Latest news with #PLI-eligible
Economic Times
5 days ago
- Business
- Economic Times
Bracing for pressure: Phonemakers dread the day govt pulls plug on PLI
Agencies Representative Image New Delhi: With the production-linked incentive (PLI) scheme for mobile phone manufacturing ending next year and the government remaining non-committal on extending it, Indian contract manufacturers are bracing for pressure on operating income and executives and experts said the end of the scheme is also expected to increase competition, as the PLI beneficiaries will lose the advantage they have from passing on some of the incentives to customers."The million-dollar question for the industry is 'what's remaining' if these incentives go away? The scheme has been critical in allowing manufacturers to offset higher manufacturing costs by passing incentives back to customers," the chief executive of an Indian contract manufacturer said, asking not to be the scheme ends, quality and workmanship will become crucial in becoming dominant in the industry, the CEO said, adding that the industry is expected to see more consolidation after FY26, with space for two-three more players controlling major volumes. Analysts forecast a fall in operating margins and increase in net working capital days for players such as Dixon Technologies, which has been one of the biggest beneficiaries of the scheme. PhillipCapital cut its fiscal 2027 estimates on Dixon - revenue by 4%, Ebitda by 6% and profit after tax by 9% - citing "higher competition in the mobile-phone assembly space"."Dixon shares its PLI benefits with its mobile phone clients, which is offset by favourable net working capital (NWC) terms. However, once its mobile phone PLI ends, we expect Dixon's NWC days to trend towards 35+ (in line with peers - Foxconn's were at 40+ for CY24), leading to a falling RoCE trajectory," the brokerage said. The PLI scheme for mobile phones, which has been a significant driver for making India the second largest manufacturer of handsets, is set to conclude in FY26. Eligible manufacturers receive 4-5% direct incentive on incremental production, which helps offset the cost-disability they had against global peers. In an earnings call, Dixon managing director Atul Lall said PLI incentives add 0.6-0.7% to its mobile phone manufacturing margins, reported at 3.5% in FY25. A significant portion of the PLI incentive (around 3.4% out of the 4-5%) is passed down directly to customers to offer competitive costs and deter competition. The contract manufacturer expects to offset the margin loss with more backward integration of components and improving operational efficiencies. It has also signed strategic joint ventures with some of its customers, ensuring a long-term the scheme ending, the advantage PLI-eligible players had in commanding lower prices for customers will go away, experts said."There is a doubt whether a significant competitive moat will exist for Indian companies in this business once the PLI subsidy ends. Companies like DBG Group, which is Chinese-owned and operates in India, have demonstrated the ability to compete even without the PLI benefit due to their high yields and operational efficiency," an industry analyst told added that DBG operates at lower margins (3-3.2%) compared to Indian players benefiting from PLI. Once the market returns to organic margins after the PLI scheme concludes, analysts expect Chinese players will gain market manufacturers, on their part, have been asking for an extension of the scheme."It is in the government's interest to extend the current scheme or introduce a 'PLI 2.0', though there is no certainty that this will happen," the CEO cited earlier officials said the renewal of the mobile phone PLI is still under discussion."We are discussing with the industry what are their further requirements and how to support them," an official said. "The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence."
