Samsung has reportedly told Indian officials that it will not apply for India’s production-linked incentive (PLI) scheme for telecom equipment in the absence of a strong business case.
According to a report by the Economic Times, Samsung’s greenfield facility would have involved around Rs 800-1,000 crore ($108-135 million) investment, which it considered extremely high in India, where it just supplies 4G gear to Reliance Jio.
The publication, citing company officials, reported that Samsung’s plants in Vietnam, South Korea and China have sufficient capacity for global demand, including Jio’s 4G requirement. Additionally, Samsung has been importing 4G equipment for Jio from Vietnam and South Korea at zero duties through the free trade agreement route.
“Hence, Samsung did not find the business need to invest in another new facility in India right now since it already enjoys zero import duties and more so since it has just one client in the country,” a company executive was quoted as saying by the publication.
Samsung’s top management has reportedly told the Indian government that it might explore such opportunities in the future, as per the report.
Notably, Samsung’s exclusive partnership with the Mukesh Ambani-led Jio on 4G ended in 2020, following the latter’s decision to build everything related to 5G on its own. The latest decision indicates that Jio has decided against giving any commitment for future network-related requirements.
Samsung was looking to secure new network business from legacy Indian telcos like Bharti Airtel, Vodafone Idea and BSNL after it ended exclusive tie-up with Jio on 4G. However, the vendor’s talks didn’t yield any results. It laid off several hundred employees last year that were involved in Jio’s pan India network in the absence of any new business from the telco.
Jio, on the other hand, is currently in talks with various domestic and multinational contract manufacturers for local production of 5G equipment based on its indigenous technology. The company already works with companies like Flex to manufacture the JioPhone in India and may extend the partnership for 5G equipment manufacturing, as per media reports.
Samsung is one of the key players to be leveraging the PLI scheme for mobile phones. It was the only company to have achieved investment and output targets under the scheme in the last fiscal year.
The company has a large factory in India’s Uttar Pradesh state, which Prime Minister Narendra Modi inaugurated in 2018. Samsung had then committed Rs 4,915 crore ($673.29 million) investment for the factory.
It recently relocated its mobile and IT display production unit from China to Uttar Pradesh and invested Rs 4,825 crore ($660.96 million).
India recently revealed guidelines for the PLI scheme for telecom and networking equipment, which will lead to production of Rs 2.4 lakh crores ($32.88 billion) and exports of about Rs 2 lakh crore ($27.4 billion) over the five years. The scheme has an outlay of Rs 12,195 crore ($1.67 billion).
The scheme, operational from 1st April 2021, will require approved companies to make a minimum investment of Rs 100 crore ($13.7 million) over the next few years. For MSMEs, the minimum investment threshold has been kept at Rs 10 crore ($1.37 million), and they will get a 1% higher incentive proposed every year for the first three years.
Indian is expecting fresh investment of Rs 3,000 crore ($405.41 million) through this scheme. The telecom department (DoT) has earlier this month sought applications from domestic and multinational companies.
Finnish telecom gear maker Nokia, which has a large facility in Chennai, has confirmed that it will participate to expand its facility to cater to both domestic and export-related requirements.