Other BriefingsPLI 2.0 for IT Hardware in India: Application Window Opens June 1
The Ministry of Electronics and Information Technology has launched a new phase of incentives for India’s IT hardware sector, aiming to expand the success achieved in mobile manufacturing to other advanced technology segments. The application window opens June 1, 2023. Foreign companies seeking to diversify their manufacturing operations in Asia should explore these incentive programs and government support.
IT Hardware PLI Scheme 2.0
India approved the Production Linked Incentive (PLI) Scheme 2.0 for IT Hardware on May 17. The PLI scheme for this second phase has a budget of INR 170 billion (US$2.05 billion) spread over a tenure of six years and aims to boost electronics manufacturing in India. (US$1=INR 82.72.)
On May 29, the scheme was officially notified in the Gazette by the Ministry of Electronics and Information Technology (MeitY) – see here. The Scheme Guidelines from the MeitY are currently awaited.
The IT PLI scheme 2.0 covers laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices. It is expected to generate INR 3.35 trillion (US$40.48 billion) in incremental production, INR 24.3 billion (US$293.64 million) in incremental investment, and create 75,000 jobs over the scheme’s six-year implementation period.
The Cabinet has approved the revised version of the scheme based on industry feedback, according to Union Minister for Communications, Electronics and Information Technology Ashwini Vaishnaw.
Vaishnaw said that the changes include an increased incentive rate of 5 percent and the introduction of an additional optional incentive for using domestically produced components. However, he did not clarify the specific rates of these optional incentives, only speculating that if utilized as intended, the total incentive could reach 8-9 percent. More details are now awaited.
A comprehensive plan has been approved today [May 17, 2023]. The IT hardware [industry] has a very complex atmosphere…[The government intends] to bring IT firms to India, localize and incentivize them, [so they] work for the growth of the Indian companies to increase their capacities and capabilities so that in future Indian brands can be developed by a combination of design and manufacturing. – Union Minister for Communications, Electronics and Information Technology Ashwini Vaishnaw
Implementation of the PLI 2.0 scheme
Companies, both global and domestic, that meet the eligibility criteria specified in the PLI 2.0 Scheme guidelines will receive support for manufacturing goods in India within the specified target segment.
The classification of applicants into the Hybrid (Global/Domestic) category will be determined by whether the company is domestic or global. A comprehensive ranking of all applicants will be maintained based on the eligibility criteria outlined in the scheme guidelines. Subsequently, the selection of applicants in each category—global, hybrid, and domestic—will be based on their ranking and overall PLI projection, subject to the availability of the budget.
Application window
The window of applications under the PLI Scheme 2.0 for IT Hardware will open from June 1, 2023. The initial application period for the Production Linked Incentive Scheme – 2.0 for IT Hardware will be 45 days, with the possibility of an extension.
Additionally, the scheme may be reopened for applications at any time during its duration based on the industry’s response. For applications received after the initial application period, the applicants will be eligible for incentives for the remaining period of the scheme, which will conclude on March 31, 2031.
Tenure of incentives
The incentives provided under the PLI 2.0 Scheme will be applicable for a period of 6 years, starting from either July 1, 2023, April 1, 2024, or April 1, 2025. The specific start date will depend on the choice made by the applicants to commit incremental investment and incremental sales under the scheme.
Base year
For the calculation of net incremental sales of manufactured goods, the base year will be the financial year 2022-23. However, if an applicant chooses to participate starting from April 1, 2024, or April 1, 2025, then the base year for the computation of net incremental sales will be FY 2023-24 and FY 2024-25, respectively. Nevertheless, when considering the qualification criteria, FY 2021-22 will be taken into account regardless of the participation year.
Incentives payout
The incentive granted to each company will be based on the net incremental sales of manufactured goods in the target segment, compared to the base year. The maximum incentive amounts will be capped at INR 45 billion for global companies, INR 22.50 billion for hybrid (global/domestic) companies, and INR 5 billion for domestic companies.
