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New Delhi: A majority of the 27 manufacturers - largely small- and mid-sized entities – seeking to avail production-linked incentives (PLI) for IT hardware are struggling to meet the targets for FY25 as major PC companies are pushing direct imports, bypassing the local content requirement in the bargain. Under the scheme that began in April, the majority of the 27 companies enlisted as beneficiaries are yet to even start production. And those who have started, are producing volumes too small to have any significant revenue impact to meet the incremental targets.
Some are yet to make even initial investments under the scheme. Advt In the first year of the scheme, only a handful of companies — VVDN Technologies , Flextronics and Bhagwati ( Micromax ) – are on track to meet targets for the first year. Dixon, which met the target under the previous PLI scheme , is set to open a large facility in Chennai in December and will be missing the targets in its second year.
For the majority, FY2026 is expected to be the first year of production, industry executives said. They added that it is a lack of orders that is keeping back most manufacturers from expanding capacity and starting production. The IT Hardware PLI scheme was revised with an outlay of Rs 17,000 crore and notified in May 2023 with a total of 27 companies approved under the scheme.
The companies include large multinationals like Dell, HP, Flextronics, as well as local manufacturers like Dixon Technologies , VVDN and Sahasra Electronic Solutions. Some like Dixon have cornered the top four IT hardware brands in the country, capturing a part of their local demand, while another is banking upon a single large US customer to meet targets, executives said. The industry now is banking on the US, under Donald Trump, imposing a steep 25% tariff on laptops and smartphones imported from China, coming as a disruption to the existing supply chain.
China exports almost $30 billion worth of IT hardware to the US, according to industry associations. The government expects Rs 1.6 lakh crore worth of production over the six-year tenure of the scheme.
"India is in the best place to capture that chunk,” the executive quoted above said. “The IT Hardware PLI sops are the most competitive among nations, with incentives going up to 13% if you include local sourcing, which is over and above the cost disability in making in India.” Advt But despite the PLI scheme, India imported IT hardware worth $8.
4 billion compared with $8.7 billion in FY23, according to government data. “I don’t think the top brands have issues on the quality of production coming out of India.
They are trying to see whether they can manoeuvre the system and not have a full base of manufacturing in India,” said J.S Gujral, managing director, Syrma SGS, which is part of the IT Hardware PLI but is yet to commit any significant revenues under the scheme. Import Curbs The government last year imposed a restriction on mass imports of laptops to curb zero-duty import of laptops and PCs, later reverting to an import authorisation regime which was extended till December 31, 2024, according to a policy circular issued in September.
The government will issue fresh guidelines in 2025 and brands will have to seek fresh authorisations. “They (global PC brands) see comfort in the existing supply chains being so good. Because establishing a new supply chain is definitely a herculean task.
When you are making volumes in millions, a small aberration can lead to a supply chain recall. It’s a dangerous game,” Gujral said. He added that bigger companies in India have an advantage in this business as making laptops is a Rs 3000-4000 crore business, similar to a mid-sized company’s turnover.
Smaller companies under the scheme see tying up large scale brands as crucial to succeeding under the scheme. But the IT hardware industry, dominated by only 4-5 brands driving high volumes, is projected to remain stagnant with single-digit growth globally by market trackers. “The challenge here is if you tie up Tier 2 or Tier 3 vendors, their volumes could be very erratic, and then you would be lumped with inventories,” Gujral said.
He added that Syrma will give guidance in the next fiscal on whether IT hardware will contribute significantly as a revenue channel. The company currently makes motherboards and memory modules of notebooks in small volumes. To be eligible for sops, global IT hardware companies (HP, Dell, Flextronics) will have to invest Rs 500 over six years, and clock incremental production of Rs 1,000 crore in the first year.
Companies under the hybrid category (Dixon) have an investment threshold of Rs 250 crore over six years and Rs 500 crore incremental production, while domestic category companies will have to invest Rs 20 crore over six years and undertake Rs 50 crore worth of incremental production to be eligible for incentives. By Subhrojit Mallick , ET Bureau Published On Nov 11, 2024 at 07:56 AM IST Telegram Facebook Copy Link Be the first one to comment. Comment Now COMMENTS Comment Now Read Comment (1) All Comments By commenting, you agree to the Prohibited Content Policy Post By commenting, you agree to the Prohibited Content Policy Post Find this Comment Offensive? Choose your reason below and click on the submit button.
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