Lok Sabha Question No. 864 (UNSTARRED), answered on 2024-02-07
Subject: Manufacturing of Mobile Components
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Sanjay Sadashivrao Mandlik, Prataprao  Jadhav, Sudheer Gupta, Shrirang Appa Barne, Sambhajirao Mane Dhairyasheel

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOKSABHA

## UNSTARRED QUESTION NO. 864

TO BE ANSWERED ON 07.02.2024

## MANUFACTURING OF MOBILE COMPONENTS

## 864. SHRI SANJAY SADASHIVRAO MANDLIK: SHRI PRATAPRAO JADHAV: SHRI SUDHEER GUPTA: SHRI SHRIRANG APPA BARNE: SHRI DHAIRYASHEEL SAMBHAJIRAO MANE:

Will the Minister of Electronics and Information Technology be pleased to state:

- (a) whether the Government has any proposal to reduce the import duty on components for mobile phone and if so, the details thereof;
- (b) whether substantial increase has been registered in export of Indian mobile phones in the global market due to increased manufacturing and if so, the details thereof;
- (c) whether the Government proposes to start the manufacturing of mobile components at domestic level;
- (d) if  so,  the  details  thereof  and  the  steps  taken/  being  taken  by  the  Government  in  this regard; and
- (e) the other steps taken by the Government to compete with cheap mobile manufacturing countries like China, Vietnam etc.?

## ANSWER

## MINISTER OF STATE FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI RAJEEV CHANDRASEKHAR)

(a): Over the last nine years, India's electronics ecosystem has seen tremendous growth and expansion, investment, and job creation. From almost insignificant in the global electronics supply  chain,  India  is  currently  rapidly  becoming  a  significant  and  trusted  player  in  the electronics  Global  Value  Chain  (GVC).  Most  global  and  Indian  electronics  brands  are investing, growing and creating jobs in the sector. Government of India's goal is to increase India's share in the electronics GVCs by broadening and deepening the country's electronics manufacturing sector.  Government  of  India's  goal  is  to  broaden  and  deepen  the  country's electronic  manufacturing  ecosystem  as  well  as  increase  India's  share  in  electronics  GVC. Government has taken several measures to boost electronics manufacturing including mobile phones in the country and incentivize large investments in the electronic goods and appliances as well as to promote exports.

To transform our domestic manufacturing from import substitution to export led manufacturing, Government has reduced the Basic Customs Duty (BCD) to 10% on the goods covered under Mechanics, Die Cut Parts and Others category for use in the manufacturing of mobile  phones.  Further,  BCD  has  been  exempted  on  the  inputs  or  parts  for  use  in  the manufacturing of goods covered under Mechanics and Die Cut Parts.

(b) to (c):  As a result of various initiatives, including visionary Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing, there has been an unprecedented growth in the mobile phones manufacturing under the Make in India and AtmaNirbhar Bharat initiatives of the Government of India. The mobile phones manufacturing has increased from an estimated INR 18,900 crore in 2014-15 to an estimated INR 3,50,000 crore in 2022-23, making  an  impressive  increase  in  production  by  more  than  1700%.  India  has  become  the second largest manufacturer of mobile phones in the world (in volume terms). The export of mobile  phones  has  also  increased  from  an  estimated  INR  1566  crore  in  2014-15  to  an estimated INR 90,000 crore in 2022-23, making an impressive increase in exports by more than 5600%.

Government has an ambitious target of domestic electronic manufacturing of $300 Billion by 2026. The goal of Government of India is to make India a significant design and export driven manufacturing hub in global value chains for Electronics as part of its AtmaNirbhar Bharat economic  policies.  The  strategy  to  reach  the  $300  billion  production  of  electronics  from current level of about  $75  billion is built on  broadening  and  deepening  electronics manufacturing in India. This is proposed to be achieved by building competitiveness and scale by attracting global electronics manufacturers/brands, shifting, and developing sub-assemblies and  component  ecosystem,  building  a  design  ecosystem,  nurturing  Indian  champions,  and steadily removing cost disabilities faced by the industry.

