Asus, Dell, others apply for manufacturing laptops in India: What the Production Linked Incentive scheme is

The development comes weeks after the Centre imposed – and then postponed – a licensing requirement on the import of laptops and personal computers, which had set alarm bells ringing at major electronics hardware manufacturers. The move was deferred until October 31.

What is the PLI scheme for IT hardware?

The Centre had more than doubled the IT Hardware PLI in May this year to Rs 17,000 crore since it was first cleared in 2021 with an outlay of Rs 7,350 crore. The first version of the scheme was a laggard with only two companies – Dell and Bhagwati – managing to meet first year (FY22) targets, and the industry calling for a renewed scheme with an increased budgetary outlay.

The average incentive over six years will be about 5 per cent of net incremental sales compared with the 2 per cent over four years offered earlier. Companies that locally manufacture certain components including memory modules, solid state drives and display panels will also get additional incentives under the restructured scheme. There will be flexibility in choosing the base year as well. Officials said the total benefits – given the sales projections by companies – could add up to PLI of Rs 22,880 crore.

The IT hardware manufacturing drive also seeks to penalise companies if production lags behind the set thresholds, by deducting as much as 10 per cent from the subsidies.

IT Minister Ashwini Vaishnaw said that the scheme will interplay with the semiconductor scheme of the government, with chips made in India, by the likes of Micron Technology potentially being used by laptop manufacturers. Sourcing local components has an added incentive under the scheme.

Why is local production crucial for India?

Even as the country has identified electronics manufacturing as a key sector for future economic growth, 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.

Which companies have applied?

Apart from Asus, Dell, HP and Foxconn, other companies that have applied for the scheme include Lenovo, Acer, and Flex, which is said to be manufacturing Reliance’s JioBook laptop. HP Enterprises (HPE) has also applied for manufacturing servers in India.

It is worth noting that at this stage, these are just applications, and not all companies might win approvals from the Centre.

While the expected incremental production at the end of six years of the scheme is estimated at Rs 3.35 lakh crore, it could bring an incremental investment of just Rs 4,000 crore over these many years. The government estimates the manufacturing process to result in 75,000 direct jobs, said Union Minister for Electronics and IT Ashwini Vaishnaw.

Dell, which was the only big brand to participate in the earlier iteration of the scheme, is understood to migrate to the new scheme. However, the government needs to pay the company close to Rs 50 crore for its production under the first scheme, which is said to be under approval currently.

Did the import restriction on laptops play a role in the uptick in PLI applications?

A day after the import restriction was imposed, two senior officials from the IT Ministry had said as of August 4, only two companies had applied to participate in the IT hardware PLI which was renewed in May this year, with 44 companies having registered with an intent to apply. The number of applicants jumped by another 36 after 26 days, taking the total to 38. The deadline for application was August 30.

The Indian Express had earlier reported about the chaos that ensued at some of the biggest tech companies following the import restriction notification by the Director General of Foreign Trade (DGFT), with companies like Apple and Samsung freezing their imports until more clarity was available. Some manufacturers also had their consignments held at customs due to the immediate nature of the directive.

Earlier this month, industry associations representing companies like Apple, Dell and HP, had written to the US government decrying New Delhi’s decision, and seeking its intervention to initiate a conversation with the Indian government and urge New Delhi to reconsider the policy.