IT hardware manufacturing business could zoom 60-70% near term: Contract makers

Electronics contract manufacturers were enthused by the government move to impose import restrictions on laptops, tablets, all-in-one personal computers, ultra small form factor computers and servers with immediate effect, saying IT hardware manufacturing business can surge 60-70% in the near term.

But IT hardware brands, privately, said the move could hurt consumers due to supply issues.

An Indian contract manufacturer who has set up a laptop assembly unit but wasn’t getting orders is now hopeful that it will kickstart the operations.

Another senior executive at a contract manufacturer, who wished not to be named, said that the Directorate General of Foreign Trade (DGFT) notification can help the IT hardware manufacturing business zoom from an annual $7 billion currently to 60-70% in the short term, to even 90% in the next two years, similar to how TV assembly sprang with import substitution.

Thursday, DGFT said that exemption from import licensing is provided for up to 20 items per consignment for R&D, testing, benchmarking and evaluation, repair and return, product development purposes.

The move is expected to cut imports from countries like China.

“Import of laptops, tablets, all-in-one personal computers, and ultra small form factor computers, servers... is 'restricted' with immediate effect,” it said.

Products under restrictions need license or permission from the government.

Navkendar Singh, associate vice president, IDC India said that the objective of this move is to push local manufacturing.

“However, our ecosystem isn’t ready yet for an assembly of this magnitude. Vendors ship in close to 2 million notebooks every quarter with around 3/4th out of this imported. Also, the almost entire volume of premium notebooks are imported,” Singh said.

He added that the timing isn’t the best as the PC market has been struggling since the last 2-3 quarters and this will further dampen the market sentiment.

Pankaj Mohindroo, chairman, India Cellular and Electronics Association (ICEA) said that the policy announcement seems to be based on the premise of providing secure digital access to the burgeoning number of digital citizens in the country. "We are confident that valid licenses will be provided to trusted industry partners which will enable Ease of Doing Business (EoDB) and unrestricted access to trusted brands for digital consumers.”

Interestingly, the government on Monday extended the application date for the production-linked incentive (PLI) scheme for IT hardware for the second time on Monday, due to lack of applications within the deadline. Interested companies or applicants can now apply until August 30, 2023.

The centre notified the second phase of the production-linked incentive scheme for IT hardware with a budgetary outlay of Rs 17,000 crore, more than doubling the incentives in the initial version of the plan.

The scheme intends to attract global companies like Dell, HP, Apple, and Samsung to manufacture IT hardware such as laptops, tablets, all-in-one PCs, servers, and ultra small form factors in India. But no one has applied so far for the scheme.

The revised scheme was notified in the Gazette after the union cabinet approved it on May 17. The new scheme will extend an average incentive of around 5%, more than double the 2% incentive offered in the previous version.

The revised scheme added flexibilities in both tenure and investments for participants. While the tenure of the scheme is for six years, participants can choose 2023, 2024, or 2025 as the base year for investment and calculating incremental sales.