Samsung, the South Korean electronics giant, has been denied production-linked incentives (PLI) for smartphone manufacturing in fiscal year 2022 (FY22) in India. The company failed to meet the production targets set by the Indian government, resulting in the denial of incentives worth around 900 crore. This setback comes after Samsung successfully met the targets in the first year (FY21) of the PLI scheme, which resulted in cashbacks of around 500 crore.
The denial of incentives for smartphone production in FY22 could have implications for Samsung’s future strategy in India. The PLI scheme was designed to encourage domestic manufacturing and boost the country’s smartphone production capabilities. By missing out on these incentives, Samsung may face increased competition from other manufacturers who have successfully met the production targets and received the associated benefits.
The Indian government has expressed concerns about the low share of Chinese mobile phone brands in India’s exports, despite their dominance in the domestic market. Chinese firms such as Xiaomi, Oppo, Vivo, and Realme together hold a commanding 74% share of the Indian mobile phone market in volume terms but only have a 4% share of exports. In contrast, Apple and Samsung have a dominance in the premium segment and hold a 55% share of the $40 billion India smartphone market by value.
The government has been pushing Chinese brands to increase exports and focus more on high-end devices. However, there has been little progress in this regard, with only small shipments from Vivo and Oppo, while Xiaomi is considering starting exports. The Chinese brands have cited the lack of benefits under the Indian government’s PLI scheme as a hindrance to their export efforts. However, government officials argue that Indian contract manufacturers can make devices for them and claim benefits under the PLI scheme.
RTM Watch’s Take
Samsung’s denial of incentives for smartphone production in FY22 is a setback for the company’s expansion plans in India. It highlights the importance of meeting the production targets set by the Indian government to avail of the benefits under the PLI scheme. With increasing competition in the Indian smartphone market, it is crucial for manufacturers to align their production capabilities with the government’s objectives of promoting domestic manufacturing and boosting exports.
