apple: Apple vendors to juice up make in India

The government may have got around a critical hurdle to its plans to make India a manufacturing hub for mobile handset exports by allowing the bulk of Apple’s Chinese vendors that have shown interest in setting up local joint ventures. The production-linked incentive (PLI) scheme requires handset manufacturers to develop the local vendor ecosystem while scaling up output. Samsung and contract manufacturers for Apple have made the biggest production commitments under the PLI scheme that has seen mobile handset exports from India surging. The scheme requires handset manufacturers to accelerate capacity and local value addition but was running into lack of investment appetite by Indian vendors. Hence the rethink on allowing Chinese vendors to partner local companies.

This workaround is expected to deliver because Chinese handset vendors have built global scale in manufacturing that will help medium-sized Indian firms to acquire heft. The investment and job-creation objectives of the PLI scheme are met. And global handset brands such as Apple and Samsung move closer to building supply chain resilience without having to build it from scratch in India. The pragmatic policy reassessment will offer learnings in other industry verticals the government is pushing through production incentives. Chinese vendors enjoy significant scale advantage in the sectors India is eyeing for a bigger play in exports and can help it climb the investment ladder through joint ventures in contract manufacturing.

The PLI scheme is, thus, moving beyond the top tier of Indian companies to offer growth opportunities to medium and smaller enterprises. MSMEs also need help in accessing capital, otherwise their ability to grow will be limited even with foreign partnerships. There are other constraints in the Indian business environment that hold down small enterprises while their Chinese counterparts have flourished. Disadvantages in infrastructure, regulation and compliance need to be worked upon. Using Chinese investment to seed Indian manufacturing capability is a good starting point. Further policy realignment must follow.