Samsung, Foxconn, Lava likely to apply for incentive scheme
At least seven global and Indian companies are expected to seek benefits under the Centre’s production-linked incentive (PLI) scheme, aimed at making India a global hub for mobile device exports. Under the scheme, which was formally announced on Tuesday, prospective companies have to apply by July 31.
The government will offer the scheme to five global and domestic entities. However, if there are more than five applications, eligibility will be decided by the ranking of companies based on their global consolidated revenues in the base year.
According to sources, global players that are likely to apply for the scheme include Foxconn, Wistron (both of which manufacture mobile devices for Apple), South Korean major Samsung, and US’S electronic manufacturing services giant Flextronics. Lava International and Micromax are among the home-grown players.
E-mail queries sent to Foxconn, Wistron, and Micromax did not elicit any response. Flextronics declined to comment at the moment.
It is not clear yet whether Chinese players like Xioami, Vivo or Oppo will also join the game. Xioami India Chief Operating Officer Muralikrishnan B, while welcoming the scheme, did not respond to the specific query whether the company would apply though its vendors. Vivo and Oppo declined to comment.
Under the scheme, global companies will get incentives ranging from 4 to 6 per cent based on production for a period of five years. However, they will have to meet three conditions — they will have to export only those phones which have a production value of $200 each, will have to invest ~1,000 crore staggered across this period, and export a minimum of ~4,000 crore in the first year, going up to ~25,000 in the fifth year. For home-grown companies, no minimum production value of a phone has been fixed. But they have to make an incremental investment of ~200 crore in five years and export an incremental amount of ~100 crore in the first year, going up to ~600 crore in the fifth year. Confirming that it would apply for the scheme, Hari Om Rai, chairman of Lava International, said, “We are planning to increase our assembly line by 25 per cent and that of PCBA making by 125 per cent. In the next six months, we will shift our mobile exports capacity from China to India to increase our mobile making capacity from 2 million to 5 million a month by investing ~100 crore.”
Rai said the firm would concentrate on exporting mobile phones below $200 and undertake contract manufacturing for other global device players.
According to sources, Apple is in talks with both its partners to use them for manufacturing phones for exports. Foxconn, for instance, has two entities in India, one of which exclusively undertakes manufacturing for Apple (Hon Hai Precision, which makes for Apple and Rising Stars, which makes for others). Then there is Wistron. The game plan of Apple, say sources, is to export over ~60,000 crore worth of phones by the fifth year. That would, according to analysts, constitute around 7 per cent of Apple’s production value from China in the first year of the PLI scheme, going up to 18 per cent in the fourth year.
Foxconn could make applications through both the companies (the other company manufactures for other global players). South Korean giant Samsung is also expected to apply for the scheme, though a company spokesperson did not comment on a query. The company has already made an investment of ~5,000 crore in a 120-million per annum mobile plant and is looking to export 30 per cent of its capacity. However, one key issue is that as the investment has already been made, it will not be considered for PLI. As a result, the company has to fork out an additional ~1,000 crore to get the benefit. However, talks are on with the government to resolve this issue.
The PLI scheme, if it takes off, could help India grab about 7 per cent share of the $369 billion global export market by 2025.