Handset supply chain issues hit India’s PLI scheme

PLI India
Image by Arayabandit | Bigstockphoto.com

India’s ambitious production-linked incentive (PLI) scheme for smartphones is set to take a hit due to ongoing supply chain issues and acute component shortage of chipsets. Mobile handset makers and contract manufacturers that recently received approval under the scheme will shortly write to the Indian government to extend the PLI target timelines.

Due to the supply chain disruption, these companies have not been able to build capacities at their existing and new facilities and said that they would not be able to achieve industry’s target exports worth Rs 50,000 crore ($6.76 billion). However, they are expecting to exceed last year’s exports worth Rs 27,400 crore ($3.7 billion).

“The industry is suffering right now as there is a shortage of semiconductor chips and raw materials and it is already impacting the targets,” Pankaj Mohindroo, chairman India Cellular and Electronics Association (ICEA) was quoted as saying.

ICEA, which represents Apple, Foxconn, Wistron, Pegatron, Xiaomi and local players like Lava International, Karbonn (Jaina Group) and Micromax, said that companies would seek a 3-month extension to meet the investment and the production targets for the first year under the PLI scheme.

Key Apple suppliers Wistron, Pegatron, and two units of Foxconn received approval in October from India along with Korean major Samsung. Lava, Micromax, Karbonn, Dixon and Optiemus were also approved by India to avail of benefits under the $5.5 billion PLI scheme.

India’s Ministry of Electronics and Information Technology (MEITY) had also approved AT&S, Ascent Circuits, Visicon, Walsin, Sahasra, and Neolync under the “Specified Electronic Components” segment.

Foxconn has already said that it will invest up to $1 billion in India to expand its factory in Tamil Nadu to take advantage of the scheme. Wistron is also investing a total of $ 387.73 million, while Pegatron will invest $150 million to build new factories for Apple’s iPhones.


The PLI scheme is already running delayed by two months as the previous plan was to start benefits by August 2020. Approved companies were previously pushing the MEITY to take the delay into account while setting targets til March 2021.

According to media reports, the delay was on account of differences over whether the Indian Cabinet approval was required for the PLI scheme since it entails investments over Rs 1,000 crore ($135.14 million)

The Economic Times separately reported that the ministry issued letters to the industry intimating it about their qualification on October 7, 2020. “…therefore, the industry got very little time to negotiate, select, order, procure and install all the machinery and equipment within such short duration…this delay affected particularly companies that had to procure brand new equipment,” a senior industry executive was quoted by the publication.

Under the scheme, the target for incremental sales of manufactured handsets over the base year is Rs 4,000 crore ($540.54 million) each for multinational manufacturers and Rs 500 crore ($67.57 million) for local manufacturers. For the first year, the incentive rate for both domestic as well as foreign companies is 6%.

The target for incremental investment over the base year for foreign companies is Rs 250 crore ($33.78 million) in the first year, only for phones with an invoice value of Rs 15,000 ($202) and above. For domestic companies, it is Rs 50 crore ($6.76 million) for any handsets manufactured.

As per a recent notification by the MEITY, the approved companies are expected to lead to total production of around $142 billion over the next 5 years. Out of the total production of $142 billion in the next 5 years, around 60% will be contributed by exports.

Companies approved under the scheme will bring additional investment in electronics manufacturing to the tune of Rs 11,000 crore ($1.49 billion) and will generate more than 2 lakh direct employment opportunities in next 5 years along with the creation of additional indirect employment of nearly 3 times the direct employment, the ministry had said.

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