In order to support the increasing exports of mobile phones and other electronics, the electronics manufacturing sector is pleading with the government for a Rs 30,000–Rs 35,000 crore production-linked incentive (PLI) scheme for components and sub-assemblies, in addition to capital expenditure support, according to the Economic Times.
The incentive program, according to the India Cellular & Electronics Association (ICEA), which is made up of leading smartphone manufacturers and brands, is necessary to sustain the rising demand for electronics components, which is expected to reach $75–80 billion by 2026 and $300 billion by 2032. This demand will support the production of $300 billion worth of electronics products by 2026 and $1.2 trillion by 2032.
According to ICEA, the program intends to raise domestic value addition from the current 18% to 35–40%, with a focus on the production of mobile phones. The fabrication of components need to advance concurrently with the ongoing expansion of the semiconductor ecosystem in India.
Encouragement of Semiconductor production in India
The industry requested PLI support with a 4-6 percent incentive structure for manufacturing high-end printed circuit boards, surface-mount components, thru-hole passive components, and sub-assemblies (camera modules, display assemblies, vibrator motors, etc.) in its submission to the Ministry of Electronics and Information Technology.
An eight-year PLI plan with the option to collect rewards for up to six of those years was advocated by the industry. According to ICEA's proposal, companies that invest a minimum of Rs 1,000 crore in producing high-end PCBs, lithium-ion batteries, and SMD passive components should be eligible for 40% capex support. Additionally, they should receive support for producing raw materials and other component inputs, with an average incentive of 5% over a six-year period.
Cutting Back on Imports
The industry association also stated that there is an urgent need to move away from a high reliance on imports and toward the development of an indigenous semiconductor ecosystem, which will be aided by focused circuit design, localized PCBA operations, and improved value addition in product manufacture.
ICEA also stated that it would take at least two to three years for the component ecosystem to start producing goods for sale. According to the Economic Times, once created, local component manufacturing should be able to fulfill 5–10% of world demand in 6-7 years. International companies should be asked to take a sizable portion of both the home and global component manufacturing sectors.
Additionally, the ICEA recommended that supply chain auxiliary units that assist in the fabrication of components be given a 25% capex assistance. A 4–6% incentive linked to additional sales should be given to vital sub-assemblies and components such speaker modules, camera modules, display assemblies, vibrator motors, mechanics, and connections.
To offset the high cost of financing in India, the sector requested a five percent interest subsidy for component manufacture on term loans and working capital requirements.
In order to strengthen India's position in semiconductor product design and intellectual property development, the ICEA suggested a number of steps last month. These initiatives included classifying chip design and manufacturing as a strategic industry and encouraging major Indian corporations to invest in semiconductor design. The ICEA also recommended creating an exclusive market exchange for the electronics and high-tech sectors in its most recent report.
