As per the scheme guidelines, Samsung, having met the Rs4,000 crore production target for the first year, must produce mobile phones worth Rs 8000 crore in the second year over and above their base year (FY19-20) revenues in the above $200 price category, to avail of the second-year incentives of 6% cashbacks.

New Delhi: Samsung Electronics, the only company to achieve production target for the handset production-linked incentive (PLI) scheme, has chosen FY20-21 as its first year to avail the 6% incentive, a person familiar with the matter said.

“Samsung will take its incentives for the first year – FY20-21. It did all the hard work and met its targets,” the person said.

The choice means that while the rest 15 manufacturers including iPhone makers Foxconn, Wistron etc. will produce incremental goods worth Rs 4000 crore in the current fiscal which started on April 1, Samsung will need to manufacture double of that in a year marred by the Covid second wave and an anticipated third wave, to avail of the second year’s incentives, say industry experts.

Samsung didn’t respond to ET’s emailed query.

“Samsung had a quick ramp up last year because of its already installed capacity in their Noida factory and larger dependency on Korea rather than China for its supply chain, which is why they were able to achieve the targets while everyone else lagged behind,” said an industry expert who did not wish to be named.

“But in the current year when India was facing a destructive second wave, their factory was working on 50-60% capacity due to the disruptions as well as falling market demand. With another spurt of Covid infections predicted in the fourth quarter, producing an additional Rs 8000 crore worth of goods may be challenging for the company,” he added.

The South Korean electronics maker clocked in revenue of Rs 70,628 crore in FY19-20, of which close to 70% came from the mobile phone segment, according to business intelligence firm Tofler.

As per the scheme guidelines, Samsung, having met the Rs4,000 crore production target for the first year, must produce mobile phones worth Rs 8000 crore in the second year over and above their base year (FY19-20) revenues in the above $200 price category, to avail of the second-year incentives of 6% cashbacks.

“In the first year of the scheme, Samsung had started manufacturing high value phones locally while outsourcing the production of lower segment phones via EMS (electronics manufacturing services) players,” a smartphone market research analyst said. “We believe it will continue the same strategy going forward, but, it must be kept in mind that demand for above $200 phones in India is limited and they may have to rely on higher exports for meeting targets.”

In a relief to the handset manufacturing industry at large, the government earlier this month decided to extend the timeline for PLI scheme by one year while accepting FY20-21 as zero year for companies to make fresh investments and expand manufacturing capacity amid Covid-related difficulties.

But Samsung, being the only producer to qualify the targets, has chosen to stick to the original timeline to avail the crucial 6% incentive.

“It was a wise decision because you can’t let go of incentives for already produced output over uncertainties of the future,” the person quoted above said.

The ambitious Rs41,000 crore handset PLI scheme–which entails incentives in the form of cash payouts based on investment and targeted increments in production–is aimed at making India a more attractive manufacturing destination and weaning companies away from bases such as China and Vietnam. The Centre is looking to make the country a global manufacturing hub with an export target for phones worth $100 billion over the next five years.

The PLI offers graded incentives of 6% of incremental sales of goods achieved over base year for the first two years each, 5% for the third and fourth year and 4% for the fifth year. To qualify for these, global companies must produce incremental goods worth Rs 4,000 crore, Rs 8,000 crore, Rs 15,000 crore, Rs 25,000 crore and Rs 50,000 crore in five successive years.

https://telecom.economictimes.indiatimes.com/amp/news/samsung-chooses-fy21-as-first-year-to-avail-6-pli-incentives/84404442