Samsung's FY26 Q1 exports fall 20% as PLI benefits end; Apple, Dixon may be next

Economic Times

28-07-2025

Reuters A store selling Samsung mobile phones
New Delhi: Samsung's exports of smartphones slumped by almost a fifth — both year-on-year and sequentially — in the first quarter of FY26, likely because the South Korean major is no longer eligible for benefits under the smartphone production-linked incentive (PLI) scheme since April.
According to industry executives, without the PLI incentives, Samsung may have lost export competitiveness and thus recalibrated its export plans. And the same could happen to Apple and Dixon Technologies – two other major beneficiaries of the scheme – after March 2026.
'The combined effect of all three – who have been the flagbearers of the PLI scheme and local manufacturing and exports – has the potential to derail India's bid to become a smartphone manufacturing hub for global markets,' an industry executive said, asking not to be identified.Samsung exported smartphones worth about $950 million in the June quarter, according to industry data.This is down from $1.17 billion a year earlier and $1.2 billion in January-March.
Without the smartphone PLI, India suffers a manufacturing cost differential, or disability, of 10% compared with Vietnam, and 15% with China, experts said.Even with PLI benefits of 4-6%, there was some disability, but still, brands and manufacturers were diversifying production and increasing exports from India considering the geopolitical situation, they said.Not being able to compete against the likes of China and Vietnam would be disastrous at a time all three countries are trying to get a favourable trade deal with the US, and more companies are examining a China+1 strategy amid continuing geopolitical tensions, experts said.The industry has been sounding out the government for an extension of the smartphone PLI scheme beyond FY26 to sustain the momentum of growing exports, which zoomed to $24.1 billion in FY25, from just $200 million in FY18.While the government does accept the competitive disadvantage without the scheme incentives, it is yet to take a call on an extension. 'The scheme tenure was fixed, and we have to see the legalities if it can be extended or not. But we do intend to support the industry,' an official told ET on condition of anonymity.India recently launched a Rs 22,919-crore components incentive scheme to build on the success of the smartphone PLI scheme and increase local value addition.However, this latest initiative could suffer if manufacturers back off on further investments in local production owing to disabilities compared to competing geographies, experts said.During the PLI years, Samsung increased smartphone exports from India to $4.4 billion in FY25, from $1.2 billion in FY21.The company is seeking incentives under the scheme in the current fiscal in lieu of the second year, when it did not get them as it failed to meet the targets. People familiar with the matter said Samsung faced Covid-related issues in the second year of the scheme, that is, FY22.The electronics major's argument is that if other PLI applicants could get an extension owing to Covid restrictions, it, too, should be given a year more, industry executives said.A query sent to Samsung regarding drop in exports in the first quarter of FY26 remained unanswered at the time of going to press.Samsung was the only company to meet PLI targets and avail incentives for the first year of the scheme – FY21. It had selected FY21-FY25 for its five-year PLI as it was already present in the country and could utilise the existing brownfield operations.Apple and others had to build factories and, due to Covid restrictions, they failed to complete the operations on time and sought a year's extension under the force majeure clause. The government agreed and extended the scheme tenure to six years – till FY26 – with a condition that companies can seek incentives for any five consecutive years of their choice within the time band.Apple has been the flagbearer of smartphone exports, followed by Samsung and Dixon, which manufacturers devices for Google, Motorola and Xiaomi, among others. Motorola has been increasing exports from India, particularly to the US.The industry estimates Samsung can manufacture 70 million phones annually in India, and the capacity can be further expanded rapidly. Its current domestic production is about 45 million smartphones.ET reported earlier that Samsung exported more than Rs 30,000-crore ($3.5 billion) worth of smartphones from India in FY25, compared to an estimated $35 billion from Vietnam, with the US accounting for $10 billion.There have been talks about Samsung exporting more from India, though that hinges on India maintaining its competitiveness against Vietnam, which is currently the hub of the company's manufacturing and exports.
Exports now outpace domestic smartphone demand – which has remained sluggish over the last couple of years – and are the primary driver of production growth.