Time of India
13-07-2025
- Business
- Time of India
Bracing for pressure: Phonemakers dread the day govt pulls plug on PLI
New Delhi: With the production-linked incentive (PLI) scheme for mobile phone manufacturing ending next year and the government remaining non-committal on extending it, Indian contract manufacturers are bracing for pressure on operating income and margins. Industry executives and experts said the end of the scheme is also expected to increase competition, as the PLI beneficiaries will lose the advantage they have from passing on some of the incentives to customers. "The million-dollar question for the industry is 'what's remaining' if these incentives go away? The scheme has been critical in allowing manufacturers to offset higher manufacturing costs by passing incentives back to customers," the chief executive of an Indian contract manufacturer said, asking not to be named. After the scheme ends, quality and workmanship will become crucial in becoming dominant in the industry, the CEO said, adding that the industry is expected to see more consolidation after FY26, with space for two-three more players controlling major volumes. Analysts forecast a fall in operating margins and increase in net working capital days for players such as Dixon Technologies , which has been one of the biggest beneficiaries of the scheme. Live Events PhillipCapital cut its fiscal 2027 estimates on Dixon - revenue by 4%, Ebitda by 6% and profit after tax by 9% - citing "higher competition in the mobile-phone assembly space". "Dixon shares its PLI benefits with its mobile phone clients, which is offset by favourable net working capital (NWC) terms. However, once its mobile phone PLI ends, we expect Dixon's NWC days to trend towards 35+ (in line with peers - Foxconn's were at 40+ for CY24), leading to a falling RoCE trajectory," the brokerage said. The PLI scheme for mobile phones, which has been a significant driver for making India the second largest manufacturer of handsets, is set to conclude in FY26. Eligible manufacturers receive 4-5% direct incentive on incremental production, which helps offset the cost-disability they had against global peers. In an earnings call, Dixon managing director Atul Lall said PLI incentives add 0.6-0.7% to its mobile phone manufacturing margins , reported at 3.5% in FY25. A significant portion of the PLI incentive (around 3.4% out of the 4-5%) is passed down directly to customers to offer competitive costs and deter competition. The contract manufacturer expects to offset the margin loss with more backward integration of components and improving operational efficiencies. It has also signed strategic joint ventures with some of its customers, ensuring a long-term commitment. With the scheme ending, the advantage PLI-eligible players had in commanding lower prices for customers will go away, experts said. "There is a doubt whether a significant competitive moat will exist for Indian companies in this business once the PLI subsidy ends. Companies like DBG Group, which is Chinese-owned and operates in India, have demonstrated the ability to compete even without the PLI benefit due to their high yields and operational efficiency," an industry analyst told ET. He added that DBG operates at lower margins (3-3.2%) compared to Indian players benefiting from PLI. Once the market returns to organic margins after the PLI scheme concludes, analysts expect Chinese players will gain market share. Contract manufacturers, on their part, have been asking for an extension of the scheme. "It is in the government's interest to extend the current scheme or introduce a 'PLI 2.0', though there is no certainty that this will happen," the CEO cited earlier said. Government officials said the renewal of the mobile phone PLI is still under discussion. "We are discussing with the industry what are their further requirements and how to support them," an official said. "The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence."
Time of India
01-07-2025
- Business
- Time of India
‘Make in India' success: Chinese smartphone brands bet on India for manufacturing & exports; Indian phonemakers compete for assembly
The Indian smartphone sector remains at around 150-160 million units yearly. (AI image) Chinese brands look to ' Make in India ': Indian contract manufacturers are intensely competing in large-scale smartphone assembly, aiming to secure additional orders from Chinese brands that seek to broaden their manufacturing presence in India amidst shifting global dynamics. Chinese brands, experiencing growth and starting exports from India, are broadening their supply chain networks to maintain cost advantages rather than depending on a single Indian supplier as the smartphone production-linked incentive (PLI) scheme approaches its end. Motorola, owned by Lenovo and previously relying exclusively on Dixon Technologies, has begun allocating some production to Dixon's competitor Karbonn, another PLI-eligible manufacturer. Motorola remains Dixon's primary customer, with projected volumes of 12 million units in FY25, according to an ET report. Chinese smartphone brands grow volumes in India The Indian smartphone sector remains at around 150-160 million units yearly. Industry observers note that increasing competition could restrict local companies' expansion, with Dixon particularly vulnerable to losing production volumes to competitors. The available market for contract manufacturers stands at 80-90 million units annually, excluding Apple and Samsung's independent supply chains in India. