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Economic Times
4 days ago
- Business
- Economic Times
Bracing for pressure: Phonemakers dread the day govt pulls plug on PLI
Agencies Representative Image New Delhi: With the production-linked incentive (PLI) scheme for mobile phone manufacturing ending next year and the government remaining non-committal on extending it, Indian contract manufacturers are bracing for pressure on operating income and executives and experts said the end of the scheme is also expected to increase competition, as the PLI beneficiaries will lose the advantage they have from passing on some of the incentives to customers."The million-dollar question for the industry is 'what's remaining' if these incentives go away? The scheme has been critical in allowing manufacturers to offset higher manufacturing costs by passing incentives back to customers," the chief executive of an Indian contract manufacturer said, asking not to be the scheme ends, quality and workmanship will become crucial in becoming dominant in the industry, the CEO said, adding that the industry is expected to see more consolidation after FY26, with space for two-three more players controlling major volumes. Analysts forecast a fall in operating margins and increase in net working capital days for players such as Dixon Technologies, which has been one of the biggest beneficiaries of the scheme. PhillipCapital cut its fiscal 2027 estimates on Dixon - revenue by 4%, Ebitda by 6% and profit after tax by 9% - citing "higher competition in the mobile-phone assembly space"."Dixon shares its PLI benefits with its mobile phone clients, which is offset by favourable net working capital (NWC) terms. However, once its mobile phone PLI ends, we expect Dixon's NWC days to trend towards 35+ (in line with peers - Foxconn's were at 40+ for CY24), leading to a falling RoCE trajectory," the brokerage said. The PLI scheme for mobile phones, which has been a significant driver for making India the second largest manufacturer of handsets, is set to conclude in FY26. Eligible manufacturers receive 4-5% direct incentive on incremental production, which helps offset the cost-disability they had against global peers. In an earnings call, Dixon managing director Atul Lall said PLI incentives add 0.6-0.7% to its mobile phone manufacturing margins, reported at 3.5% in FY25. A significant portion of the PLI incentive (around 3.4% out of the 4-5%) is passed down directly to customers to offer competitive costs and deter competition. The contract manufacturer expects to offset the margin loss with more backward integration of components and improving operational efficiencies. It has also signed strategic joint ventures with some of its customers, ensuring a long-term the scheme ending, the advantage PLI-eligible players had in commanding lower prices for customers will go away, experts said."There is a doubt whether a significant competitive moat will exist for Indian companies in this business once the PLI subsidy ends. Companies like DBG Group, which is Chinese-owned and operates in India, have demonstrated the ability to compete even without the PLI benefit due to their high yields and operational efficiency," an industry analyst told added that DBG operates at lower margins (3-3.2%) compared to Indian players benefiting from PLI. Once the market returns to organic margins after the PLI scheme concludes, analysts expect Chinese players will gain market manufacturers, on their part, have been asking for an extension of the scheme."It is in the government's interest to extend the current scheme or introduce a 'PLI 2.0', though there is no certainty that this will happen," the CEO cited earlier officials said the renewal of the mobile phone PLI is still under discussion."We are discussing with the industry what are their further requirements and how to support them," an official said. "The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence."
