The government’s new incentive framework for mobile phone manufacturing is likely to favour companies with scale, export capabilities and strong domestic supply chains, with Dixon Technologies well positioned to meet these requirements, according to Motilal Oswal Financial Services.
According to Motilal Oswal, the Mobile Phone Manufacturing Scheme (MPMS) has an incentive outlay of Rs 62,500 crore spread over five years from FY26 to FY31, with incentives ranging from 2.25% to 5.0% depending on whether companies meet prescribed sales thresholds.
The brokerage said the scheme aims to increase domestic and export volumes while encouraging greater local value addition, with its scale requirements restricting competition to companies with sufficient manufacturing capacity and backward integration. The mobile phone manufacturers and electronics manufacturing services (EMS) players must have a minimum turnover of Rs 10,000 crore in FY25-26 to qualify. With FY26 as the base year, it noted, a brand must also generate minimum incremental sales of Rs 5,000 crore each year.
As per the brokerage’s note, the cumulative sales threshold above FY26 levels rises to Rs 5,000 crore in FY27, Rs 10,000 crore in FY28, Rs 15,000 crore in FY29, Rs 20,000 crore in FY30 and Rs 25,000 crore in FY31.
Motilal Oswal added that meeting these targets would require brands to increase production rapidly, supported not only by domestic demand but also by a sharp rise in exports. The brokerage believes Dixon has the brand-level scale needed to satisfy these conditions.
The incentive framework has two tiers. Sales up to the difference between baseline domestic sales and average sales for FY24, FY25 and FY26 will receive incentives of 2.75% in FY27 and FY28, 2.50% in FY29 and FY30, and 2.25% in FY31, it said, with baseline domestic sales assumed to increase by 15% annually.
Eligible sales above the baseline, according to the brokerage, will attract a higher incentive of 5.0% in FY27 and FY28, 4.5% in FY29 and FY30, and 4.0% in FY31.The brokerage added that further companies can also receive additional incentives of up to 1.5% for sourcing key components domestically, comprising 0.3% each for display and camera modules, 0.5% for enclosures, and 0.2% each for batteries (including cells) and USB cables (including connectors).
These benefits, it noted, will apply when domestically sourced components are used in at least 25% of the mobile phone units sold during a financial year.
Motilal Oswal also said that the scheme provides separate support for Indian mobile brands. India-registered manufacturers and EMS companies with a minimum turnover of Rs 1,000 crore in FY26 will be eligible, it said, although there is no minimum sales threshold for Indian brands, with the Empowered Committee selecting the brands that qualify.
Selected Indian brands, according to the brokerage, will receive an incentive of 5% on incremental sales over the base year, along with an additional 3% on eligible sales involving Indian design and research and development. The domestic sourcing incentives, it added, will remain the same as those available under the broader mobile phone manufacturing programme.
Motilal Oswal expects the scheme to lift volumes for mobile brands and EMS companies, particularly through exports. It also sees greater benefits for manufacturers that have already invested in backward integration and domestic component sourcing.
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