Flex to Inventec, foreign players see potential in PLI for tech products

Initial reactions to the government’s Production Linked Incentive (PLI) scheme, announced on Wednesday, have been positive with global electronic manufacturers of laptops, tablets, computers, and mobile phones, showing interest in participation.
 
The scheme is aimed at promoting local manufacturing and export of these items.
 
Companies such as Flex in Singapore and Foxconn, Wistron, Pegatron Quanta Computers, Compal, and Inventec in Taiwan are considering applying for the incentive, according to sources.
 

While Flex and Wistron said they will not comment, Quanta, Compal, and Inventec did not respond to queries. Flex has already tied up with HP to make desktop computers and workstations at its plant near Chennai. Earlier, HP had been manufacturing at its own plant in Pantnagar in Uttarakhand.

 
Lenovo India has said it would like to increase its laptop-making capacity by 10x at its Puducherry plant and also manufacture tablets.
 
Lenovo did not respond to a query about whether it plans to participate in the scheme directly or through its vendors.    
 
However, Apple, which has tied up with three Electronics Manufacturing Services (EMS) players to manufacture mobile devices under the PLI scheme, might not show the same enthusiasm for laptops and tablets, say sources who track the company. Apple declined to comment.
 
The reason some global PC brands may not opt for the PLI scheme, say analysts, is that it is not too attractive for exports. An executive of a leading global laptop brand said the 2-4 per cent incentive rate was ‘very low’ as the cost disability with China, which dominates this market, is over 20 per cent.

 
“The scheme looks more for import substitution rather than exports, as India imports the bulk of its laptops and tablets from China and makes very little in India,” he said.
 
The government hopes the PLI scheme will help make India a global hub for the manufacture of telecom, computer, and networking products. The PLI scheme offers an incentive rate of 2-4 per cent for four years on laptops with an invoice value of Rs 30,000 and tablets with an invoice value of Rs 15,000 for global players, provided they make an investment of Rs 500 crore in this period.

 
Firms have to make incremental sales of Rs 1,000 crore in the first year, going up to Rs 10,000 crore in the fourth year.
 
For domestic entities, the investment criterion is Rs 20 crore and incremental sales have to rise from Rs 50 crore in the first year to Rs 300 crore in the fourth year.
 
This is why domestic players are leveraging this potential. Lava International, selected for PLI benefits in making mobile devices, will take a final call soon.
 
Sunil Vachani, CMD of Dixon Technologies, has confirmed the company will apply for the PLI.

 
“There are hardly any manufacturers of these products in India and the bulk is imported. Also, the government is buying large volumes of PCs with a preference for Made in India products. So, there is a large market for domestic production as an EMS player and also from exports,” said Vachani.
 
He added that while the minimum investment requirement is Rs 10 crore, Dixon is looking at building a larger plant with a minimum investment of Rs 100 crore. 
 
Lava International chairman Hari Om Rai, however, said that the detail about minimum investment remained somewhat unclear and Lava is still studying it.