India has already become a major mobile phone manufacturing base. The harder task now is to ensure that more of the components, technology and intellectual property behind those phones are also created in the country.

That is the larger ambition behind the government’s new Mobile Phone Manufacturing Scheme (MPMS), notified on Friday, August 21.

With an outlay of ₹62,500 crore over five years from FY27 to FY31, the scheme will offer incentives ranging from 2.25% to 5%, depending on the level of production and sales achieved. It is aimed not only at increasing mobile phone manufacturing but also at supporting Indian mobile phone brands and encouraging manufacturers to use more components and sub-assemblies made in India.

The bigger question, however, is whether MPMS can take India beyond large-scale assembly and help build a deeper electronics ecosystem.

Industry leaders Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association (ICEA), and Ashok Chandak, president of the India Electronics and Semiconductor Association (IESA), believe the groundwork is now being laid through a combination of government schemes.

India has already built scale. What comes next?

The first mobile PLI scheme was primarily about getting companies to invest and manufacture at scale in India.

It appears to have worked.

The scheme, which ended in March 2026, had an investment target of ₹7,000 crore. Actual investment crossed ₹20,500 crore. Mohindroo said PLI 1.0 resulted in manufacturing of around ₹22 lakh crore at a government incentive cost of less than ₹20,000 crore. India’s mobile phone industry has now reached output of more than $71 billion, according to him.

But the domestic market is no longer growing at the pace needed to drive the next leg of that expansion.

India has been selling around 150 million smartphones a year for the past three to four years, Mohindroo said. That makes exports increasingly important if manufacturers are to achieve higher production and sales under MPMS.

“A very large part of this will be for export,” Mohindroo told CNBC-TV18.

That does not mean the government is directly subsidising exports, he said. The incentive is linked to production and can support manufacturing for both domestic and overseas markets.

Mohindroo also expects Indian demand to eventually pick up, pointing to China’s experience. China had reached annual smartphone sales of around 390 million units at its peak, compared with India’s roughly 150 million currently.

The immediate opportunity, therefore, is to use India as a larger global manufacturing base while preparing for the next increase in domestic demand.

Why MPMS cannot work on its own

The most important difference between the first phase and the next one is the emphasis on what goes into a phone, not just how many phones are made.

MPMS is intended to encourage manufacturers to use more components and sub-assemblies made in India. That makes domestic value addition a key measure of whether the strategy is working.

Chandak estimates that India could increase domestic value addition from around 23% currently to 35-40% if the government’s different schemes work together.

“India should be targeting, all schemes put together, 35% to 40% of domestic value addition,” Chandak told CNBC-TV18.

That would mean a greater share of the economic value of a smartphone — from components and manufacturing to design — is generated in India rather than imported.

And this is where MPMS connects with the other programmes.

The three schemes that could change the equation

Chandak’s argument is that MPMS should not be viewed as a standalone manufacturing incentive.

The Electronics Component Manufacturing Scheme (ECMS) is intended to build domestic capacity in areas such as camera modules, multi-layer PCBs, mechanics, cells, capital goods and tooling. These are the components and manufacturing inputs that mobile companies need if they are to increase local sourcing.

Semicon 2.0 adds another layer by building semiconductor capabilities, including Assembly, Testing, Marking, and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) facilities. Chandak pointed out that several semiconductor components used in mobile phones are still imported.

Then there is the Design Linked Incentive (DLI), which is intended to encourage domestic chip design.

Put simply, the strategy is to build the ecosystem around the phone at the same time as India expands phone production.

MPMS can provide the manufacturing scale. ECMS can help localise components and tooling. Semicon 2.0 can build semiconductor capabilities, while DLI can support chip design.

If these programmes develop together, mobile manufacturers should have more opportunities to source from Indian suppliers and use locally developed technologies.

That is what could push India from an assembly-heavy model towards higher-value manufacturing.

The bigger ambition: an Indian global champion

Increasing local value addition is one challenge. Creating an Indian smartphone brand that can compete globally is another.

The government has said it wants a national champion, with the product, intellectual property and R&D capabilities rooted in India.

Mohindroo believes that is possible, but cautions that simply creating an Indian brand will not be enough.

“It has to be a brand or brands deeply invested in R&D, in technology, in building the entire ecosystem,” he said.

That is a significantly harder proposition than manufacturing phones for established global brands.

A company trying to compete globally would need product development capabilities, intellectual property, hardware and software expertise, a supply chain, distribution and, above all, the scale to compete against some of the world’s largest technology companies.

Mohindroo described the task as a “very hard road”. But he also pointed to the progress made by India’s mobile manufacturing industry as evidence that the country can take on ambitious targets when policy support and private investment work together.

Chandak is more confident about the timing.

His view is that India is now in a much better position to attempt this than it was three or five years ago because the manufacturing ecosystem is more developed and several complementary government schemes are now being rolled out.

Can India reach ₹39 lakh crore of production?

The government has set an aggregate production target of ₹39 lakh crore under the new mobile manufacturing push.

Chandak believes the target is achievable, but it will depend on both domestic demand and exports.

India already has companies manufacturing phones for overseas markets, while more global manufacturers are considering a “beyond-China” manufacturing model. That could give India another source of production growth even if domestic smartphone sales remain relatively steady.

“My view is it is not difficult. It is definitely doable,” Chandak said.

This is also why the graded incentive structure under MPMS matters. The higher incentive of up to 5% is intended to reward companies that reach higher levels of production and sales, encouraging manufacturers to build greater scale.

The target, therefore, does not necessarily depend on a dramatic increase in the number of smartphones sold to Indian consumers. A significant part of the growth could come from India producing more phones for global markets.

What will decide whether mobile manufacturing 2.0 works?

The government has now put much of the policy framework in place. The next test is execution.

Exports will matter because India’s domestic smartphone market is relatively mature. Manufacturers will need access to global markets to keep expanding production.

Localisation will determine how much of the value created by that production stays in India. The country will need competitive suppliers across components, semiconductors, tooling and other parts of the electronics value chain.

And technology and R&D will determine whether India can move beyond being a manufacturing destination to becoming a source of products and intellectual property.

That last point is particularly important for the national champion ambition.

India has already demonstrated that it can manufacture smartphones at global scale. The next question is whether it can also design more of those products, develop the components and technologies that go into them, and build brands that can sell them around the world.

That is ultimately what will determine whether MPMS becomes another production incentive scheme or the beginning of a broader shift in India’s electronics industry.

PLI 1.0 helped India build scale. The combination of MPMS, ECMS, Semicon 2.0 and DLI is now intended to build the depth around that scale.

The success of the second phase will be measured not only by how many phones are made in India, but by how much of the value, technology and intellectual property behind those phones is created here.