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Adidas Three Shorts With 60% Discount, Limited Stock Available Original Adidas Shop Now Undo This volume is anticipated to be distributed amongst three to four major manufacturers in the future. Incoming call Initially, Dixon was the sole Indian firm claiming PLI benefits, as others struggled to secure clients. However, recent years have seen firms like Karbonn, Micromax, and Lava becoming PLI beneficiaries. These organisations could potentially claim government incentives alongside Dixon upon achieving specified targets. Also Read | Not just Apple iPhones! Android smartphone makers like Samsung, Motorola step up exports from India to US; move due to Trump's tariff policies Longcheer, Dixon's second-largest client and a Chinese ODM (Original Design Manufacturer), which contributes 7 million units to Dixon's FY25 production, has begun shifting approximately 2% of its volume from Dixon to Karbonn since May, aligning with its Indian expansion strategy. In a June 24 report, Phillip Capital indicated that Karbonn's handling of Motorola's production volume increased significantly from 5% in January-February to 25% in April-May. The shift in Motorola's supply chain corresponds with increased sales and exports from India to the US, following the implementation of substantial tariffs on China by the Donald Trump administration. An industry analyst informed ET that Motorola's monthly operations have grown from Rs 2,400 crore, previously managed entirely by Dixon, to Rs 3,000 crore, with the additional Rs 600 crore being assigned to Karbonn. Longcheer is also strengthening its Indian operations to safeguard against potential restrictions on Chinese exports. According to the aforementioned analyst, Longcheer's production in India could swiftly rise to at least 15% of its total volume, as there was no exclusive arrangement with Dixon. Also Read | Reducing acute dependence, countering China's near monopoly: India readies Rs 5,000 crore scheme for rare earth minerals Dixon's market share faces competition from Bhagwati Products Ltd (Micromax), which has established a joint venture with Chinese ODM Huaqin. This partnership affects Dixon's potential revenue from its strategic Vivo manufacturing facility in India, according to Phillip Capital's analysis. "(Dixon's) Management expects the JV to handle two-thirds of Vivo India's mobile phone volumes. Assuming a proportional volume-to-value ratio conversion, the JV would generate a topline of Rs 160bn at optimal utilisation, of which Dixon's share would be Rs 80bn," the report said. The Bhagwati-Huaqin collaboration has achieved production levels of 1.6 million smartphones monthly, with operations commencing in the second half of 2024. "Bhagwati is one of the fastest-growing EMS players in India. They are projected to close June at 1.6 million units per month, and are aiming for more market share. This rapid ramp-up has occurred within a year, primarily from Oppo and Vivo under the partnership with Huaqin," an industry executive familiar with the situation was quoted as saying. Also Read | Advantage India! As West moves away from China & Bangladesh, India's apparel exports see big growth; $120 billion US market biggest opportunity Longcheer produces handsets for Vivo and Realme via Dixon, and Vivo and Oppo through Karbonn. Meanwhile, Huaqin collaborates with Bhagwati for Vivo and Oppo devices, whilst partnering with DBG for Xiaomi production, according to the analyst. "I foresee the market having space for at least 3-4 players in the coming years, instead of just one as the ecosystem grows. The volumes will be commanded by players which can offer the desired quality of service. Cost comes secondary," one of the executives said. Dixon leads in Android device production volumes, whilst Foxconn and Tata Electronics produce iPhones for Apple, which is experiencing rapid growth. Apple's iPhone production reached ₹1.48 lakh crore ($17.5 billion) in 2024, showing a nearly 46% increase. Apple's supplier network is projected to achieve $30 billion in yearly production in India by year-end. 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Mint
25-06-2025
- Business
- Mint
PLI Schemes attract ₹1.76 trillion, create 12 lakh jobs: Govt
New Delhi: The government's Production Linked Incentive (PLI) schemes have catalyzed a manufacturing surge across critical sectors, drawing investments worth ₹ 1.76 trillion and generating sales of over ₹ 16.5 trillion, the Ministry of Commerce & Industry said in a statement on Wednesday. The schemes, spread across 14 strategic sectors, have collectively created over 1.2 million jobs as of March 2025, it said. So far, the Centre has disbursed ₹ 21,534 crore in incentives across 12 sectors, including electronics, IT hardware, pharmaceuticals, telecom, food processing, white goods, auto components, speciality steel, textiles, and drones. "The impact of PLI schemes has been significant across various sectors in India," the ministry said. "These schemes have incentivized domestic manufacturing, leading to increased production, job creation and a boost in exports," it added. Commerce and industry minister Piyush Goyal, who chaired a high-level review meeting on Wednesday, said India must prioritize sectors where it holds a natural competitive edge and work to resolve challenges faced by stakeholders to sustain export growth. "Emphasizing that the ministries should focus on creating quality skilled manpower instead of focusing on the quantity and resolve infrastructure bottlenecks... Goyal stressed preparing a roadmap for the next five years both on investment and disbursement," the ministry added. The pharmaceuticals sector has emerged as a standout performer, clocking cumulative sales of ₹ 2.66 trillion, including exports worth ₹ 1.70 trillion in the first three years of the scheme. In FY25 alone, PLI-eligible products contributed ₹ 67,000 crore, around 27% of India's total pharma exports, the ministry said. Notably, 40% of the sector's PLI-linked investments, ₹ 15,102 crore, have gone into research and development, pushing domestic value addition to 83.7%. In bulk drugs, the PLI scheme has reversed India's trade position from a net importer in FY22 ( ₹ -1,930 crore) to a net exporter ( ₹ 2,280 crore), while narrowing the domestic demand-supply gap in critical drug components, it added. In the food processing sector, the scheme has attracted ₹ 9,032 crore in investments, resulting in sales of ₹ 3.8 trillion and employment for over 340,000 people, the commerce ministry said. By mandating the use of locally grown agri-produce (excluding additives and oils), the scheme has deepened rural supply chains and improved farmer incomes. The ministry said that micro, small, and medium enterprises (MSMEs) have been a key pillar as 70 MSMEs have been direct PLI beneficiaries, while 40 more are operating as contract manufacturers, spurring innovation, expanding market access, and supporting the value chain. Value-added marine products grew at a compound annual growth rate of 22% under the scheme and millet-based product sales skyrocketed 25 times in FY25 compared with the base year (FY21). Millet procurement rose from 4,081 million tonnes in FY23 to 16,130mt in FY25, contributing to rural income growth, the commerce ministry added. The textiles sector has also recorded healthy export growth, with exports of man-made fibre (MMF) textiles touching $6 billion in FY25, up from $5.7 billion the previous year.