Time of India
6 days ago
- Business
- Time of India
Duty Dilemma: India Inc's American dream on hold as tariff talks drag
Kolkata | Pune: Prolonged trade talks between India and the US are weighing on export orders, business plans, and onboarding new US clients for Indian businesses, as global companies and brands adopt a wait-and-watch mode on the outcome of the negotiations, said industry executives. The cautious stance is seen across major sectors such as electronics, apparel and textiles, seafood, gems and jewellery. Electronics contract manufacturers like Dixon Technologies , Micromax-owned Bhagwati Products, and Karbonn Group said, while they are continuing exports to the US, clients have halted plans for new orders till they get clarity on the trade negotiations. Explore courses from Top Institutes in Select a Course Category Public Policy Cybersecurity MCA PGDM Healthcare Design Thinking others Product Management Operations Management Management CXO Leadership Technology Artificial Intelligence healthcare Project Management Data Science Data Analytics Digital Marketing Degree Others Finance Data Science MBA Skills you'll gain: Economics for Public Policy Making Quantitative Techniques Public & Project Finance Law, Health & Urban Development Policy Duration: 12 Months IIM Kozhikode Professional Certificate Programme in Public Policy Management Starts on Mar 3, 2024 Get Details Skills you'll gain: Duration: 12 Months IIM Calcutta Executive Programme in Public Policy and Management Starts on undefined Get Details "Prospective clients who wanted to manufacture in India for the US are in a wait-and-watch mode, expecting clarity on where India stands vis-a-vis China and Vietnam in terms of US tariff," said Atul Lall, managing director at Dixon Technologies. Dixon produces Motorola smartphones for exports to the US. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like [70%할인] 갱년기 증상 전부 완화가능한 '이것' 특가 진행 중! 한 달치 무료 증정 이벤트 곧 마감! 리피어라 더 알아보기 Undo Karbonn Group managing director Pardeep Jain noted prevailing high level of uncertainty regarding the US market. "Brands have made it clear that if there is no substantial duty difference between India and China, they are unlikely to shift manufacturing to India. Discussions are still continuing," he said. India and the US are continuing discussions to finalise a bilateral trade agreement . The US government had earlier extended a 90-day pause on imposing reciprocal tariffs for most of its trading partners to August 1 from July 9. For India, the US has proposed a 26% tariff. Live Events US President Donald Trump on Wednesday said the deal with India could be soon finalised before reciprocal tariffs come into effect next month. The US is India's largest trading partner with bilateral trade valued at $131.84 billion in FY25. The current scenario is also impacting India's long-term export orders for gems and jewellery too, including for the Christmas and year-end shopping period. "The process of placing orders for Christmas usually begins in June from the JCK Show of jewellery at Las Vegas; first with sample line orders followed by the full orders in September-October," said Sabyasachi Ray, executive director, The Gems and Jewellery Export Promotion Council. "This process has been disrupted as US importers are buying only for a short term for each month as there is no clarity on the exact rate of tariff." US buyers are also doing rate negotiations, said Ray, adding that the buyers are expecting demand to fall if Indian jewellery becomes pricier due to higher tariffs. "Some buyers are negotiating about sharing the burden," he said. Industry body Confederation of Indian Textile Industry (CITI) secretary general Chandrima Chatterjee said there is optimism in the short term that India will secure a good deal, with relative tariffs likely to be largely better than its major competitors. "However, this optimism may not completely translate into orders in the medium term due to the vague scenario about applicable product specific tariffs that will unfold," she said. "There is cautious optimism. The buyers are holding back on big orders as the sectoral or category-wise tariff rates could vary significantly." Seafood exporters too are facing slowdown in orders in the past few weeks as buyers are inquiring if the former is ready to absorb the entire burden of any increase in tariff. "There is a slowdown in exports from the past three weeks as new orders are not coming," said Pawan Kumar G, president, Seafood Exporters' Association of India. Many marine sector exporters are also facing difficulty in obtaining loans as some banks are offering limited financing due to sluggish orders. The companies, which asked not to be named as it may affect their credit ratings, are seeking support from banks and the government to tide over the situation. The US has imposed a 19% tariff on Indonesia under a new agreement, and 30% on the European Union effective August 1. Trump has sent tariff letters to about two dozen countries including Canada, Japan, and Brazil which specifies tariff rates ranging from 20% to 50% apart from a 50% tariff on copper. He has said for the smaller countries, it is likely to be around 10%.
