The Indian government has launched the ₹62,500 crore Mobile Phone Manufacturing Scheme and the ₹1.3 trillion Semicon 2.0 initiative to boost electronics production. While these programs aim to increase domestic value addition and exports, experts note that higher competition may cap the profit margin gains for contract manufacturers like Dixon Technologies and Amber Enterprises.
The Indian government has officially approved the next phase of its manufacturing incentive programs, introducing the Mobile Phone Manufacturing Scheme (MPMS) and an expanded semiconductor support plan, known as Semicon 2.0. The government has allocated ₹62,500 crore for mobile phone incentives and a significant ₹1.3 trillion for the second phase of the Indian Semiconductor Mission. These initiatives are designed to build on the foundation laid by previous schemes, with a renewed focus on deep local value addition rather than simple assembly.
Strategic Shift to Value Addition
While the first phase of the Production Linked Incentive (PLI) scheme successfully elevated India to the position of the world's second-largest mobile manufacturer, the government noted that domestic value addition remained lower than desired, reaching approximately 18-19% compared to the original goal of 35-40%. The new MPMS, which runs from fiscal year 2027 to 2031, attempts to correct this by offering tiered incentives. Companies can receive base incentives ranging from 2.25% to 5% on eligible sales, with additional rewards of 1.5% for sourcing critical components domestically and 3% for local design and research efforts.
Impact on Manufacturing Services
Electronic Manufacturing Services (EMS) companies are expected to play a central role in these schemes. Brokerage firms, including Motilal Oswal and BNP Paribas, have pointed to Dixon Technologies and Amber Enterprises as key entities positioned to benefit from the increased manufacturing activity. For Amber Enterprises, the focus is largely tied to its strategic partnerships, such as the deal with Oppo, which helps the company integrate further into the mobile and electronics supply chain. Dixon Technologies, having been a major participant in the first phase of the PLI, is expected to leverage its existing infrastructure to tap into these new incentives.
Competitive Risks and Margin Outlook
Despite the positive reception from policymakers and industry analysts, the financial benefits for companies may not be as straightforward as they were in the initial phase. Financial analysts at JM Financial have cautioned that the competitive environment has intensified significantly since 2021. Because incentives in the new scheme are calculated based on incremental sales over a 2026 base year, the potential for rapid, high-margin growth is more limited for established players like Dixon, which already achieved high production volumes by that time. Furthermore, the push toward exports places Indian manufacturers in direct competition with global peers, where profit margins are often thin and heavily dependent on efficiency. Investors may track how these companies manage the cost of scaling their operations against these incentive structures and whether they can successfully increase the share of locally sourced components to qualify for the additional incentives.