Domestic players, apart from Dixon Technologies, are on course to miss out on the benefits of the government’s smartphone production-linked incentive (PLI) scheme, which concludes in FY26. Homegrown manufacturers like Bhagwati (Micromax), Lava, and Optiemus Electronics are unlikely to meet the eligibility criteria, signaling a missed opportunity for India’s indigenous smartphone sector. Among domestic manufacturers, only UTL Neolyncs – which produces Karbonn and Jio phones – has managed to claim incentives under the scheme, and that too for just a year or two, according to industry sources.
This lacklustre performance is significant as the PLI scheme was envisioned not only to boost manufacturing but also to uplift local players. While it has successfully bolstered exports and strengthened local manufacturing, especially through international giants like Foxconn and Samsung, domestic firms have largely failed to leverage the initiative. The failure of domestic players to qualify for incentives stems from multiple challenges, such as the scheme’s high production and investment benchmarks, which exceeded the operational scale of many Indian manufacturers.
Additionally, companies like Lava, Bhagwati, and Optiemus faced difficulties competing with established EMS (electronics manufacturing services) leaders like Dixon Technologies. The inability to attract global contracts has been another stumbling block, particularly for Lava, which faces the added challenge of competing with the same brands it seeks to partner with for contract manufacturing.
Sanjeev Agarwal, chief manufacturing officer of Lava, said, “As of now, PLI eligibility, is like that only for us. If we can attract some contract manufacturing, there is still a possibility to achieve PLI targets in the remaining years”. However, Lava’s foray into electronics manufacturing services (EMS) has yet to yield significant contracts, with discussions still underway. Agarwal added, “We are in high-level discussions for EMS opportunities, not limited to smartphones.”
The PLI scheme for smartphones sets different benchmarks for global and domestic players. Global players are required to invest Rs 250 crore and manufacture goods worth Rs 4,000 crore annually, with phones priced above Rs 15,000. Indian players, on the other hand, need to invest Rs 50 crore and produce phones worth Rs 500 crore annually, with targets increasing year-on-year. Out of five approved domestic applicants, only two are meeting performance expectations, the ministry of electronics and IT (MeitY) informed a parliamentary committee. The ministry is actively engaging with these firms to enhance performance and address their concerns.
Faisal Kawoosa, chief analyst at Techarc, noted that there seems to be an overcommitment in setting targets for domestic players. He observed that the local smartphone market is stagnant, and exports face intense global competition, leaving Indian firms struggling to scale. For companies like Lava and Optiemus, experts suggest diversifying into component manufacturing as a less risky and more scalable alternative to smartphone assembly.
Despite the challenges faced by domestic players, Dixon Technologies has emerged as a standout performer in the domestic EMS space. The company is doubling its production from 15 million smartphones in FY24 to an expected 30 million in FY25. Dixon manufactures devices for major brands, including Samsung, Xiaomi, Motorola, and Pixel, holding an 11% market share in contract manufacturing from January to September 2024.
