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HomeGADGETSELECTRONICS‘Domestic value addition in electronics manufacturing can reach 30% soon’

‘Domestic value addition in electronics manufacturing can reach 30% soon’

To do this, the industry is seeking a production-linked incentive (PLI) scheme for component manufacturing, even as Vachani believes that contract manufacturers should start looking at how to expand their market share in order to export devices globally.

“It’s important to understand that even China’s domestic value addition in manufacturing is around 45%, because even China imports nearly all of its semiconductors for mobile manufacturing. All of this is work in progress, which will take time,” Vachani said.

On Monday, share prices of the contract manufacturer hit an all-time high of ₹7,045 apiece, driven by the company winning a mobile phone manufacturing contract, and also opening an appliances factory in Dehradun last week. The company’s share price has surged 2.6x in one year, as a Centre-backed push has seen India look for more localization in electronics production.

To do this, Vachani said that the company is set to open a mobile phone manufacturing plant in Noida—a “megafactory” with “nearly 1 million square feet of space”. The plant with the capacity to manufacture 25 million mobile phone units annually, is expected to reach full capacity by March next year, Vachani said.

The company is also looking to capture a large chunk of India’s laptop manufacturing demand, which has risen from the introduction of the revised IT hardware PLI scheme. “A lot of chip firms are working with local companies to design laptops here, which will lead to interesting results in the next two to three years. Dixon has a partnership with Acer for laptop manufacturing, while Lenovo’s factory is being set up. Laptops represent a very large market in India—IT hardware imports are to the tune of $10 billion. This gives us a very large import substitution opportunity here,” Vachani said.

Further value addition, however, will eventually come from the component manufacturing supply chain. “For smartphones, if you look at mechanicals, investments are going in, and the likes of the Tata group are investing in local manufacturing of mechanicals for the Apple ecosystem. Dixon, too, is making these. There are other components too, such as camera modules, which we’re making locally. Adapters and batteries are also being assembled here. What now needs to happen is display manufacturing, and we at Dixon are looking at display assemblies very seriously.”

To do this, a PLI component scheme would be key, Vachani said. “Our inverted duty structure means a finished product comes with lower duties. We’re working with industry bodies CII and ELCINA to try and get support from the Centre for a support package for electronics components—which will also help us raise investments,” he added.

Criticism for India’s electronics PLI has been around, with former Reserve Bank governor, Raghuram Rajan, stating that India’s domestic value addition has been limited. Union minister of state for IT, Rajeev Chandrasekhar, said that India’s domestic value addition is not too far from China’s in an interview with Mint in December. The Centre has also expressed interest in incentivizing component supply chains for electronics and semiconductors in the long run—but Chandrasekhar has also warned that the industry should not be over-reliant on incentives to scale-up manufacturing. This leaves Dixon and ELCINA’s demands in a mixed bag of reactions from the Centre.

Brokerages have maintained a mixed view of Dixon Technologies, and the overall electronics manufacturing sector itself. On Tuesday, brokerage Jefferies downgraded Dixon Technologies, saying the company’s stock was overvalued after the company’s valuation surged by more than 2x in margin over the past year. Shares of Dixon Technologies closed at ₹6,545 apiece—down 3.2% in Wednesday’s intraday trading, and 7% from its all-time high on Monday.

Vachani, however, said that the company remains bullish on its future. “In the coming months, we plan to hire 5,000 people. We’ll also be hiring 1,000 more people in our washing machine facility, and 1,000 more in our refrigerator plant,” he said.

Value addition in terms of jobs, he further added, will sustain despite increasing automation in electronics factories. “We have plans for additional investments in refrigerator production, and in telecom such as 5G FWA (fixed wireless access) hardware. Backward integration of IT hardware through manufacturing will also be a key focus for the coming year. The final assembly procedure in mobile factories is labour-intensive—a Foxconn plant in China typically employs over 300,000 people. A similar move will happen in India, where single plants will see nearly 60,000 people working at one location. This industry will thus add a massive number of jobs, despite automation. This is because the final assembly processes are very high precision jobs,” he added.

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Published: 29 Feb 2024, 01:46 PM IST

 

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