Mint
25-06-2025
- Business
- Mint
PLI Schemes attract ₹1.76 trillion, create 12 lakh jobs: Govt
New Delhi: The government's Production Linked Incentive (PLI) schemes have catalyzed a manufacturing surge across critical sectors, drawing investments worth ₹ 1.76 trillion and generating sales of over ₹ 16.5 trillion, the Ministry of Commerce & Industry said in a statement on Wednesday. The schemes, spread across 14 strategic sectors, have collectively created over 1.2 million jobs as of March 2025, it said. So far, the Centre has disbursed ₹ 21,534 crore in incentives across 12 sectors, including electronics, IT hardware, pharmaceuticals, telecom, food processing, white goods, auto components, speciality steel, textiles, and drones. "The impact of PLI schemes has been significant across various sectors in India," the ministry said. "These schemes have incentivized domestic manufacturing, leading to increased production, job creation and a boost in exports," it added. Commerce and industry minister Piyush Goyal, who chaired a high-level review meeting on Wednesday, said India must prioritize sectors where it holds a natural competitive edge and work to resolve challenges faced by stakeholders to sustain export growth. "Emphasizing that the ministries should focus on creating quality skilled manpower instead of focusing on the quantity and resolve infrastructure bottlenecks... Goyal stressed preparing a roadmap for the next five years both on investment and disbursement," the ministry added. The pharmaceuticals sector has emerged as a standout performer, clocking cumulative sales of ₹ 2.66 trillion, including exports worth ₹ 1.70 trillion in the first three years of the scheme. In FY25 alone, PLI-eligible products contributed ₹ 67,000 crore, around 27% of India's total pharma exports, the ministry said. Notably, 40% of the sector's PLI-linked investments, ₹ 15,102 crore, have gone into research and development, pushing domestic value addition to 83.7%. In bulk drugs, the PLI scheme has reversed India's trade position from a net importer in FY22 ( ₹ -1,930 crore) to a net exporter ( ₹ 2,280 crore), while narrowing the domestic demand-supply gap in critical drug components, it added. In the food processing sector, the scheme has attracted ₹ 9,032 crore in investments, resulting in sales of ₹ 3.8 trillion and employment for over 340,000 people, the commerce ministry said. By mandating the use of locally grown agri-produce (excluding additives and oils), the scheme has deepened rural supply chains and improved farmer incomes. The ministry said that micro, small, and medium enterprises (MSMEs) have been a key pillar as 70 MSMEs have been direct PLI beneficiaries, while 40 more are operating as contract manufacturers, spurring innovation, expanding market access, and supporting the value chain. Value-added marine products grew at a compound annual growth rate of 22% under the scheme and millet-based product sales skyrocketed 25 times in FY25 compared with the base year (FY21). Millet procurement rose from 4,081 million tonnes in FY23 to 16,130mt in FY25, contributing to rural income growth, the commerce ministry added. The textiles sector has also recorded healthy export growth, with exports of man-made fibre (MMF) textiles touching $6 billion in FY25, up from $5.7 billion the previous year. Technical textile exports rose to $3.36 billion in FY25, compared to $2.99 billion in FY24, it added.
