India has a new incentive scheme for smartphone makers, and the numbers are worth pausing on – Rs 62,500 crore over five years. But not every manufacturer gets to claim a share of it. There is a minimum revenue bar to qualify and which companies actually makes the cut?
PLI 1.0 vs PLI 2.0: What’s different
Analysis of the fine print of the Smartphone PLI 2.0 highlights three clear focus areas-
-Entities need to report annual incremental revenue of Rs 5,000 cr to ensure eligibility for incentives, making exports growth imperative.
-Increasing localisation – Companies can qualify for additional incentives of up to 1.5% for local sourcing of key components/sub-assemblies and such components/sub-assemblies need to be used in 25% of total entity-wise smartphone sales in 1 financial year.
-Companies can qualify for incentives of 9.5% for domestic brands ensuring manufacturing, local designing, and component localisation.
However, unlike PLI 1.0 wherein participants enjoyed incentives on a large base, PLI 2.0 sets steep brand-wise targets. This could shrink the overall eligible pie.
After considering all of these, two different brokerage houses point to the same company, Dixon Technologies, as one of the key beneficiaries. Let’s take a look at what’s driving Motilal Oswal and JM Financial’s investment rationale.
PLI 2.0: Scale is the new entry ticket
According to Motilal Oswal, the five-year scheme will run from FY26 to FY31 and offer incentives ranging from 2.25% to 5%, depending on sales growth and other conditions.
The brokerage said the scheme is focused on “enhancing scale both domestically and in exports, along with higher value addition.”
There is a sizeable hurdle. Eligible mobile manufacturers and EMS companies need Rs 10,000 crore of revenue in FY26, while brands must meet a minimum annual incremental sales threshold of Rs 5,000 crore.
Motilal Oswal noted, “…we believe Dixon fits these scale requirements”. The brokerage expects the scheme to benefit companies that can rapidly increase production and expand exports.
Why exports could become the bigger opportunity
India’s domestic smartphone market has remained relatively flat. That makes exports increasingly important for manufacturers trying to meet the new PLI targets.
JM Financial highlighted the same issue, saying “exports growth – annual incremental revenue of Rs 5,000 crore to ensure eligibility for incentives” makes overseas shipments critical under the new framework.
According to JM Financial, PLI 2.0 could support Apple’s manufacturing and export expansion in India.
For EMS companies, this creates a different growth equation. Higher domestic demand alone may not be enough. Manufacturers will need larger global orders and greater production capacity.
Local sourcing gets another push
The government is also trying to reduce dependence on imported components.
According to Motilal Oswal, manufacturers can receive an additional 1.5% incentive for domestic sourcing of components such as display modules, camera modules, enclosures, batteries and USB cables.
These components must be localised for at least 25% of the total mobile phone units sold in a financial year.
JM Financial said the scheme has three clear focus areas: “Exports growth”, “Increasing localisation” and “Emergence of domestic brands.”
For companies investing in backward integration, this could create another incentive to expand their domestic supply chain.
Dixon Technologies: Why the brokerage sees a potential beneficiary
The biggest question is whether Dixon can convert the policy support into actual earnings growth.
Motilal Oswal believes it can. The brokerage said the scheme’s scale requirements and emphasis on exports could limit competition to companies with sufficient manufacturing capacity and backward integration.
JM Financial also identified Dixon as eligible under the Rs 10,000 crore revenue requirement. It added that the scheme could potentially trigger consolidation among larger EMS players, the “scheme mandates FY26 revenue of Rs 10,000 crore for EMS players, which could drive a round of market consolidation. Dixon is a beneficiary, as concerns around Neolyncs grabbing Motorola share could cease to exist.”
JM Financial cautioned that PLI 2.0 “may not be as margin accretive as PLI 1.0” because the new scheme has steeper brand-wise targets.
What investors should watch
For investors, the Rs 62,500 crore scheme changes the backdrop for India’s electronics manufacturing sector. But the next few quarters will show which companies can actually meet the demanding targets.
Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.