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India approves multi-billion dollar incentives to attract smartphone manufacturers

(Image credit: Akshat Gupta/Unsplash)

India has strengthened its bid to become a major manufacturing hub for the smartphone industry with a multi-billion package of incentives to encourage greater production and investment in the country.

The $6.65 billion Production Linked Incentive (PLI) scheme promises approved vendors with cash rewards worth between 4% and 6% on sales of devices made in India over the next five years.

The government has approved sixteen companies for the scheme, including Samsung, Apple’s contract manufacturers Foxconn, Wistron and Pegatron, and several local manufacturers.

India smartphones

It is hoped the initiative will increase investment, create hundreds of thousands of jobs, and fulfil a long-standing government ambition of increasing exports as part of a wider economic strategy. The additional investment expected from Apple’s partners alone is believed to be worth $900 million.

India has become an increasingly popular choice for vendors in recent times, partly due to the large domestic market but also due to changing economic and political conditions elsewhere.

China had long been the predominant location for the industry, but concerns about an economic slowdown, rising labour costs and ongoing trade tensions with the US have seen many manufacturers look for alternatives. This list includes not just India but also Thailand and Vietnam.

Samsung and Sony have closed down their final factories in China, while Apple – which has long relied on China for the rapid assembly of its devices and the manufacturing of components – is also looking to diversify its supply chain for the same reasons.

It is thought that between 15 and 30 per cent of activities could be moved to other countries, with India, Indonesia, Malaysia, and Mexico among the candidates. However, it would take several years to move even a portion of production away from China given the complex ecosystem that has been established there.