Samsung’s decision that it will need to manufacture double of that this year to avail of the second year’s incentives
Samsung Electronics has reportedly chosen the 20-21 fiscal to be the first year from which it will begin availing the 6 per cent incentive of the production-linked incentive (PLI) scheme for smartphone manufacturing.
A report by Economic Times said quoting sources, “Samsung will take its incentives for the first year – FY20-21. It did all the hard work and met its targets.”
Notably, the Korean giant was the only company that only met the investment and output targets set by the PLI scheme, but surpassed them.
Recently, the government of India extended the tenure of PLI for Large Scale Electronics Manufacturing by a year, which includes smartphones as a major category, at the behest of multiple industry bodies urging for an extension on the reasoning that pandemic-led supply shortages and other supply chain constraints prevented companies from meeting the targets set by the scheme.
However, Samsung’s decision means that while the rest 15 manufacturers including iPhone makers Foxconn, Wistron etc. will produce incremental goods worth Rs 4000 crore in the current fiscal which started on April 1, Samsung will need to manufacture double of that in a year marred by the Covid second wave and an anticipated third wave, to avail of the second year’s incentives, industry experts told Economic Times.
“Samsung had a quick ramp up last year because of its already installed capacity in their Noida factory and larger dependency on Korea rather than China for its supply chain, which is why they were able to achieve the targets while everyone else lagged behind,” revealed one source.
As per the scheme guidelines, Samsung, having met the Rs4,000 crore production target for the first year, must produce mobile phones worth Rs 8000 crore in the second year over and above their base year (FY19-20) revenues in the above $200 price category, to avail of the second-year 6 per cent incentive.
“But in the current year when India was facing a destructive second wave, their factory was working on 50-60% capacity due to the disruptions as well as falling market demand. With another spurt of Covid infections predicted in the fourth quarter, producing an additional Rs 8000 crore worth of goods may be challenging for the company,” he added.
The South Korean electronics maker clocked in revenue of Rs 70,628 crore in FY19-20, of which close to 70% came from the mobile phone segment, according to business intelligence firm Tofler.
“In the first year of the scheme, Samsung had started manufacturing high-value phones locally while outsourcing the production of lower segment phones via EMS (electronics manufacturing services) players,” a smartphone market research analyst said.
“We believe it will continue the same strategy going forward, but, it must be kept in mind that demand for above $200 phones in India is limited and they may have to rely on higher exports for meeting targets.”
The Rs 41,000 crore handset PLI scheme is aimed at making the country a global manufacturing hub with an export target for phones worth $100 billion over the next five years.
The PLI offers graded incentives of 6 per cent of incremental sales of goods achieved over the base year for the first two years each, 5 per cent for the third and fourth year and 4 per cent for the fifth year. To qualify for these, global companies must produce incremental goods worth Rs 4,000 crore, Rs 8,000 crore, Rs 15,000 crore, Rs 25,000 crore and Rs 50,000 crore in five successive years.
