PLI Scheme Reduces India's Dependency On China; 3 Manufacturers Meet Production Targets: Report

The production of mobile phones in India has grown and its dependency on China has decreased as the Production Linked Incentive (PLI) scheme for mobile handset makers seems to be working well, says CRISIL.

The production of mobile phones in India has grown and its dependency on China has decreased as the Production Linked Incentive (PLI) scheme for mobile handset makers seems to be working well, says a report by Credit Rating Information Services of India Limited (CRISIL). According to the report, the local mobile production is estimated to have increased 24-26 per cent in fiscal 2022 and that three global manufacturers have met the PLI production targets despite the ongoing chip crisis.

CRISIL expects CAGR to be 22-24 per cent between fiscals 2022 to 2024 to Rs 4-Rs 4.5 lakh crore in terms of value which is likely to be driven by the government's PLI scheme. "As a corollary, the country’s mobile imports decreased ~33 per cent on-year in fiscal 2022. Dependency on China reduced to 60 per cent from 64 per cent in fiscal 2021 and is expected to fall further in the medium term. However, with rising production, imports of electronic components essential for mobile assembling/manufacturing also increased 27 per cent on-year," the report said.

Meanwhile, a recent report by rating agency ICRA also said that the 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.

Also, Samsung, one of the two major MNCs contributing to the government's PLI scheme, is said to be exiting the feature phone business in India in the wake of the PLI mandate that the brand will get incentives only if it produces handsets worth Rs 15,000 of factory price.

The feature phones segment is one area where Samsung was the market leader and the market has now been taken over by the likes of Itel and Lava. This also means the company will make fewer launches within the budget Rs 10,000 and below smartphone segment. The feature phone market in India has been on a decline. The feature phone market saw a 39 per cent year-on-year decline in the first quarter of 2022, according to a Counterpoint Research report. Samsung has now lost ground to Itel and Lava in the feature phones segment, according to the market research agency.