Govt weighs PLI in wearables; move may boost localization

New Delhi/ Mumbai: The Union government is weighing the introduction of a production-linked incentive (PLI) scheme for wearables, including hearing devices, to boost local production by both Indian and global companies.

“We’re exploring whether there’s a need for it. It’s the fastest-growing category (for consumer goods). The Indian brands are doing very well,including designing and manufacturing, and they are quite competitive,” a senior official in electronics and information technology ministry said seeking anonymity.

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

The government was evaluating the requirement of a scheme for wearables after PLIs were introduced for 14 sectors, starting with mobile phones in 2020, which led to soaring exports from leading manufacturers like Apple and Samsung. Other brands have also raised their local production capacities and value addition for goods made in India.

While plans for hearables and wearables may be in the early stages, industry stakeholders said the move could boost localization for Indian brands, which account for 75% of the overall wearable and audio products segment in India.

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

Counterpoint Research estimates suggest that wearables and audio products could be an $11 billion industry in India by 2028, and a PLI scheme will help create a robust supply chain, besides easing pressure on the already-tight margins of popular brands.

“PLI for the sector does make sense since it would bring extra incentives for us to make more products here. This, in turn, will create more employment. Even if the direct beneficiaries of incentives will be contract manufacturers, local assembling will reduce our per-unit cost. Potentially, this can cut down import duties of components by up to 5%, which would further augment our margin,” said a top executive from a leading wearables company.

The Indian market is dominated by local brands Fire-Boltt, Noise and boAt, which together make up for a 75% share in smartwatches. boAt, Boult Audio, OnePlus, Noise and Mivi are the top five brands in the true wireless stereo (TWS) segment. boAt was No.3 globally with a 6% share in TWS shipments as of June.

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

Tarun Pathak, research director at Counterpoint, said the wearables and hearables market in India crossed 100 million units shipment last year. In terms of value, it is around $4 billion, and by 2028 it is expected to grow to $11 billion, driven largely by a rise in demand and shipments, and not a major increase in the average selling price (ASP), he added.

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

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

In terms of volumes, IDC projected 2023 to see 130-140 million wearables being shipped, out of which 70% is expected to be earwear. However, the value of these shipments will be lower, as the wearable category comes with an ASP that is 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 is looking to set up a plant.

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

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

The industry is expecting the wearable PLI scheme to come through soon. There wouldn’t be a dearth of applicants for it, with Indian brands and manufacturers such as Dixon Technologies being the potential beneficiaries.