Why Google producing its Chromebook laptops in India is significant

India recently closed the window to apply for its Rs 17,000 crore production linked incentive (PLI) scheme for IT hardware such as laptops, personal computers and servers and has initiated the process to check imports from China after a failed bid to licence such gadgets.

The significance of Google’s decision to shift manufacturing to India

The Chromebooks — laptops that run on Google’s Chrome operating system — will be manufactured at the Flex facility near Chennai, where HP has been producing a range of laptops and desktops since August 2020. The production has started from October 2 and will cater to the demand for affordable PCs in India, mainly from the education sector.

Chromebooks are among the most popular laptops used in educational institutions worldwide, but are yet to find mainstream traction in India, where laptops running on the Windows operating system continue to rule the roost.

The move will help Google compete more effectively with Windows computers from companies such as Dell, Lenovo, and Asus.

“Manufacturing Chromebook laptops in India will allow Indian students to get easy access to affordable PCs. By further expanding our manufacturing operations, we continue to support the Make in India initiative of the government,” said Vickram Bedi, senior director of personal systems at HP India.

India positions itself as a China alternative

The development is in line with India’s ambition to establish itself as a “trusted partner” in global supply chains, especially at a time when companies, especially from America, are looking to diversify from China – the traditional hub of such manufacturing for decades.

While India has a big domestic demand for laptops and computers, almost all of it is currently being fulfilled by imports from China, something New Delhi wants to change as soon as possible.

India has seen an increase in imports of electronic goods and laptops/computers in the last few years. During April-June this year, the import of electronic goods increased to $6.96 billion from $4.73 billion in the year-ago period, with a share of 4-7 per cent in overall imports.

The highest share of imports is in the category of personal computers, including laptops and palmtops, under which imports from China stood at $558.36 million in April-May this year as against $618.26 million in the year-ago period. China accounts for roughly 70-80 per cent of the share of India’s imports of personal computers, laptops.

As the window for the Centre’s production-linked incentive (PLI) scheme closed in August, over 40 companies — including Dell, HP, Asus, Acer and Lenovo — applied to participate in the programme to manufacture laptops, computers and servers in India. Apple has opted to skip it. The government is expected to clear applications of around 30 companies soon, a majority of whom will start production from next April, it is understood.

Beyond manufacturing

Even as India has turned towards incentives to kickstart a manufacturing industry that has traditionally not existed in the country in a meaningful way, it has also adopted policy changes to discourage imports from China.

In August, the government had attempted to impose a licensing requirement on the import of laptops and computers, but was forced to delay the directive’s implementation till October 31 after strong pushback from the industry.

With that attempt thwarted, it has now introduced the so-called ‘import management system’ through which it will require companies to register and disclose data related to their imports, countries from which they import electronic hardware like laptops and personal computers, and domestic sales value.

Eventually, the government will also impose a condition on companies to reorient their supplies from “trusted sources”, a move squarely aimed at reducing import dependence on China.

While the quota system, as envisaged earlier, has for now been put on the backburner, it will be implemented in a staggered manner by means of a credit formula – the government will create a ratio between domestic production and imports, and depending on the former, will allow the latter.