The recent notification by the Ministry of Commerce and Industry that imposed restrictions on the import of laptops, tablets, all-in-one personal computers, and ultra-small form factor computers, can help India become an IT hardware manufacturing hub. Just months ahead of imposing the restriction, the government had introduced the Production Linked Incentive Scheme 2.0 (PLI 2.0) for IT hardware manufacturing in India. Currently, brands like HP, Dell, Acer, and Lenovo are manufacturing some laptops and computing devices in India. However, barely 30% of the country’s consumption is assembled in India.
"The market size of laptops and tablets in India is estimated at $6 billion in 2023, which would grow to $8.4 billion by 2028, at a CAGR of 7%. Of this, only about 30% is assembled in India. The remaining 70% is imported, especially from China," says Kathir Thandavarayan, Partner, Consulting, Deloitte India.
Karthir adds that in the laptop category, 30–32% of the domestic demand is assembled in India. The top three manufacturers together account for 70% of the market. The market is dominated by low- and medium-priced portfolios that is primarily manufactured in India. Like laptops, 30% of domestic tablet demand is assembled in India. The demand for tablets is highest in the low-price category that are manufactured within the country.
China continues to dominate electronics manufacturing. But with the various PLI schemes, India aims to emerge as a successful alternative to China. In addition, electronics manufacturing can play a significant role in driving economic growth and development in India regarding skill development and the creation of jobs, foreign direct investments, export opportunities, and more. The recently announced PLI 2.0 scheme for IT hardware exhibits the commitment of the government of India to boosting domestic manufacturing.
Col. Suhail Zaidi (Retd), Director General, Manufacturers’ Association for Information Technology (MAIT), the apex body representing the ICT and electronics manufacturing sectors in India, explains, "Earlier, the outlay of PLI 1.0 was Rs 7,350 crore which has been increased to Rs 17,000 crore. Secondly, there are additional incentives for each component localization, which means that for each component localisation, a certain percentage is added to the base percentage. Additionally, the government of India has made sure that all outlay is fully utilised by having a clause where underperformers’ incentives shall be given to overperformers based on a rating system."
When it comes to the manufacturing ecosystem, India has a cost disadvantage (cost of production in India) vis-a-vis competition such as China, Vietnam, and Malaysia. Adding to this is the lack of component ecosystems, which is emerging as yet another big challenge. Zaidi believes that another PLI for components/sub-assemblies can help address this challenge.
However, from the capabilities point of view for manufacturing IT hardware in India, Faisal Kawoosa, founder and Chief Analyst at Techarc says, manufacturing in India can be conducive. "Among all these (electronics manufacturing), smartphone manufacturing is the most complex of all. As we are assembling phones in India, we can manufacture other hardware as well." However, he raises a valid question. "Do we have enough of a market domestically to justify manufacturing from a business standpoint? That is where PLI becomes instrumental, as that literally makes the entire world market for anyone wanting to manufacture in India."
Queries sent to Apple, HP, Lenovo, and Dell did not elicit any response. However, Xiaomi India, which is currently not manufacturing laptops in India, said, "We have been facilitating local manufacturing in India since 2015 with our partners based on cost-effectiveness considerations. Presently both our smartphones and smart TVs are 100% locally manufactured, and recently, we have also commissioned our OEM partners to manufacture our audio and AIoT products locally. We believe that these products will bring enhanced product experiences to our users. Our aim is to increase our domestic value addition by 50% within the next two years, and we will make announcements around these plans in due course."
Given the rising demand for electronics including IT hardware in the country, India has a significant potential to emerge as the preferred location for manufacturing laptops and tablets for not just domestic consumption but export as well.