Smartphone makers seek PLI push in budget as rising costs test Make-in-India ambitions

As Finance Minister Nirmala Sitharaman gears up to unveil the Union Budget for 2026–27 on February 1, the smartphone sector in India is urging the government to amplify support for local component manufacturing. Industry leaders are highlighting the challenges posed by escalating global input costs and the rapid integration of artificial intelligence in devices, which they believe are straining the current assembly-led growth model. Executives from both Indian and international brands are advocating for a shift in India’s electronics strategy. They emphasize the necessity of bolstering the local supply chain for components such as memory chips, semiconductors, and sophisticated processing hardware, rather than just focusing on finished device assembly. Anand Dubey, CEO of Indkal Technologies, stated that the consumer electronics sector is crucial to India's economic progression, and he called for enhanced policy support to drive localization efforts. "Budget 2026 must vigorously extend the production-linked incentive (PLI) scheme and related initiatives to boost localization, increase domestic value addition, and reduce reliance on imports," Dubey expressed in a conversation with Business Today. He further emphasized the importance of creating an ecosystem that enables Indian firms to develop, engineer, and scale homegrown brands for international dominance. The urgency of these measures is underscored by rising component costs, which are squeezing profit margins and threatening device affordability. Rajesh Sethi, CFO of Lava International Ltd, pointed out that inflation in global prices for memory and semiconductors is already impacting the market. He noted the critical need for more component-linked incentives and the Electronics Component Manufacturing Scheme (ECMS) to stabilize cost structures and enhance domestic contributions. Sanjeev Agarwal, Lava’s executive director and chief manufacturing officer, remarked that the push for manufacturing in India has reached a stage where increased localization is both necessary and timely. He believes that strengthening the domestic ecosystem would pave the way for the next growth phase in the Indian smartphone industry, focusing on exports and enhancing global competitiveness. Global manufacturers are also facing significant supply-chain challenges. Sudhin Mathur, COO of Xiaomi India, highlighted ongoing cost pressures due to rising component prices and changing global supply-chain dynamics. He pointed out that targeted foreign direct investment relaxations could bolster the electronics manufacturing ecosystem, potentially lowering costs and attracting long-term investments at a time when the adoption of AI-driven features is increasing the demand for advanced memory and processing components. As the Budget approaches, industry leaders assert that while the initial phases of the PLI scheme were beneficial for scaling smartphone assembly, the next steps must involve a more integrated policy framework focused on component manufacturing. They believe that clearer support for smaller parts production could position India as a competitive global hub for advanced electronics.