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Lava To Separate Production Facility For PLI Goals

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Optimistic with a new component production incentive package, Lava International plans to spin off its production arm to attract business and meet PLI scheme targets.

Indian smartphone brand and contract manufacturer Lava intends to separate its production unit from the main company, as per reports. This move aims to attract business from other handset brands and achieve the targets set under the production-linked incentive (PLI) scheme for smartphones.

Although the company has never met its PLI smartphone targets since the scheme’s inception, it hopes to improve its manufacturing outcomes with the new component production incentive package by the government.

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As per the Head of Manufacturing, Lava International, Sanjeev Agarwal’s statement to the Economic Times, the challenge to overcome the failed PLI target is to boost production by Rs 5 billion annually, either by expanding Lava’s market share or by supporting manufacturing for other brands.

Lava plans to enhance local value addition and intellectual property by leveraging the upcoming PLI components. As manufacturing has remained a constant focus, the company aims to advance in component production, expanding beyond printed circuit board assembly and deciding which components to produce in-house or outsource.

Agarwal further explained that Lava’s difficulty in meeting smartphone PLI targets was due to starting with a higher production base, which made it harder to achieve incremental goals compared to newer companies that began manufacturing with the scheme and faced lower initial targets.

He noted that establishing an ecosystem will reduce lead times and improve working capital efficiency.

The company also lost business with top Chinese brands and Google Pixel because rival brands avoid partnering with manufacturers with their brands, missing out on opportunities from the government’s PLI push, according to Agarwal.

The electronics industry is awaiting the government’s announcement of the new scheme’s financial outlay in the 2024-2025 union budget, seeking Rs 45,000-75,000 crore expected by the end of the fiscal year.

The industry seeks a package supporting both capital and operating expenses to build a component ecosystem.

The Electronics Industries Association of India (ELCINA) requests 40% capex support for critical components and a seven-year OPEX incentive under PLI, with varying rates based on meeting sales and production targets.

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