electronics manufacturing: Government targets 80% local value addition in IT gear in 5-10 years

The government has started discussing ways in which global electronics and IT hardware companies can increase the local value addition in products that are assembled in India to 60-80% in the next five-ten years, people aware of the development told ET.

A primary request of the government is that industries operating in India look to implement new production techniques, such as surface-mount technology (SMT) lines, to step up the local value-addition percentage, one of the people said.

“So, for example, in the IT hardware production-linked incentive (PLI) scheme, the government wants the industry to go beyond the assembly of components. Their ask is to make the printed circuit boards (PCBs) locally. If we make the motherboard here, that will give a big boost to local value addition,” an industry executive who attended a meeting with officials of the Ministry of Electronics and Information Technology told ET.

Some other industry executives said the development of an ecosystem around electronics hardware manufacturing is still nascent in India and could take more than 24 months to develop fully.

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“Most laptop makers right now get the components in strips which need to be soldered on the circuit board. It is an automated process which needs SMT lines to be set up in India. The industry is now looking to start that,” said an executive.

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Some of the companies, which are applicants under the IT hardware PLI scheme, have already started the groundwork for manufacturing components like PCBs, people in the know said.

“The packaging, India-specific sockets, keycaps, panel covers and to an extent even the display is being made here. Brands have various levels of expertise in localising these components,” one of the people said.

As per the PLI scheme for IT hardware, applicant companies can avail of additional incentives based on the percentage of localisation that they do. For example, they can seek additional incentives if they source the PCB assembly locally during the first year of the scheme. From the second year, companies can add at least one component or sub-assembly every year to gain additional incentives.

Under the PLI scheme for IT hardware, the government expects incremental investments of Rs 2,430 crore with a potential to generate additional production worth Rs 3.35 lakh crore.

ET on August 14 reported that the government was open to the idea of giving foreign electronics manufacturing companies more time to set up domestic units provided they submitted a clear, detailed and graded roadmap of their make-in-India plans for specific products such as laptops, desktops and servers.

These companies have sought at least 12 months to do so, ET has reported.

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