Smartphone makers seek 30% incentive for component manufacturing in India

The opportunity cost of starting a component manufacturing facility is the loss of revenue of around 5-9 months in the best case scenario and at worst, almost 2 years, the report said

The incentive under M-SIPS for smartphone players should be raised to 30 per cent of the capital expenditure to help offset the loss of revenue faced by companies when they move a component manufacturing facility to India, industry body IAMAI said on Thursday.

The opportunity cost of starting a component manufacturing facility is the loss of revenue of around 5-9 months in the best case scenario and at worst, almost 2 years, the report said.

It added that if a global player decides to manufacture in India, the entity will lose revenue of at least 2-3 quarters against the better alternative of setting up or continuing in China or Vietnam.

The report, titled ‘Modified Special Incentive Package Scheme (M-SIPS) 2.0’, suggested that the M-SIPS incentive be raised to 30 per cent from 25 per cent of the capital expenditure to offset this loss of revenue.

IAMAI also recommended that the Ministry of Electronics and Information Technology should develop and launch a special purpose vehicle to quickly evaluate, assess and disburse the special incentive scheme M-SIPS 2.0.

In the medium term, India needs to work on developing its transport and logistics infrastructure, introduce labour reforms, provide focussed skill training and streamline processes to ensure enhanced ease of doing business, IAMAI said.

The Internet and Mobile Association of India (IAMAI) said M-SIPS 1.0 had attracted foreign investments into mobile manufacturing, albeit into the low value-additive processes.

There is a need for a paradigm shift to increase the Indian ownership of the value chain by strategically targeting the highest value-additive portions of components manufacturing, inviting high technology driven investment to India, it added.

India needs to focus on components that have potential of high value addition, can be commonly used across the electronic manufacturing sector and are the lowest hanging fruit in the current mobile manufacturing ecosystem, IAMAI said.

Manufacturing of printed circuit boards, plastic mouldings and display modules fit these three key factors, it added.

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