Plug and play models are being developed for components after Apple PLI

In order to facilitate the initiation of large-scale domestic production of electronic components, the government is now formulating the details of a new incentive program that will resemble a plug and play model.

 

According to officials, the plan will be presented once a new administration takes office and will vary existing semiconductor subsidy programs and production-linked incentive programs.

The plug-and-play approach aims to make it possible for printed circuit boards and electrical components, including resistors, diodes, lenses, camera modules, and metallics, to be produced domestically. According to authorities, a new model is required since it will be difficult to convince manufacturers to move their operations from Taiwan or China to other countries using PLI schemes because these items do not provide significant profit margins.

In the plug-and-play concept, the government will locate, buy, and construct factories on the designated site. International manufacturers of these goods may then set up equipment and use the spaces to start distributing the specified products. According to authorities, “the margin in such products is around 3-4% but the volumes are huge.”

The government wants to establish at least five sizable factories to begin producing the components for these kinds of economic clusters.

According to officials, the government’s expenditures in developing industries and purchasing land would be immediately reimbursed by goods and services taxes. Additionally, there will be a decrease in the import bill for electronic components, which will lower the current account deficit.

For example, the government has set high goals to increase the nation’s total exports of electronics. But, since there is now little value addition occurring in the nation and a significant percentage is imported, manufactured, and then re-exported or utilized for local consumption, imports will increase along with exports.

While PLI programs for telecom, consumer electronics, IT, and smartphones will increase exports and boost local manufacturing, the trade imbalance will keep growing in the absence of a program of a similar kind for electronics components.

China, Thailand, and Vietnam are nations with surplus trade that compete with India in the electronics trade and are home to the majority of component manufacturers.

Officials said that increasing domestic value addition—which may occur when an increasing number of components are made domestically—is the only method to reduce the trade imbalance in electronics. This weak point will be filled up by the plug and play model. More direct and indirect employment will be created under such a strategy, according to officials.

With the plug-and-play concept, nations like China and Vietnam have developed a vast ecosystem for the production of electronics components.

It is anticipated that domestic electronics production would have increased to around $115 billion in FY24 from $102 billion in FY23. The goal established by the government is to reach $300 billion by 2025–2026. In FY24, India’s overall exports decreased by 3%, while its exports of electronics items increased by 23.6% to $29.12 billion.