Given the success in Mobile Smartphone by now, we expect investment from the component industries  that  form  the  supply  chain  for  smartphone  and  IT  Hardware  to  increase  the investment by PLI in IT Hardware / Servers.

After the success of the PLI Scheme for the mobile phones, we are expecting that PLI for IT Hardware and Server will lead to expanding the investments in Component ecosystem in the country to develop the Supply Chain.

(d) to (e):  Government of India envisions to position India as a global hub for export driven manufacturing hub and Electronics System Design and Manufacturing (ESDM)  by encouraging  and  driving  capabilities  in  the  country  for  developing  core  components, including chipsets, and creating an enabling environment for the industry to compete globally. Government  intends  to  increase  the  domestic  manufacturing  of  electronic  components, including components of mobile phones. The steps taken by the Government to increase the domestic manufacturing of electronic goods are at Annexure. The aforementioned steps are aiding in  making the domestic manufacturing of mobile phones competitive vis-à-vis other competing countries.

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Government of India's goal is to broaden and deepen the country's electronic manufacturing ecosystem.  In  order  to  boost  electronics  manufacturing  including  semiconductors,  and position India as a global hub for Electronics System Design and Manufacturing (ESDM) and compete globally, following steps are taken by the Government:

1. National Policy on Electronics 2019 : The National Policy on Electronics 2019 (NPE 2019)  has  been  notified  on  25.02.2019.  The  vision  of  NPE  2019  is  to  position  India  as  a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities  in  the  country  for  developing  core  components,  including  chipsets,  and creating an enabling environment for the industry to compete globally.

To  attract  and  incentivize  large  investments  in  the  electronics  value  chain  and  promote exports, following Schemes have been notified under the aegis of NPE 2019:

- (i) Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing was  notified  on  April  01,  2020  to  provide  an  incentive  of  4%  to  6%  to eligible companies  on  incremental  sales (over base year)  involved  in  mobile  phone manufacturing  and  manufacturing  of  specified  electronic  components,  including  Assembly, Testing, Marking and Packaging (ATMP) units.
- (ii) Production  Linked  Incentive  Scheme  (PLI)  for  IT  Hardware was  notified  on March 03, 2021 to provide an incentive of 4% to 2% / 1% on net incremental sales (over base year)  of  goods  manufactured  in  India  and  covered  under  the  target  segment,  to  eligible companies, for a period of four (4) years. The Target Segment under PLI Scheme includes (i) Laptops (ii) Tablets (iii) All-in-One PCs and (iv) Servers.
- (iii) PLI Scheme 2.0 for IT Hardware was notified on May 29, 2023 with a budgetary outlay  of  INR  17,000  crore.  The  scheme  provides  increased  flexibility  and  options  for applicants,  and  is  tied  to  incremental  sales  and  investment  thresholds  to  further  incentivize growth.  Furthermore,  semiconductor  design,  IC  manufacturing,  and  packaging  are  also included as incentivized components of the PLI Scheme 2.0 for IT Hardware. It will promote large scale manufacturing in Laptops, Tablets, All-in-One PCs, Servers and Ultra Small Form Factor (USFF) devices.
- (iv) Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) was notified on April 01, 2020 to provide financial incentive of 25%  on  capital  expenditure  for  the  identified list of  electronic  goods  that  comprise downstream value chain of electronic products, i.e., electronic components, semiconductor / display  fabrication  units,  ATMP  units,  specialized  sub-assemblies  and  capital  goods  for manufacture of aforesaid goods. The scheme is open for receipt of applications till 31.03.2024 with disbursement of incentive upto 31.03.2029.
- (v) Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme was notified on April  01,  2020  to  provide  support  for  creation  of  world  class  infrastructure  along  with common facilities and amenities, including Ready Built Factory (RBF) sheds / Plug and Play facilities for attracting major global electronics manufacturers along with their supply chain to set up units in the country. The Scheme provides financial assistance for setting up of both EMC projects and Common Facility Centres (CFCs) across the country. The Scheme is open for receipt of application for a period upto March, 2024 and further period upto March, 2028 is available for disbursement of the funds to the approved projects.
2. Program  for Development  of Semiconductors and Display  Manufacturing Ecosystem: To  widen  and  deepen electronics manufacturing, the Union  Cabinet on 15.12.2021, approved a comprehensive program with an outlay of INR 76,000 crore for the development of Semiconductors and Display manufacturing ecosystem. With the approval of Cabinet,  the  programme  has  further  modified  on  21.09.2022  in  view  of  the  aggressive

