Google made two important announcement this week: It will make Pixel phones, which will roll out in 2024, as well as Chromebooks, as part of the Make in India initiative. Apart from Google, other phone-makers, including Apple and Foxconn, have also started manufacturing mobiles in India. In September, Apple announced that it plans to make the iPhone 15, manufactured in India, available in the country. In addition, around 40 companies, including global majors like Dell, Lenovo, HP, Asus, and Acer, applied for the IT hardware production-linked incentive (PLI) scheme. That companies like Google are taking steps towards domestic manufacturing when the Indian market for laptops and personal computers is very small—around 2.4% of the global demand—shows, in due course of time, several global majors will either shift their supply chains from China to India or definitely create an alternative base here.
The developments, taken together, clearly prove that apart from framing the right policies, a little bit of patience is required for the desired results to follow. The government did the right thing by realising this and junking its kneejerk move to impose import licensing on laptops and related IT hardware products to push domestic manufacturing. On Thursday, India launched a new system of “authorisation” for imports of laptops, tablets and personal computers, aiming to monitor shipments of such hardware without hurting market supply. The new “import management system” takes effect from November 1, and requires companies to register the quantity and value of imports, but the government will not reject any import requests and will use the data for monitoring, the officials said.
The idea now is to move towards a credit-based system whereby global manufacturers will have to register themselves under an import management framework. Under the credit-based system, manufacturers will be assessed on three criteria: their past year’s imports, progress on domestic manufacturing of IT hardware products, and electronics exports from India. Based on their performance on these parameters, the government will allot credit points which can be used to import laptops and other IT hardware products. For instance, Apple and Samsung have not applied for the PLI scheme for IT hardware for domestic manufacturing but are making mobile phones in the country under the smartphone PLI and are exporting in huge numbers. The credit points which will accrue to them due to this will ensure that their imports continue smoothly. Similarly, manufacturers like Dell, HP, Asus, Acer, Lenovo, which have applied for IT hardware PLI, will start domestic manufacturing and even export once their applications are approved by the government. The credit points which would accrue to them will ensure imports for them in the interim.
The hope is that even a company like Apple which does not seem keen to manufacture its iPads and MacBooks in India because of the small numbers, will eventually move its supply chain out of China over a period of time. Of Apple’s $294 billion turnover in FY23, iPhones contributed around $157 billion, with Mac and iPad contributing only around $44 billion. It thus makes sense for the company to deepen the production of smartphones in the country, and continue with the production of Mac in locations other than India. The lesson is thus clear: domestic manufacturing will strike roots in India in response to the policies which are framed in consultation with industry. Thankfully, the licence-permit move has been buried.