PLI Scheme 2.0 for IT Hardware: Is India staging a comeback?

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PLI Scheme 2.0 for IT Hardware

The Production Linked Incentive (PLI) scheme is a government initiative to boost manufacturing in India. The scheme offers incentives to companies that invest in and produce goods in India. The PLI scheme has been allocated a budget of Rs 1.97 lakh crore. 

The scheme is focused on 13 sectors which include automobile, aviation, chemical, food processing, metals, pharmaceuticals, telecom, and others. The PLI scheme for IT hardware was announced in May 2023, with a budgetary outlay of Rs 22,880 crores from Rs 17,000 crore earlier. The scheme aims to boost domestic manufacturing of IT hardware, including laptops, tablets, all-in-one PCs, servers, and ultra-small form factors.

SectorProductsBudgetary OutlayMinistry
Auto ComponentsAutomobile and Auto ComponentsRs 25,938 croresMinistry of Heavy Industries and Public Enterprises
AviationDrones and Drone ComponentsRs 120 croresMinistry of Civil Aviation
ChemicalsAdvance Chemical Cell BatteriesRs 18,100 croresDepartment of Heavy Industry, Niti Aayog
Electronic SystemsMobile Phones, Specified Electronic Components, laptops, tablets, PCs, serversRs 40,951 cr in Large-scale electronics manufacturing & Rs 7,325 cr in IT HardwareMinistry of Information and Electronics Technology
Food ProcessingReady-to-eat, ready-to-cook, fruits, vegetables, marine products, and mozzarella cheeseRs 10,900 crMinistry of Food Processing Industries
Medical Devices-Rs 3420 croresDepartment of Pharmaceuticals
Metals and MiningCoated/plated steel products, electrical steel, alloy steel products, steel wires, specialty rails, high strength/wear resistant steelRs 6,322 croresMinistry of Steel
Pharmaceuticals-Rs 6,940 cr in Bulk Drugs and Rs 15,000 cr in pharmaceutical manufacturingDepartment of Pharmaceuticals
Renewable EnergySolar PVs, Polysilicon, wafer, cell, module,Rs 24,000 croresMinistry of New and Renewable Energy
TelecomCore Transmission Equipment, 4G/5G, Next Generation Radio Access Network and Wireless Equipment, Access and customer Premises Equipment, Internet of Things Access Devices & other wireless equipmentRs 12,195 croresDepartment of Telecommunications
Textiles and ApparelMan-made fiber segment and Technical TextilesRs 10,683 croresMinistry of Textiles
White GoodsAir Conditioners and LED LightsRs 6,238 croresDepartment for Promotion of Industry and Internal Trade

PLI Scheme 2.0 for IT Hardware: How will the PLI Scheme 2.0 Work?

The PLI scheme will provide an incentive of 5% on net incremental sales (over the base year) of goods manufactured in India and covered under the target segment. The base year for the scheme is FY23. 

To be eligible for the PLI scheme, companies must meet certain investment and production thresholds. Global companies must invest Rs 500 crore in a span of six years, while hybrid and domestic companies must invest Rs 250 crore and Rs 20 crore, respectively.

The government expects to receive more applications before the window for fresh entrants closes on Wednesday midnight. The PLI scheme is a major step towards making India a global hub for IT hardware manufacturing. It is in line with the government's vision of Atmanirbhar Bharat.

PLI Scheme 2.0 for IT Hardware: Objectives

  • Increased domestic manufacturing of IT hardware
  • Creation of jobs in the IT hardware sector
  • Reduced dependence on imports of IT hardware
  • Boost to the Indian economy

The PLI scheme is a positive development for the Indian IT hardware industry. It is expected to help the industry grow and become more competitive. The scheme will also help to make India a more attractive destination for investment in the IT hardware sector.

PLI Scheme 2.0 for IT Hardware: Top Companies that Have Applied for the Scheme

The PLI scheme has received a good response from the industry, with 40 companies having applied for it so far. The top companies that have applied for the scheme are:

  • Dell
  • HP
  • Lenovo
  • Acer
  • Samsung
  • Intel
  • IBM
  • Cisco
  • Microsoft
  • SAP
  • TCS

These companies are major players in the global IT hardware market. Their participation in the PLI scheme is a vote of confidence in the Indian government's efforts to boost the IT hardware manufacturing sector.

PLI Scheme 2.0 for IT Hardware: Is this a Revival Strategy?

The IT hardware industry has faced several failures in the past. For example, the joint venture of Vedanta and Foxconn to set up a semiconductor manufacturing plant in Gujarat. The plan was proposed in December 2021, but Foxconn broke off the joint venture in July 2023. The semiconductor fabrication plant was of $19.5 billion and had plans to make 28-nanometer semiconductors. 

Moreover, India's PC market, including desktops, laptops, and workstations, saw a 30.1% decline in the quarter ending in March, shipping just 2.99 million units compared to the previous year. The consumer segment dropped by 36.1% due to weakened demand and poor market sentiment, while the commercial segment fell by 25.1% due to reduced or delayed corporate procurement.

Companies (Numbers in thousands of units)Q1 2022 Shipments Q1 2023 ShipmentsMarket Share in 2023
Dell Technologies83041713.9%
Acer Group42136812.3%

However, the PLI scheme is a new initiative that has the potential to succeed. The scheme offers a number of incentives that are designed to attract investment and manufacturing in India.

PLI Scheme 2.0 for IT Hardware: Outlook 

The PLI scheme is a positive development for the Indian economy. It is expected to boost manufacturing, create jobs, and reduce the country's dependence on imports. The success of the PLI scheme will depend on a number of factors, including the availability of skilled labor, the quality of infrastructure, and the government's ability to provide a stable and predictable business environment.