incentives  offered  by  countries  already  having  established  semiconductor  ecosystem  and limited  number  of  companies  owning  the  advanced  node  technologies.  The  modified programme  aims  to  provide  financial  support  to  companies  investing  in  semiconductors, display  manufacturing  and  design  ecosystem.  This  will  serve  to  pave  the  way  for  India's growing  presence  in  the  global  electronics  value  chains.  The  modified  programme  offers Fiscal  Support  of  50%  of  Project  Cost  uniformly  for  semiconductor  fabs  across  the technology nodes as well as for compound semiconductors, packaging and other semiconductor facilities.

Following Fiscal incentives are now available to eligible applicants:

- a) Modified Scheme for setting up of Semiconductor Fabs in India ' for attracting large investments  for  setting  up  semiconductor  wafer  fabrication  facilities  in  the  country  to strengthen  the  electronics  manufacturing  ecosystem  and  help  establish  a  trusted  value chain. The Scheme extends a fiscal support of 50% of the project cost on pari-passu basis for setting up of Silicon CMOS based Semiconductor Fab in India.
- b) ' Modified  Scheme  for  setting  up  of  Display  Fabs  in  India '  for  attracting  large investments  for  manufacturing  TFT  LCD  or  AMOLED  based  display  panels  in  the country  to  strengthen  the  electronics  manufacturing  ecosystem.  Scheme  extends  fiscal support of up to 50% of Project Cost on pari-passu basis for setting up of Display Fabs in India.
- c) ' Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab / Discrete Semiconductors Fab and Semiconductor Assembly, Testing, Marking  and  Packaging  (ATMP)  /  OSAT  facilities  in  India' shall  extends  a  fiscal support  of  50%  of  the  Capital  Expenditure  on  Pari-passu  basis  for  setting  up  of Compound Semiconductors / Silicon Photonics (SiPh) / Sensors (including MEMS) Fab/ Discrete Semiconductor Fab and Semiconductor ATMP / OSAT facilities in India.
- d) 'Semicon  India  Future  Design:  Design  Linked  Incentive  (DLI)  Scheme' offers financial  incentives,  design  infrastructure  support  across  various  stages  of  development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on  Chips  (SoCs),  Systems  &  IP  Cores  and  semiconductor  linked  design.  The  scheme provides  'Product  Design  Linked  Incentive'  of  up  to  50%  of  the  eligible  expenditure subject to a ceiling of INR 15 Crore per application and 'Deployment Linked Incentive' of  6%  to  4%  of  net  sales  turnover  over  5  years  subject  to  a  ceiling  of  ₹30  Crore  per application.

In  addition  to  the  above  schemes,  Government  has  also  approved  modernisation  of  SemiConductor Laboratory, Mohali as a brownfield Fab.

