Chinese mobile firms talk to Indian makers with PLI nod - Economic Times

Top Chinese smartphone brands are in talks with Indian contract manufacturers to leverage the latter’s production-linked incentive (PLI) scheme approved status. This comes amidst a broad push by the Indian government to get smartphone players from Asian neighbours to involve more local players in their manufacturing ecosystem.

A senior industry official said top Chinese handset brands such as Xiaomi, Oppo, Vivo and Transsion were also in talks with the likes of Bhagwati (Micromax), Lava International, UTL Neolync, Optiemus Electronics, and Dixon Technologies, all of whom have been approved under the PLI scheme.

Some of these talks revolve around forming joint ventures, said the official. “A lot of these talks are in the due diligence stages.”

Home-bred contract manufacturer Bhagwati Products Ltd., a unit of Micromax, is in advanced talks with two Chinese players, including Transsion, to get their handsets manufactured locally for the domestic market as well as for exports.

“We are in an advanced range of discussions with two Chinese companies. So, once that happens, we will be able to achieve 200-300% of our target under the PLI scheme,” Rajesh Agarwal, director, Bhagwati Products, told ET. He did not share names of the Chinese brands.

Arijeet Talapatra, CEO of Transsion, told ET the company was in talks with an Indian contract manufacturer, but did not disclose the name.

"The 6% cash back incentive is a big benefit for us. If we want to serve consumers better, we must take advantage of the (PLI) scheme," said Talapatra. “It's a great scheme, which, somehow, is not directed towards us currently. So, we have to do a joint venture with another brand. We are planning around that.” “We are talking about 75% production for domestic requirements and the rest for export,” Agarwal said.

He added that Bhagwati is also in discussions with these Chinese companies to bring their component ecosystem to India to further increase local value addition to generate employment.

"We work with Indian partners in our supply chain as well as distribution network. We will look to strengthen these partnerships, and also explore newer avenues to scale them and foster domestic champions," a Xiaomi spokesperson told ET.

ET’s mails to Oppo, Vivo, Lava International, UTL Neolync, and Dixon did not elicit a response at press time.

"We are actively in talks with various players for manufacturing different ranges of electronic products in India including Chinese players as well. ' A Gururaj, MD, Optiemus Electronics.

An industry executive explained that the PLI scheme for smartphones has a price floor of $200 for international brands, while for local manufacturers, there is no such floor. With most smartphones sold by Transsion falling under the $200 price floor, the company has been unable to participate in the government's PLI scheme.

As a result, some Chinese companies have been looking to partner with the PLI-eligible local manufacturers to produce smartphones and claim part of the benefits. “In return, Transsion will be bringing some of the component partners to India as well,” the industry executive said.

Transsion already makes all the smartphones it sells in India locally, through at three factories it assembles smartphones in semi knockdown form, with most components sourced locally. However, the JV will allow the brand to leverage the incentives, which may help bring the price of their smartphones even lower than present, the executive added.

A senior industry official said that Xiaomi, which derives a bulk of its sales from the under Rs10,000-smartphone segment, is also in talks with Indian contract makers. The company, which currently manufactures its smartphones though Bharat FIH, a Foxconn unit, declined comment.

A key point of the negotiations revolves around the sharing of the incentives given under the PLI scheme. “The incentives are given to the contract manufacturer. How and how much will be shared with the customer is key,” said another industry executive.

ET reported on December 27 that the ministry of electronics and IT (MeitY) is working on an incentive scheme, with a likely financial outlay of around Rs 10,000 crore to Rs 12,000 crore, to promote domestic manufacturing of high-end components that could go into products such as smartphones, servers and personal computers.

Bhagwati currently has a capacity of around 2 million phones and 1 million LED TVs a month at its two factories in Rajasthan and Hyderabad. It is scaling up the capacities of these facilities, while also continually working with local partners to expand the ecosystem and generate employment opportunities in the country
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The government is engaged with all domestic and multinational companies to create more employment opportunities and bring a component ecosystem to India. It also wants them to make India an export hub for smartphones,” Bhagwati’s Agarwal said.

ET had reported on November 2 that the government was open to allowing Chinese firms’ entry into the high-tech electronics sector if they set up manufacturing units in the country in partnership with local companies.