Industry Odisha Bureau, Oct 25: Falling sales and costly components may deter applicants. Smaller Indian brands face the steepest climb. Yet incentives for Indian design and local sourcing could still lift domestic manufacturing.
India’s smartphone market slump could slow applications for Mobile PLI 2.0. The scheme is formally the Mobile Phone Manufacturing Scheme (MPMS). Industry sources told The Hindu BusinessLine that weak demand may keep firms from qualifying.
Demand is weak, component prices are rising, and parts are scarce. Counterpoint Research says the overall market has shrunk 20% year on year. Lower sales make the turnover needed for incentives harder to reach.
The MPMS has two target segments. Target Segment 1 (TS-1) covers mobile makers and EMS providers registered in India. Applicants need minimum FY2026 turnover of ₹10,000 crore. Its application window reportedly opened on October 15, 2026.
Target Segment 2 (TS-2) sets a lower bar of ₹1,000 crore. It also covers manufacturers, including EMS companies, registered in India. Its application window had not been notified as of October 25. These are reported thresholds, not necessarily the full eligibility rules.
The distinction between OEMs and EMS firms matters here. OEMs, or original equipment manufacturers, design and sell phones under their own brands. EMS providers, or electronics manufacturing services firms, assemble devices under contract.
Some industry sources fear contract manufacturers will absorb most domestic benefits. One anonymous source said the scheme expands capacity but does not solve volume challenges. The source added that domestic players may see little direct impact. These are individual views, not an industry-wide consensus.
Capacity and brand strength are different goals. Contract assembly builds industrial scale. Indian-owned brands, however, carry design, intellectual property and deeper value addition.
Indian brands have made modest gains. Their shipment share rose from 2% in Q3 2025 to 7%, per Counterpoint. Yet a bigger share of a shrinking market need not mean more phones sold. Domestic brands must still raise volumes to qualify.
One component supplier reported smartphone production in India falling at least 10–20%. That is a supplier’s assessment, not official nationwide data. Lower output weakens economies of scale and complicates production planning.
One unnamed Indian OEM is still awaiting separate TS-2 guidelines for local brands. It is seeking more detail before deciding whether to apply. A contract manufacturer confirmed it is applying for PLI 2.0.
Faisal Kawoosa, Chief Analyst and Founder of Techarc, links targets to global volumes. Weaker volumes, he argues, make the scheme’s thresholds harder to meet. He expects the industry may seek revised criteria by end-December 2026. Such a request would not guarantee any change by policymakers.
The incentive design rewards more than assembly. Eligible Indian brands can receive a 5% incentive. An additional 3% applies for eligible Indian design and R&D. Up to 1.5% more is offered for domestic sourcing of key components across both segments. Each benefit carries its own conditions.
Shubham Singh, Research Analyst at Counterpoint Research, sees value for OEMs. Revenue-linked incentives, he says, could cushion pressure on margins. Local sourcing rewards may also stimulate demand for Indian-made components.
The scheme’s success now hinges on demand, compliance and manufacturing depth. For now, its long-term promise faces a difficult near-term market.
