India unveils mobile manufacturing scheme, Dixon Tech shares surge 7%
India is replacing its expired production-linked incentive programme with a five-year scheme that rewards domestic R&D and component sourcing, a policy shift expected to significantly expand the market share of domestic contract manufacturers like Dixon Technologies.
India will release the administrative notification for a new mobile phone manufacturing scheme within the next fortnight, electronics minister Ashwini Vaishnaw confirmed. The five-year programme replaces the production-linked incentive scheme that lapsed on March 31. Shares in Dixon Technologies, India's largest domestic contract manufacturer, climbed 7% on the news.
The new scheme marks a strategic shift in how New Delhi subsidises electronics. While the previous framework targeted sheer production volume, the incoming rules tie subsidies directly to domestic value addition. Eligible sales will receive incentives ranging from 2.25% to 5%, with an additional 1.5% for sourcing key components locally and a 3% bonus for Indian brands investing in their own design and R&D.
Government projections indicate the policy will drive cumulative smartphone production of Rs 39 lakh crore and exports of Rs 15 lakh crore, creating 600,000 direct jobs. This compares to the previous scheme's run of Rs 22 lakh crore in production and Rs 7.5 lakh crore in exports. The overarching goal is to lift domestic value addition in smartphones from 24% currently to between 40% and 45% by the end of the tenure.
Dixon Technologies stands out as a primary beneficiary of this regulatory architecture. The company recently secured government approval for a joint venture with Chinese brand Vivo Mobile India, where Dixon holds a 51% stake following a December 2024 term sheet. This entity will manufacture smartphones for Vivo and potentially other brands. The JV approval follows an expansion of customs duty concessions on electronics machinery and components last week, which analysts expect will improve Dixon's unit economics and margins.
Brokerages have responded aggressively to the convergence of policy support and the Vivo partnership. Emkay raised its target price to Rs 15,200 from Rs 13,477, representing an 11% upside, and upgraded its earnings-per-share estimates for FY27 and FY28 by 14% and 17% respectively. It projects the Vivo venture will produce 6.5 million units in FY27 and 18 million in FY28.
Nomura maintained a Buy rating with a target of Rs 13,813, estimating Dixon's total annual output could approach 60 million units if it secures 70% of Vivo's production. That would translate to a 35% to 38% share of India's mobile manufacturing market, up from roughly 18% currently.
"The government's conditionalities for incentives are aligned with the industry's perspective which focuses on building scale, making India globally competitive, and owning intellectual property," said Atul Lall, managing director at Dixon Technologies.
