According to government officials and industry insiders, Apple and Samsung are on track to produce smartphones worth approximately $5 billion (Rs 37,000 crore) in FY22 under the government’s flagship production-linked incentive (PLI) plan, exceeding the Centre’s objective by more than 50%.
In FY22, mobile phone exports will account for about $2 billion under the plan. “We expect global corporations to exceed their targets this year, and the figures will continue to improve each year,” a senior government official told ET.
ET’s emails to Apple, its contract makers, and Samsung went unanswered.
The handset PLI scheme promises rewards worth over Rs39,000 crore over five years.
‘Only three companies are expected to benefit from incentives.’
PLI was the first and largest of a series of government-sponsored initiatives aimed at making India a manufacturing centre and luring industries away from China.
The five candidates picked under the PLI system for smartphone production in the global manufacturers’ sector were Samsung, Apple’s three contract manufacturers – Pegatron, Foxconn’s Hon Hai and Wistron, and another Foxconn affiliate Rising Star (now Bharat FIH).
According to a government official, the government’s aim for qualified applications in FY22 is close to $3.2 billion. “Only three businesses are anticipated to benefit from the subsidies,” the person said, “since Bharat FIH and Pegatron have yet to begin manufacturing phones in this category.”
Pegatron, Apple’s second-largest worldwide manufacturer behind Foxconn, is slated to begin production in India within the next few months. Bharat FIH, on the other hand, primarily produces smartphones for Xiaomi in China. The company is not eligible for incentives under the PLI plan because the per unit cost of manufacturing these gadgets is less than Rs 15,000 per unit.
“This year, (global makers) are on track to exceed their smartphone PLI targets. According to our projections, Samsung, Wistron, and Hon Hai will produce an additional $5 billion worth of goods (Foxconn). Bharat FIH is preparing for the challenge in the coming fiscal year (which begins on April 1), and Pegatron is likely to begin production this year “Chairman of the India Cellular & Electronics Association, Pankaj Mohindroo (ICEA).
Apple, Foxconn, Wistron, and other major handset brands and manufacturers are represented by the ICEA, although Samsung is not one of them.
Incentives at a Rate:
For the second year, Samsung is providing incentives. This means it will have to generate Rs8,000 crore worth of phones in the Rs15,000 and above handset category in 2019-20 (the government’s base year). This is the first year for Apple’s contract manufacturers, which means that in order to qualify for the incentives, they must make devices worth Rs4,000 crore in the same category in 2019-20.
Incentives are 6% for the first two years, 5% for the third and fourth years, and 4% for the fifth year. This means that the government will pay a bonus of 6% of the company’s cost of production if it fulfils the objective in the second year, 5% in the third and fourth years, and 4% in the fifth year.
The output targets set over the base year to qualify for incentives are Rs4,000 crore in the first year, Rs8,000 crore in the second, Rs15,000 crore in the third, Rs20,000 crore in the fourth, and Rs25,000 crore in the fifth year.
Samsung’s initial timeline was as follows:
The scheme’s initial year of production was supposed to be FY21, and it was supposed to last through 2024-25. However, since manufacturing had come to a standstill in 2020 due to the Covid-19 outbreak, the business pressed the government for a one-year extension, which India agreed to. All but Samsung, which had previously built local manufacturing capabilities, missed out on fulfilling the most profitable first-year targets as a result of the pandemic.
Samsung was allowed to preserve the original PLI scheme timetable, which began in FY21 and provided it with Rs900 crore in first-year incentives. However, for other companies, such as Apple’s contract manufacturers, the first year is currently this fiscal year, or FY22.