Smartphone makers seeks 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 calling for increased governmental support for local component manufacturing. Industry leaders warn that the surge in global input costs, coupled with the swift integration of artificial intelligence (AI), is challenging the current assembly-led growth model. Executives from both local and international smartphone brands emphasize that India’s electronics strategy needs to transition from mere assembly of finished devices to fostering a robust local supply chain for components, including semiconductors and advanced processing hardware. Anand Dubey, CEO of Indkal Technologies, highlighted the consumer electronics sector’s vital role in driving India’s economic growth but stressed the necessity for enhanced policy measures to promote localization. “Budget 2026 must significantly extend the Production-Linked Incentive (PLI) scheme and similar initiatives to bolster localization, increase domestic value addition, and reduce reliance on imports,” Dubey stated. He further urged the government to create an ecosystem that empowers Indian firms to design, engineer, and scale local brands for global prominence. With rising component costs squeezing profit margins and potentially impacting device affordability, industry leaders assert that immediate action is critical. Rajesh Sethi, CFO of Lava International Ltd, mentioned that the inflation affecting global memory and semiconductor prices is already having a detrimental effect on market pricing. “Addressing the inflation of memory and semiconductor prices is essential to maintain device affordability. The next phase of component-linked incentives, along with the Electronics Component Manufacturing Scheme (ECMS), is vital for restructuring costs, enhancing domestic value addition, and establishing resilient supply chains,” Sethi remarked. He emphasized that robust and forward-looking policy support is essential for the electronics and semiconductor sectors to diminish India’s dependency on imports. Sanjeev Agarwal, Executive Director and Chief Manufacturing Officer at Lava, added that the country’s manufacturing ambitions have reached a pivotal moment where deeper localization is not just timely but essential. Strengthening the domestic manufacturing ecosystem could facilitate the next growth phase for the Indian smartphone industry, aiming for increased exports and improved global competitiveness. Global manufacturers are also grappling with escalating supply-chain challenges. Sudhin Mathur, COO of Xiaomi India, indicated that the sector is under persistent pressure from rising input costs driven by fluctuating component prices and changing global supply dynamics. Mathur pointed out that targeted sector-specific Foreign Direct Investment (FDI) relaxations could bolster the electronics manufacturing ecosystem, potentially lowering costs and attracting sustained investment amid the growing demand for AI-driven features that necessitate advanced memory and processing components. As the Budget approaches, industry stakeholders are emphasizing that while the initial phases of the PLI scheme have successfully scaled smartphone assembly, the upcoming phase must focus on creating a more integrated policy framework that prioritizes component manufacturing. Executives believe that clearer support for smaller parts production could position India as a competitive global hub for advanced electronics.