HP pursues Indian PC manufacturing growth through PLI 2.0

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HP pursues Indian PC manufacturing growth through PLI 2.0

HP pursues Indian PC manufacturing growth through PLI 2.0

Industry News
Sep 04,23

To bolster PLI 2.0, the government has implemented restrictions on the import of IT hardware, requiring OEMs to apply for licenses before importing.

HP pursues Indian PC manufacturing growth through PLI 2.0

Hewlett-Packard (HP), a dominant player in the market, has taken a significant stride to strengthen its presence in the Indian manufacturing landscape. With a remarkable 30 per cent market share in the Indian PC sector in 2022, as reported by IDC, HP has officially applied to participate in the Production Linked Incentive scheme 2.0 (PLI 2.0). Sources within the Ministry of Electronics and IT (MeitY) have informed that HP's engagement in PLI 2.0 is aimed at expanding its manufacturing operations to include consumer PCs within India. Under the scheme's criteria, HP is anticipated to invest between Rs 250–300 crore in manufacturing within the country.

"HP has been a longstanding partner in India's digital transformation journey and a pioneer in the country's IT manufacturing sector. We welcome the PLI scheme for IT hardware manufacturing and are eager to explore new avenues to meet the burgeoning demand for PCs. India is a dynamic growth market, and we are enthusiastic about the opportunities it presents," the company stated.

HP has been manufacturing a range of commercial laptops, desktops, All-in-One (AIO) PCs, and Workstations in India for several years. It was among the first companies to initiate PC manufacturing in India in 2006. However, in 2020, HP consolidated its manufacturing operations and relocated them to the Flex facility in Chennai.

The PLI for IT Hardware was initially announced in May 2021 with the objective of establishing India as a global manufacturing hub for laptops and tablets and increasing participation in the global electronics value chain. With a budget allocation of Rs 7,350 crore, the scheme attracted both global and Indian IT hardware manufacturers. However, two years later, there was still a significant gap between the set targets and actual investments. Consequently, the Indian government introduced PLI 2.0 in collaboration with the industry, allocating a budget of Rs 17,000 crore.

"The first PLI had limited success, with only 3 out of 4 companies achieving their targets and claiming incentives. However, MeitY has introduced PLI 2.0, which offers additional incentives and flexibilities, likely to boost IT hardware manufacturing in the country," explained Col Suhail Zaidi (Retd), Director General of the Manufacturers' Association for Information Technology (MAIT), representing the ICT and electronics manufacturing sector in India.

To bolster PLI 2.0, the government has implemented restrictions on the import of IT hardware, requiring OEMs to apply for licenses before importing. While this government move has led to more than 30 applications for PLI 2.0 for domestic manufacturing of IT hardware, including laptops, tablets, servers, and ultra-small form factor devices, it is expected to create a significant demand-supply gap in the short term, causing a substantial increase in the prices of existing hardware.

With PLI 2.0, the government aims to shift the focus from mere assembly to more extensive manufacturing and local value addition. Industry experts have expressed concerns about the requirement under PLI 2.0 for companies to produce printed circuit boards in India, as the ecosystem for this is not yet fully developed. Additionally, establishing facilities for sustainable PC manufacturing is likely to take about a year. Given the lack of a supportive ecosystem for local manufacturing, most companies will incur losses in addition to capital expenditures when manufacturing hardware in India. This could lead to a price increase of around Rs 2,000 to Rs 4,000 for locally manufactured mid-range PCs.

Consequently, PC companies are urging the government to postpone import restrictions by at least one year, enabling them to establish their local manufacturing facilities and attract ecosystem players.