PLI to raise mobile phone manufacturing to Rs 5.5 lakh crore by FY2026: ICRA
By MYBRANDBOOK
Rating agency ICRA said the production-linked incentive (PLI) scheme is likely to push mobile phone manufacturing at a healthy growth trajectory of 15-20 per cent CAGR to reach a value of Rs 5-5.5 lakh crore by FY2026.
The government introduced PLI for large-scale electronics manufacturing in April 2020, primarily targeting mobile phones and specified electronic components as product categories with a cumulative outlay of Rs 38,601 crore.
The scheme intends to offer incentives of 4-6 per cent on incremental sales over a period of 5 years provided that the shortlisted players meet set thresholds of incremental revenues and investments subsequent to base year.
Sheetal Sharad, Vice-President and Sector Head, ICRA, said, "As per estimates, PLI scheme will enable domestic sourcing or localisation to improve from current 15-20 per cent to 35-40 per cent, in case of mobile phones aided by economies of scale supporting local manufacturing of certain components starting with chargers, batteries, cameras, displays, PCB design and assembly. Given the expected investments in the manufacturing infrastructure, the scheme is also expected to generate considerable employment generation."
The scheme is expected to bring fresh investments from global and domestic mobile manufacturers, resulting in healthy growth in mobile phone production at a CAGR of 15-20 per cent between FY2022-FY2026 -- with a potential to boost India's exports.
With the success of the first round, the government introduced the second round of PLI scheme in March last year, focused on electronic components such as active semiconductor components, passive components and PCB assemblies, etc.
The eligibility to apply for incentives under the second-round scheme is contingent on relaxed threshold criteria and incentives of 3-5 percent of incremental sales.
According to the ICRA, India has emerged as the second largest manufacturer of mobile handsets in the world in terms of volumes after China, growing at a CAGR of 50 per cent during FY2015-21 on a low base.
Key challenges faced by manufacturers in India include lack of R&D infrastructure, high capital and logistics costs, muted private sector interest and weak backward linkages. Moreover, the impact of COVID-19 pandemic waves was felt across geographies which disrupted the mobile phone supply chain which is highly reliant on a few geographies such as China, Vietnam, Taiwan etc.
This prompted OEMs to improve geographical diversification of their manufacturing operations.
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