Time of India
6 days ago
- Automotive
- Time of India
Dixon's Rs 1,000 crore bet: Ties up with two Chinese firm for key electronics components; gears up for post-PLI era
Dixon Technologies is set to invest Rs 1,000 crore to strengthen its expertise in producing key components such as camera and fingerprint modules, as well as precision mechanical enclosures used in mobile phones, IoT devices, laptops and automobiles. The move is aimed at deepening backward integration and reducing reliance on external suppliers across its manufacturing operations. The company on Tuesday revealed a joint venture with China's Chongqing Yuhai Precision Manufacturing for the production of precision mechanical parts used in mobiles, laptops, Internet of Things (IoT) devices and automobiles. Under the deal, Dixon will hold a 74% stake, keeping the Chinese partner's share within the government's informal 26% cap under the component manufacturing programme. Additionally, Dixon has signed a term sheet to acquire a 51% stake in the India arm of China-based Kunshan Q Tech Microelectronics, which manufactures camera and fingerprint modules. The acquisition, worth Rs 500 crore, will be followed by another Rs 250 crore investment to scale up production capacity, under the Centre's Rs 22,919 crore Electronics Component Manufacturing Scheme. 'Acquiring majority stake in Qtech India is a major step forward in Dixon's journey foraying into development and production of camera modules and fingerprint recognition modules across mobile handsets, IoT devices and automotive applications thereby strengthening backward integration plans of the Company' Atul Lall, managing director of Dixon Technologies told ET. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Esta nueva alarma con cámara es casi regalada en Rivadavia (ver precio) Verisure Más información Undo 'This JV with Chongqing will focus on manufacturing precision mechanical & metal parts & components for a wide range of applications including laptops, mobiles, IoT, automotive which is a significant step in our effort towards localisation of key components, deepening backward integration in Dixon value chain' Lall was quoted as saying. Dixon's broader ambition is to reduce its dependence on low-margin assembly work and secure long-term margins through tech-led manufacturing. The investment also reflects a growing trend among Indian players to form strategic tie-ups with global tech suppliers as the PLI scheme nears its end. Currently, Kunshan Q Tech's Indian operations produce about 4 million modules monthly, largely catering to Android handset makers. The facility will now be ramped up to support Dixon's own assembly lines. This is Dixon's third such partnership to boost its component portfolio. The company earlier teamed up with China's HKC to produce display modules, and with Taiwan's Inventec to manufacture PCs and laptops. It also partners with smartphone majors like Vivo, Motorola and Transsion for long-term production contracts. Dixon remains one of the few Indian firms to qualify for incentives under the PLI scheme for smartphone manufacturing, which is scheduled to run till 2026. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
13-07-2025
- Business
- Time of India
Bracing for pressure: Phonemakers dread the day govt pulls plug on PLI
New Delhi: With the production-linked incentive (PLI) scheme for mobile phone manufacturing ending next year and the government remaining non-committal on extending it, Indian contract manufacturers are bracing for pressure on operating income and margins. Industry executives and experts said the end of the scheme is also expected to increase competition, as the PLI beneficiaries will lose the advantage they have from passing on some of the incentives to customers. "The million-dollar question for the industry is 'what's remaining' if these incentives go away? The scheme has been critical in allowing manufacturers to offset higher manufacturing costs by passing incentives back to customers," the chief executive of an Indian contract manufacturer said, asking not to be named. After the scheme ends, quality and workmanship will become crucial in becoming dominant in the industry, the CEO said, adding that the industry is expected to see more consolidation after FY26, with space for two-three more players controlling major volumes. Analysts forecast a fall in operating margins and increase in net working capital days for players such as Dixon Technologies , which has been one of the biggest beneficiaries of the scheme. Live Events PhillipCapital cut its fiscal 2027 estimates on Dixon - revenue by 4%, Ebitda by 6% and profit after tax by 9% - citing "higher competition in the mobile-phone assembly space". "Dixon shares its PLI benefits with its mobile phone clients, which is offset by favourable net working capital (NWC) terms. However, once its mobile phone PLI ends, we expect Dixon's NWC days to trend towards 35+ (in line with peers - Foxconn's were at 40+ for CY24), leading to a falling RoCE trajectory," the brokerage said. The PLI scheme for mobile phones, which has been a significant driver for making India the second largest manufacturer of handsets, is set to conclude in FY26. Eligible manufacturers receive 4-5% direct incentive on incremental production, which helps offset the cost-disability they had against global peers. In an earnings call, Dixon managing director Atul Lall said PLI incentives add 0.6-0.7% to its mobile phone manufacturing margins , reported at 3.5% in FY25. A significant portion of the PLI incentive (around 3.4% out of the 4-5%) is passed down directly to customers to offer competitive costs and deter competition. The contract manufacturer expects to offset the margin loss with more backward integration of components and improving operational efficiencies. It has also signed strategic joint ventures with some of its customers, ensuring a long-term commitment. With the scheme ending, the advantage PLI-eligible players had in commanding lower prices for customers will go away, experts said. "There is a doubt whether a significant competitive moat will exist for Indian companies in this business once the PLI subsidy ends. Companies like DBG Group, which is Chinese-owned and operates in India, have demonstrated the ability to compete even without the PLI benefit due to their high yields and operational efficiency," an industry analyst told ET. He added that DBG operates at lower margins (3-3.2%) compared to Indian players benefiting from PLI. Once the market returns to organic margins after the PLI scheme concludes, analysts expect Chinese players will gain market share. Contract manufacturers, on their part, have been asking for an extension of the scheme. "It is in the government's interest to extend the current scheme or introduce a 'PLI 2.0', though there is no certainty that this will happen," the CEO cited earlier said. Government officials said the renewal of the mobile phone PLI is still under discussion. "We are discussing with the industry what are their further requirements and how to support them," an official said. "The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence."
