Electronics firms bat for PLI as tariff fears loom

Time of India

5 days ago

India's ambitious $21-billion smartphone export target to the US faces uncertainty as the US administration is poised to finalize tariffs under Section 232 in August. Industry experts emphasize the need for government support and enhanced competitiveness to maintain market share amidst potential tariffs. The investigation's outcome could significantly impact India's burgeoning electronics manufacturing ecosystem, especially with a stagnating domestic market.
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New Delhi: India's $21-billion smartphone export target to the US for the current fiscal is at risk as the Donald Trump administration is set to finalise the proposed tariffs under Section 232 by the third or fourth week of August.While the electronics sector is outside the purview of the 25% reciprocal tariffs announced on Wednesday, the industry will need government support to meet the export target with the new tariff looming, industry experts said.Given the US' aggressive attitude, India cannot depend on tariff arbitrage to compete against China and Vietnam but needs to develop as a manufacturing destination and be globally competitive to increase or even hold on to its share in the US smartphone market, they noted.The industry is seeking extension of the smartphone production-linked incentive (PLI) scheme to remain globally competitive."Smartphones, laptops, tablets, servers, etc. are not immediately impacted by the 25% tariffs," an expert tracking the sector and trade said on condition of anonymity. "The tariff impact on these products is subject to the outcome of the Section 232 investigation that is currently underway and expected to be finalised by the third or fourth week of August."In April, the US department of commerce had announced a national security investigation under Section 232 related to import of certain products including semiconductors, and any tariff would also cover products that contain semiconductors like smartphones, laptops, tablets, servers, etc.These electronics products are currently exported with zero duties to the US and any tariff impact will be detrimental for the country's burgeoning electronics manufacturing ecosystem, which is becoming more reliant on exports as the domestic market stagnates, the expert quoted above said.In FY25, the US accounted for $10.5 billion out of India's total smartphone exports of $24.1 billion, according to official data. In FY26, the smartphone exports to the US are expected to double if the tariffs stay at zero, experts said. But the target may take a hit if tariffs are imposed after the Section 232 investigation.The core purpose of this investigation was to assess whether imports threaten or impair national security, experts said.Apart from semiconductors, the investigation is also applicable to product lines like steel, aluminium, pharmaceuticals, critical minerals, commercial aircraft, copper and derivation products among others.While tariffs for certain like steel and aluminium are already announced at 50%, others are yet to be declared. As per an official, the Section 232 investigation is independently led by the US department of commerce and is expected to be completed in the coming few weeks.