foxconn has submitted two applications – one in the name of Hon Hai Precision Industry Co and the second as Rising Stars Mobile India Pvt Ltd. Hon Hai will primarily be making iPhones while Rising Stars will produce devices of other firms like Xiaomi, Oppo etc.

Companies will require to meet incremental investments and produce incremental phones over and above FY20 (which has been defined as the base year). Investment and production targets increase over a three-year period and five-year period, respectively.

The PLI scheme will extend an incentive of 4% to 6% on incremental sales over base year of goods manufactured in India and covered under target segments, to eligible companies, for a period of five years subsequent to the base year as defined. Due to this the domestic value addition for mobile phones is expected to rise to 35%-40% by 2025 from the current level of 2%-25%.

According to industry estimates, mobile manufacturing companies have the potential to get an incentive of around Rs 7,500 crore if they scale up production to worth about Rs 1.5 lakh crore over the next five years under the PLI scheme.

The production of mobile handsets in 2018-19 has reached 29 crore units worth Rs 1.70 lakh crore from 6 crore units worth Rs 19,000 crore in 2014. While the exports of electronics has increased from Rs 38,263 crore in 2014-15 to Rs 61,908 crore in 2018-19, India’s share in global electronics production has reached 3% in 2018 from 1.3% in 2012.

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