The government is weighing PLI in wearables; relocation can boost localization

“We are investigating whether there is a need for this. It is the fastest growing category (for consumer goods). The Indian brands are doing very well, both in terms of design and production, and they are quite competitive,” said a senior official of the ministry of electronics and information technology, seeking anonymity.

PLI schemes are intended to encourage local manufacturing through incentives. Companies can supply locally produced goods to domestic and export markets. Several electronics manufacturing and service companies export smartphones and other electronic devices.

The government evaluated the need for a scheme for wearables after introducing PLIs for 14 sectors, starting with mobile phones in 2020, leading to rising exports from leading manufacturers like Apple and Samsung. Other brands have also increased their local manufacturing capacity and value addition for Indian-made goods.

While plans for hearingables and wearables may still be at an early stage, industry stakeholders say this move could boost localization of Indian brands, which represent 75% of the total wearables and audio products segment in India.

Currently, about 55% of all products in this category are made in India, and this is expected to reach 90% in the next three years, industry executives said.

Counterpoint Research estimates show that wearables and audio products could be an $11 billion industry in India by 2028, and a PLI program will help create a robust supply chain, in addition to easing pressure on already tight margins from popular brands.

“PLI for the sector makes sense as it would provide additional incentives for us to make more products here. This in turn will create more employment. Even if the direct beneficiaries of the incentives will be contract manufacturers, local assembly will reduce our unit costs. This could potentially reduce import duties on components by as much as 5%, which would further increase our margins,” said a top executive of a leading wearables company.

The Indian market is dominated by local brands Fire-Boltt, Noise and boAt, which together account for a 75% share of smartwatches. boAt, Boult Audio, OnePlus, Noise and Mivi are the top five brands in the true wireless stereo (TWS) segment. boAt was number 3 globally with a 6% share of TWS shipments as of June.

In the smartwatch segment, Indian brands have increased their global market share to 34% in June from 22% in June 2022. Noise has a global market share of 10% in smartwatches, according to Counterpoint.

Tarun Pathak, research director at Counterpoint, said the wearables and hearingables market in India crossed the 100 million unit mark last year. In terms of value, this amounts to approximately US$4 billion, and by 2028 it is expected to grow to US$11 billion, largely driven by an increase in demand and supply, rather than a large increase in the average selling price (ASP ), he added.

Amit Khatri, co-founder of Noise, said the company “makes about 95% of its products in India, with more than 1 million smartwatches shipped every month.”

Sameer Mehta, CEO of boAt, said nearly 65% ​​of the company’s earwear products, and 90% of its wearables, are assembled locally.

In terms of volumes, IDC expects 130 to 140 million wearables to be shipped in 2023, of which 70% are expected to be earphones. However, the value of these shipments will be lower as the wearable category comes with an ASP that represents a tenth of the smartphone market, said Navkendar Singh, associate vice president, India, IDC.

According to reports, contract manufacturer Foxconn is planning to make Apple’s Airpods in India and wants to set up a factory.

Analysts said the PLI program will further boost localization efforts. Given India’s already robust supply chain for increased local assembly, India can also contribute to meeting export targets.

“If brands can start producing here on a large scale, they can even start exporting locally assembled products. Brands like Fire-Boltt already export some products to Vietnam and the Philippines, but still import parts from China. In such a scenario, it only makes sense to treat India as an export hub,” Singh said.

The industry expects the portable PLI program to be implemented soon. There would be no dearth of applicants, with Indian brands and manufacturers like Dixon Technologies being the potential beneficiaries.

Updated: Sep 20, 2023 12:00 IST