Limiting Imports of IT Hardware in India

By Shivangi Acharya
NEW DELHI (Reuters) – India is expected to limit imports of laptops, tablets, and personal computers after January, according to two government sources with direct knowledge of the matter. This move aims to encourage companies like Apple (NASDAQ:AAPL) to boost domestic manufacturing.

This plan, if executed, could disrupt an industry valued between $8 billion and $10 billion, reshaping India's IT hardware market, which heavily depends on imports.

A similar import restriction proposal was withdrawn last year due to backlash from companies and lobbying from the United States. Since then, India has been monitoring imports under a regime set to expire this year, prompting firms to seek new import approvals next year.

The government believes it has given the industry sufficient time to adapt, as noted by the sources who requested anonymity due to the private nature of discussions.

Government Consultations

One source indicated that New Delhi will commence consultations with all relevant parties next week. There may be a delay in implementing the import restrictions by a few months if necessary.

India's Ministry of Electronics and Information Technology (MeitY) is currently developing a new import authorization system. Under this system, companies will need prior approval for imports, deviating from the current process that allows laptop importers to freely register online.

Market Dynamics

The industry is currently dominated by HP (NYSE:HPQ), Dell (NYSE:DELL), Apple, Lenovo, and Samsung (KS:005930), with imports satisfying two-thirds of Indian demand, a substantial portion coming from China. The total IT hardware market in India, encompassing laptops, is nearly $20 billion, with $5 billion attributed to domestic production, according to consultancy Mordor Intelligence.

The government is also contemplating minimum quality standards under its 'compulsory registration order' for laptops, notebooks, and tablets to eliminate inferior quality devices.

As one official noted, "We are considering such restrictions due to global treaties that prevent imposing tariffs on laptops and tablets, leaving us with limited policy options to curb imports."

While requests for comments from the federal electronics ministry went unanswered, the trade ministry stated that an appropriate decision on the import management system would follow consultations with the electronics ministry and other stakeholders.

Local Production Benefits

Such restrictions would benefit contract manufacturers like Dixon Technologies, which have formed agreements with global firms like HP to manufacture laptops and computers in India. Dixon aims to fulfill 15% of India's total demand.

Considerations for Production Capacity

Limits on imports should be aligned with India's domestic production capabilities, asserted an industry source involved in government talks.

India's production incentive scheme for IT hardware has attracted participation from global firms, including Acer, Dell, HP, and Lenovo. The electronic minister stated last year that most approved participants are ready to commence manufacturing.

Federal subsidies worth nearly $2.01 billion are being allocated to stimulate domestic production.

Data from research firm Counterpoint noted a 4% decline in imports of fully assembled laptops in the first five months of 2024 compared to the previous year, with companies like Lenovo and Acer ramping up local assembly for entry-level products.

India has continually emphasized the necessity for "trusted sources" for electronics and communication devices amid rising concerns over cybersecurity and data breaches. In 2022, Prime Minister Narendra Modi highlighted the need to lessen dependence on foreign entities for communication technology, including servers.

Starting April 2025, India will enforce mandatory testing of "essential security parameters" for all CCTV cameras.

($1 = 84.0390 Indian rupees)

(Additional Reporting by Munsif Vengattil in Bangalore; Editing by Jacqueline Wong)