Smartphone success for Indian incentive scheme

Smartphone success for Indian incentive scheme

We reported last week that incentives to encourage local production of electronics in India were encountering problems attracting major names from the telecommunications network equipment business. Smartphone makers, by contrast, seem a lot more enthusiastic.

According to Bloomberg and Indian press reports, more than two dozen companies have so far pledged $1.5 billion in investments to set up mobile phone factories in India.

The incentives involved make electronics manufacturers eligible for a payment of four to six percent of their incremental sales over the next five years. Samsung, Foxconn (which is an assembly partner of Apple), Wistron Corp and Pegatron Corp have all shown interest.

Companies certainly want more diversified supply chains but, for the moment, Vietnam, Cambodia, Myanmar, Bangladesh and Thailand are said to be top of most lists. If India can establish itself as one of the most investment-friendly areas in which to set up shop, especially given the ongoing issues between the US and China, there could be a big boost in local electronics production.

The government expects that the programme for electronics alone, if successful, could lead to $153 billion worth of locally manufactured goods over the next five years and could create about one million jobs directly and indirectly.

A similar production-linked incentive scheme to encourage local production of telecommunications network equipment has reportedly been less popular with major names, possibly due to upfront investment requirements and uncertainty about the potential of 5G in India.

India has also extended similar incentives to pharmaceutical businesses and plans to cover more sectors.

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