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IT Hardware Companies May Receive an Extended Timeline for Local Manufacturing

A high-ranking government official stated that the government is receptive to the notion of extending the timeframe for foreign IT hardware companies to establish manufacturing facilities in India, contingent upon their submission of a well-defined, comprehensive, and progressive plan detailing their “make-in-India” strategies for specific products like laptops, personal computers, and servers.

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These companies have requested up to a year to set up local production plants. If the government approves of the plans submitted by these companies, it might consider easing the licensing regulations for the import of such items, including tablets and compact computers.

The objective is to motivate prominent companies such as Apple, Dell, and HP, along with others, to initiate their manufacturing operations within India, rather than being limited to contract manufacturing or private labeling. The government is actively engaged in discussions with these companies regarding the timeline and prerequisites for domestic production in India. The official added that collaborative efforts will be made with the companies to achieve this goal.

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image 318 IT Hardware Companies May Receive an Extended Timeline for Local Manufacturing

The Directorate General of Foreign Trade released a notice on August 3rd, stating that the import of electronic devices such as laptops, tablets, all-in-one PCs, compact computers, and servers would be categorized as having a “restricted” status. Companies importing these electronics would need an additional license to bring them into the country. Following industry opposition, the DGFT released an amended notification extending the deadline for the licensing requirement by three months, until November 1.

Previously, the immediate effect clause in the initial notification had led to confusion and halted shipments, but they have now resumed. Senior government officials clarified that the restrictions were not intended to discourage imports, as was widely perceived. The process of obtaining a license is meant to be straightforward and rapid.

Industry executives believe that the domestic ecosystem is not yet prepared for a swift transition to the necessary scale of manufacturing. The Nasscom lobby group urged the government to reconsider the decision, citing potential negative impacts on the $245 billion Indian IT sector.

image 319 IT Hardware Companies May Receive an Extended Timeline for Local Manufacturing

Going forward, the Ministry of Electronics and Information Technology, responsible for electronics manufacturing in the country, is likely to request companies to submit their plans for establishing manufacturing units in India within the next two years.

Sources revealed that the IT ministry had been consistently communicating with companies, informing them of potential non-tariff barriers. Major global electronics manufacturers, including Apple and Acer, engaged with senior officials of the IT ministry to seek an extension of the licensing deadline, citing the need for time to set up domestic manufacturing facilities.

The government expects that import licensing will incentivize local manufacturing, complementing the production-linked incentive (PLI) scheme for IT hardware. The first phase of the PLI scheme garnered lackluster responses, with only a few companies meeting their targets. The second phase of the PLI scheme was approved by the cabinet, offering increased incentives and a broader incentive structure. About 44 companies have applied for the PLI scheme for IT hardware manufacturing, and the deadline for this scheme has been extended twice, with the new deadline set for August 30.

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