IT hardware firms find scaling up in India tough

NEW DELHI: Despite a highly competitive incentive scheme to attract companies looking to shift IT hardware manufacturing from China, cost remains 3-4% higher when assembling in India, industry executives said. IT firms like Acer pointed to the lack of a consolidated ecosystem in India on the lines of the one in China as a key reason why they were finding it difficult to ramp up local production of IT hardware, justifying it against zero-duty imports.

However, companies are still going ahead with making some models in India, as the government is expected to tighten imports from China in 2025 under the import management system to spur local manufacturing. “There are challenges in terms of cost structures because there has been a lot of consolidation of the supply chain in China,” said Sudhir Goel, chief business officer, Acer India. “But I think time has come when India can definitely scale up. We have now seen that there is policy stability in the last four-five years where there is a consistent thought process, but it is still not competitive enough.”

Goel said companies are taking a phased approach where initially the costs will be higher to make in India, but eventually as the supply chain shifts and there is scale, the cost structures can improve. “In this period, we are actually incurring double costs in logistics when importing components, which is the primary reason for the higher cost in producing in India. During this phase, there will still be a 3-4% gap despite the offset from the PLI,” Goel said.

Most IT hardware firms, which have started making locally in India with PLI-eligible partners have been sourcing components such as the printed-circuit board, display, storage and memory from China, leading to both increased lead times in production and higher costs, executives said.

A senior executive from another global IT hardware firm said while sourcing components locally for desktops has been made possible in India, doing so for a laptop is trickier given its shorter shelf life.

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