3. 100% FDI: As per extant Foreign Direct Investment (FDI) policy, FDI up-to 100% under the automatic route is permitted for electronics manufacturing (except from countries sharing land border with  India), subject  to  applicable  laws  /  regulations;  security  and  other conditions.
4. Modified Special Incentive Package Scheme (M-SIPS) :  The  Scheme was notified on 27 th July, 2012 to provide financial incentives to offset disability and attract investments in the electronics manufacturing sector. It was amended in August, 2015 to extend the period of the scheme, enhance scope of the Scheme by including 15 more product verticals, and attract more  investment.  The  scheme  was  further  amended  in  January,  2017  to  expedite  the investments. The scheme provides subsidy for capital expenditure - 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. The incentives are available for 44 categories  /  verticals  of  electronic  products  and  components  covering  entire  electronics manufacturing value chain. The Scheme was open to receive applications till 31.12.2018 and is in the implementation mode.
5. Electronics  Manufacturing  Clusters  (EMC)  Scheme :  Electronics  Manufacturing Clusters Scheme was notified on 22 nd October, 2012 to provide support for creation of worldclass infrastructure along with common facilities and amenities for attracting investment.
6. Electronics  Development  Fund  (EDF) :  Electronics  Development  Fund  (EDF)  has been set up as a 'Fund of Funds' to participate in professionally managed 'Daughter Funds' which in turn will provide risk capital to startups and companies developing new technologies in  the  area  of  electronics  and  Information  Technology (IT).  This fund is expected to foster R&D and innovation in these technology sector.
7. Phased Manufacturing Programme (PMP) has  been notified to promote domestic value addition in mobile phones and their sub-assemblies / parts manufacturing. As a result, India has rapidly started attracting investments into this sector and significant manufacturing capacities  have  been  set  up  in  the  country.  The  manufacturing  of  mobile  phones  has  been steadily  moving  from  Semi  Knocked  Down  (SKD)  to  Completely  Knocked  Down  (CKD) level, thereby progressively increasing the domestic value addition.
8. Tariff  Structure has  been  rationalized  to  promote  domestic  manufacturing  of electronic goods,  including, inter-alia, Cellular  mobile  phones,  Televisions,  Electronic components, Set Top Boxes for TV and LED products.
9. Exemption from Basic Customs Duty on capital goods :  Notified capital goods for manufacture of specified electronic goods are permitted for import at 'NIL' Basic Customs Duty.
10. Simplified  import  of  used  plant  and  machinery :  The  import  of  used  plant  and machinery having a residual life of at least 5 years for use by the electronics manufacturing industry  has  been  simplified  through  the  amendment  of  Hazardous  and  Other  Wastes (Management  and  Transboundary  Movement)  Rules,  2016,  vide  Ministry  of  Environment, Forest and Climate Change Notification dated 11.06.2018.
11. Relaxing  the  ageing  restriction :  The  Department  of  Revenue  vide  Notification No.60/2018-Customs  dated  11.09.2018  has  amended  the  Notification  No.158/95-Customs dated  14.11.1995,  relaxing  the  ageing  restriction  from  3  years  to  7  years  for  specified electronic goods manufactured in India and re-imported into India for repairs or reconditioning.
12. Public  Procurement  (Preference  to  Make  in  India)  Order  2017 :  To  encourage 'Make in India' and to promote manufacturing and production of goods and services in India with  a  view  to  enhancing  income  and  employment,  the  Government  has  issued  Public Procurement (Preference to Make in India) Order 2017 vide the Department for Promotion of Industry and  Internal  Trade  (DPIIT) Order dated 15.06.2017 and subsequent revisions vide Orders  dated  28.05.2018,  29.05.2019,  04.06.2020  and  16.09.2020.  In  furtherance  of  the aforesaid Order, MeitY has notified mechanism for calculating local content for 13 Electronic Products viz., (i) Desktop PCs, (ii) Thin Clients, (iii) Computer Monitors, (iv) Laptop PCs, (v) Tablet PCs, (vi) Dot Matrix Printers, (vii) Contact and Contactless Smart Cards, (viii) LED Products, (ix) Biometric Access Control / Authentication Devices, (x) Biometric Finger Print Sensors,  (xi)  Biometric  Iris  Sensors,  (xii)  Servers,  and  (xiii)  Cellular  Mobile  Phones,  for procurement to be made from local suppliers.
13. Compulsory  Registration  Order  (CRO) :  MeitY  has  notified  'Electronics  and Information Technology Goods (Requirement of Compulsory Registration) Order, 2012' for mandatory compliance to ensure safety of Indian citizens by curbing import of substandard and unsafe electronic goods into India. 64 Product Categories have been notified under the CRO and the order is applicable on 63 product categories.

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