Moving beyond assembly, MPMS rewards the manufacturing of displays, chips, camera modules and other critical smartphone components
NEW DELHI: The Union Cabinet approved the Mobile Phone Manufacturing Scheme on July 15 with a budgetary outlay of ₹62,500 crore spread across five years from FY27 to FY31. The scheme replaces the earlier Production Linked Incentive programme for large scale electronics manufacturing which concluded in March.
While the headline number invites comparison with the older scheme the more meaningful shift lies in how incentives are structured. Instead of rewarding companies purely for final assembly sales as before, MPMS introduces layered incentives that reward domestic component sourcing and local design. This distinction matters because it addresses a problem the earlier scheme never quite solved, India makes a lot of phones but very few of the parts that go into them.
Why the Old Scheme Fell Short
PLI-LSEM by most measures performed well on paper. Capital investment came in at two and a half times the original target while mobile production and exports both comfortably beat their goals. However all of this happened while local value addition remained stuck between 23% and 24%. Since incentives were tied only to the value of finished phones, manufacturers had little reason to localise expensive components like displays, chips or camera modules. They continued arriving as imported kits with assembly happening almost entirely in India.
This mattered because India still imports roughly 70% to 80% of smartphone components largely from China. In the first half of 2026 alone India’s imports from China touched $79.41 billion with electronics forming more than half of that figure. In effect the country built an impressive assembly line but the actual engineering and manufacturing value stayed offshore.
How MPMS Tries to Fix This
MPMS attempts to correct this by stacking incentives. A base incentive of 2.25% to 5% applies to incremental sales similar to before. However an additional 1.5% is now available specifically for sourcing components domestically while a further 3% bonus applies to companies investing in local design and R&D under Indian brands. Together these bonuses push manufacturers to think beyond assembly and toward owning more of the manufacturing chain.
The scheme also splits beneficiaries into distinct categories. Large global contract manufacturers tied to Apple and Samsung fall under one segment while homegrown players like Dixon and Lava are treated separately with comparatively lower thresholds, reflecting their different starting points.
The Hard Part Is Components
Even with better incentive design the bigger obstacle is technical rather than financial. Building a competitive display fabrication facility alone can cost $3 to $4 billion, meaning the entire MPMS outlay could be exhausted on just two or three large component fabs. This is why capital-heavy component manufacturing continues to be routed through separate programmes like the India Semiconductor Mission rather than MPMS itself.
Some early movement is visible. Dixon Technologies has entered a joint venture for display module manufacturing and acquired a stake in a camera module maker, gradually expanding its local component capture from around 10% toward a targeted 35 to 40%. Tata Electronics meanwhile has taken a different route entirely, focusing on high precision contract assembly for Apple rather than building a consumer smartphone brand of its own, while separately investing heavily in semiconductor fabrication.
Can India Build Its Own Smartphone Brands
The scheme’s 3% design and R&D bonus is aimed partly at reviving homegrown smartphone brands, a segment that has essentially collapsed. Brands like Micromax and Karbonn once held meaningful market share in the early 2010s but did so by rebranding imported Chinese hardware rather than investing in design. When Chinese brands entered India directly with better specifications and stronger supply chains local players lost ground almost entirely. Today homegrown brands hold under 3% of the domestic smartphone market with Lava as the only one still meaningfully present.
History suggests this is a difficult gap to close quickly. Countries that successfully built globally competitive electronics brands, South Korea with Samsung and China with Xiaomi and Huawei, did so through two to three decades of sustained state support, protected domestic markets and patient capital. A five-year incentive cycle alone is unlikely to replicate that trajectory though it may lay early groundwork.
Are the Targets Realistic
The scheme aims for cumulative production worth roughly ₹39 lakh crore over five years compared to ₹22 lakh crore achieved under the previous scheme. Given that annual production has already grown from ₹2.14 lakh crore in FY20 to ₹5.5 lakh crore in FY25 and with Apple planning to shift a quarter of its global iPhone production to India by 2027, the production target appears achievable.
Interestingly the employment target is far more conservative than before, just 60,000 direct jobs compared to over 1.8 lakh under the previous scheme. This is not a sign of weaker ambition but rather reflects the nature of the shift, component manufacturing is capital intensive and automated rather than labour heavy, unlike the assembly-line jobs that dominated the first phase.
Whether MPMS succeeds will ultimately depend on something the incentive structure alone cannot guarantee, whether India can build the dense supplier clusters and long-term policy consistency that turned assembly hubs elsewhere into genuine manufacturing ecosystems.
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