Economic Times
13-07-2025
- Business
- Economic Times
Make (more) in India: India switches to factory settings for niche electronics
TIL Creatives Representative Image Kolkata: After iPhones, smart televisions and microwave ovens, India is now scaling up manufacturing of more niche electronic products such as robotic vacuum cleaners, coffee makers, built-in refrigerators and air fryers, which, till recently, were fully imported. The development, according to industry executives, is driven by the government's expanding list of electronic products whose factories need certification under the quality control orders (QCO) of the Bureau of Indian Standards (BIS) that are meant to control imports from China and other places, as well as promote local production. Most of these specialised products have come under QCO in the past eight to nine months. Till recently, most consumer goods firms argued that the market size for these categories was so small that local production did not make sense. 'BIS norms have been a big trigger, with more and more brands — including premium ones — exploring local production for small appliances despite small market size,' said Atul Lall, managing director of Dixon Technologies. 'It's a nice business opportunity.' Earlier this week, Dixon signed an agreement with Eureka Forbes to manufacture robotic vacuum cleaners, a category with a market size of just about Rs 700 is the largest home-grown electronics contract manufacturer. Europe's Liebherr has set up a plant for built-in customised refrigerators in Aurangabad, with production commencing in April, despite domestic annual sales of only 14,000-15,000 Agarwal, India managing director (sales) at Liebherr Appliances, said that implementation of the BIS norms for refrigerators from this year served as a wake-up call to set up a factory locally, further aided by the premiumisation wave. 'We were importing from Germany but getting the factory certified is a tedious process. We also believe the market will grow to 1 lakh units in five years. So a local plant made a business case and will reduce import lead time,' he Greaves Consumer Electricals' annual report said it will prioritise local sourcing this fiscal. Havells India said in its annual report it will further support localisation of products to reduce import dependence, from about 8% of its total sourcing in the previous financial year, having scaled it down from around 15% of total sourcing in of QCOs has opened up more attractive categories, according to Ajay Singhania, MD of contract manufacturer Epack Durable, while the business for more mature categories such as mixer grinders has been either flat or growing at a nominal rate of 3-4% annually. The opportunity includes 72 categories, such as air fryers, electric kettles and hair dryers, most of which were earlier fully imported, he said. 'We are taking a lead in localising these categories and meeting the requirements of most of the marquee customers,' he told analysts last firms imported these products in bulk in the past few months before the QCO came into executives said that while the market size may be small for standalone categories, it's altogether a business opportunity of more than Rs 12,000-13,000 crore. To put it in perspective, the market size of air-conditioners alone is more than Rs 40,000 crore and that of smartphones is more than Rs 1.5 lakh crore. Another leading contract manufacturer, PG Electroplast, began small appliance production seven to eight years ago, but had to discontinue it as the opportunity was very small at the time, said its managing director (operations) Vikas Gupta. 'But with the BIS norms, we are now relooking at it as a lot of brands are approaching us,' he said. The government has, over the past few years, expanded the compulsory BIS QCO certification to products such ACs, washing machines, refrigerators, ceiling fans, plugs, switches and cables, and very few overseas factories have received the BIS certification.
