India’s laptop ban hints at limits of onshoring

Acer Incorporated

18/08/2023 03:45

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Shritama Bose
       MUMBAI, Aug 18 (Reuters Breakingviews) - India’s plans
to become a major personal computer maker to the world may face
a hard reboot.  Earlier this month, Prime Minister Narendra
Modi’s administration announced a surprise licensing regime for
the hardware in the hopes of cutting a $14 billion import bill.
Convincing manufacturers like America’s Dell  DELL.N  and HP
 HPQ.N  to manufacture locally in the giant emerging market will
take much more.
    Just one day after New Delhi’s shock announcement that
special import licences would be required for PCs, laptops and
tablets with immediate effect, officials partly walked back on
the new rules. Implementation has been pushed back by three
months amid opposition from blindsided device makers. Details of
how the mechanism will work are now being ironed out.
    Officials cite reasons ranging from boosting local
manufacturing to addressing the trade imbalance with China to
national security. Regardless, winning over firms like HP,
Lenovo  0992.HK , Dell, Acer  2353.TW  and Asus  2357.TW  will
be vital. The five account for over 82% of the country’s
personal computer market, according to International Data
Corporation. And while sales in the overall IT hardware market,
which includes computers, servers and laptops, were just $10
billion for the year to March – half of Dell’s sales in the
three months to May  – developing supply chains in a market
where demand for computers is five times local output, according
to S&P Global Market Intelligence, makes sense.
    The problem is, unlike in semiconductors, where global
chipmakers are scrambling to diversify their supply chains,
laptop brands and their contract manufacturers like Taiwan’s
Foxconn  2317.TW  and Wistron  3231.TW  have already been
shifting factories outside the People’s Republic. A fifth of
Dell laptops will be made in Vietnam this year, the Nikkei
reported, while HP is moving aggressively to expand production
in Thailand and Mexico. India will have to compete with these
countries to woo foreign investment. Moreover, requiring special
licences for computer imports could draw ire from trading
partners including the Association of Southeast Asian Nations,
India’s largest source of IT hardware after China, since many
trade agreements prohibit non-tariff barriers. 
    New Delhi is adding stick to its carrot approach to lure
overseas companies. The government’s $24 billion flagship
production-linked incentive scheme, which offers subsidies for
manufacturing investments in more than a dozen sectors already
includes computer hardware and has had some success in mobile
phones; local value addition in handsets has risen to 20% over a
three-year period, faster than Vietnam and China, authorities
say. Removing red tape and speeding up payouts would make the
arrangement even more attractive. India is late though to the PC
party and global companies and nearby countries all have a
reason to push back. 
    Follow @ShritamaBose on X

    CONTEXT NEWS
    India is open to the idea of giving foreign companies more
time to set up manufacturing units if they submit a detailed and
graded roadmap of local manufacturing plans for laptops,
personal computers and servers, The Economic Times reported on
Aug. 14, citing an unnamed government official.
    The country’s Directorate General of Foreign Trade on Aug. 3
restricted the import of laptops, tablets and personal computers
and said the entry of these items would be allowed against valid
licences. On Aug. 4, the Department deferred the implementation
of the restriction by three months to Nov. 1.

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India aims to up electronics output exponentially    https://tmsnrt.rs/44eiHnG
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 (Editing by Robyn Mak and Thomas Shum)
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