Eligibility threshold criteria
|
Category |
Incremental investment after March 31, 2023 |
Incremental sales of manufactured goods over base year |
|
Global IT hardware companies |
INR 5 billion over 6 years (cumulative minimum):
|
|
|
||
|
Hybrid (global/domestic) companies |
INR 2.5 billion over 6 years (cumulative minimum):
|
|
|
||
|
Domestic companies |
Cumulative minimum:
|
|
|
Items targeted for localization
|
Items for Localization – IT Hardware PLI 2.0 Scheme |
||
|
S. No. |
Components / sub-assemblies |
% incentive |
|
1. |
Assembly of IT Hardware – Laptop / Tablets/ AIOs (Year-1/Year-2/Year-3/ Year 4/Year 5/Year 6)) |
3/2/1/1/1/0 |
|
2. |
Assembly of IT Hardware – Server / USFF (Year-1/Year-2/Year-3/Year 4/Year 5/Year 6) |
3/2/2/1/1/0 |
|
3. |
PCBA of IT Hardware (Target Segment) |
1.20 |
|
4. |
Add on Controllers assembled in India – (For Servers) |
0.41 |
|
5. |
Bare PCB |
0.57 |
|
6. |
Memory Modules assembled in India |
0.95 |
|
7. |
Memory Modules assembled in India – (For Servers) |
1.89 |
|
8. |
Solid State Drive (SSD) assembled in India |
0.95 |
|
9. |
Display panel – Assembled in India (Not for Servers/USFF) |
1.49 |
|
10. |
Power Adapter / SMPS |
0.41 |
|
11. |
Power Adapter / SMPS – (For Servers) |
0.54 |
|
12. |
Battery |
0.41 |
|
13. |
Cabinets / Chassis / Enclosures |
1.49 |
|
14. |
Memory Modules additional incentive for ATMP in India (over and above incentive for item 6) |
+0.25 |
|
15. |
Memory Modules additional incentive for ICs manufactured in India (over and above incentive for item 6) |
+0.25 |
|
16. |
Memory Modules additional incentive for ATMP in India (over and above incentive for item 7) (For Servers) |
+0.50 |
|
17. |
Memory Modules additional incentive for ICs manufactured in India (over and above incentive for item 7) – (For Servers) |
+0.50 |
|
18. |
Solid State Drive (SSD) additional incentive for ATMP in India (over and above incentive for item 8) |
+0.25 |
|
19. |
Solid State Drive (SSD) additional incentive for ICs manufactured in India (over and above incentive for item 8) |
+0.25 |
|
20. |
Display Panel – Additional incentive for ICs manufactured in India (over and above incentive for item 9) |
+0.60 |
|
21. |
System on Chip (SoC) Processors designed in India (IP ownership/Co-ownership in India) including but not limited to SHAKTI and VEGA (IC manufactured outside India) for Laptop, Tablet, AIO and Server/USFF) |
+3.24/3.78 |
|
22. |
System on Chip (SoC) Processors designed in India – Additional incentive for ATMP/ICs manufactured in India (over and above incentive for item 21) for Laptop, Tablet, AIO and Server/USFF) |
+1.49/1.62 |
Booming sector performance
The PLI Scheme for IT hardware follows the success of the PLI scheme for mobile phones, which has propelled India to become the world’s second-largest mobile phone manufacturer.
Further, in the telecom manufacturing sector, 42 companies invested INR 16 billion (US$193.34 million) in the first year of the PLI Scheme, surpassing the initial projection of INR 9 billion (US$108.75 million). Two of these companies are now major exporters in the world for complex radio equipment. (For a full list of approved applicants under the PLI Scheme for Telecom and Networking Products and the location of their investments, see our article here.)
Overall, India’s electronics manufacturing sector is attracting more global investments and is steadily building itself to become a significant player in the industrial supply chain. The focus is now expanding sales of homegrown devices to export markets; import substitution is no longer considered the primary objective.
Speaking to the media, Vaishnaw noted with optimism that global IT players like HP, Dell, Acer, and Asus have shown interest in India’s rapidly growing manufacturing ecosystem. India is also not averse to extending PLI incentives for local assembly by Chinese companies like Lenovo if they partner with an Indian electronics manufacturing services (EMS) enterprise.
Overall, the electronics manufacturing sector has witnessed consistent growth at 17 percent compound annual growth rate (CAGR) in the last eight years, crossing a major benchmark in production — US$105 billion this year.
Exports of mobile phones from India crossed US$11 billion in March. The country is now the second-largest mobile handset manufacturer, trailing only China, as per the government.
Through the central government’s production-linked incentives program, India hopes to supercharge its manufacturing ambitions.
Moreover, it must be noted that multiple states across India have demarcated additional incentives for manufacturing investors based on their scale of operations and localization efforts. These are over and above the central government’s schemes. Special economic zones and industrial zones have been also set up with the necessary facilities and connectivity infrastructure.
Foreign investors seeking to enter the Indian market should do their due diligence when assessing location and scope of incentives, available tax and industrial policies, as well as relevant labor regulation.
For more information on how India’s policy efforts are boosting the indigenous electronics manufacturing ecosystem, read our article here.
(This article was originally published May 19, 2023. It was last updated May 31, 2023.)
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