Headwinds and Ambition: Why India’s New Mobile Phone Manufacturing Scheme Faces a Cautious Industry Response
By Economic and Technology Desk Published: October 25, 2026
Executive Summary: The Paradox of India’s Mobile Manufacturing Ambitions
India’s aggressive push to cement its status as a global electronics manufacturing powerhouse has entered a critical new phase with the rollout of the Mobile Phone Manufacturing Scheme (MPMS). Designed as a successor and evolution of the foundational Production Linked Incentive (PLI) frameworks, the MPMS aims to deepen domestic value addition, foster local research and development (R&D), and fortify indigenous brands against stiff international competition.
However, beneath the initial enthusiasm surrounding the scheme lies a climate of acute industry hesitation. Muted global smartphone sales, persistent component price volatility, and stringent financial eligibility thresholds are threatening to dampen the pace of applications. While major contract manufacturers and multinational giants navigate the framework with calculated steps, domestic Original Equipment Manufacturers (OEMs) and smaller Electronic Manufacturing Services (EMS) providers find themselves weighing ambitious state-backed targets against grim real-market conditions.
As stakeholders grapple with supply chain friction and sluggish consumer demand, questions are mounting over whether the current structural design of the MPMS can effectively rescue domestic players or if its benefits will disproportionately accrue to massive contract manufacturing behemoths.
Chronology of Events: From PLI 1.0 to the Launch of MPMS
To understand the current friction surrounding the Mobile Phone Manufacturing Scheme, it is essential to trace the trajectory of India’s electronics manufacturing policy over recent years:
The Genesis (2020): The Government of India launches the landmark Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing, primarily targeting mobile phone production. This initial framework successfully attracts global giants like Apple suppliers (Foxconn, Pegatron, Wistron/Tata Electronics) and Samsung, drastically boosting India’s smartphone export capabilities.
The Maturation Phase (2023–2025): As the initial PLI scheme matures, industry bodies and domestic brands increasingly lobby policymakers for targeted interventions. They argue that while the first iteration successfully transformed India into an export hub, it largely bypassed homegrown brands struggling with low profit margins and heavy reliance on imported components.
Mid-2025 Market Realignment: Counterpoint Research data highlights a paradoxical shift in the Indian smartphone ecosystem: while the market share of domestic Indian brands inches upward from 2% in Q3 2025 to 7%, the overall domestic market experiences a sharp 20% annual slump due to weakened consumer purchasing power and macroeconomic headwinds.
October 15, 2026: The application window for Target Segment-1 (TS-1) of the MPMS officially opens. This segment is tailored for large-scale mobile phone manufacturers and EMS providers registered in India, requiring a staggering minimum turnover of ₹10,000 crore in the financial year 2026 (FY26).
Late October 2026: While contract manufacturers confirm their participation, domestic OEMs stall their applications. Stakeholders point toward lagging guidelines for Target Segment-2 (TS-2)—which covers smaller domestic brands with a ₹1,000 crore turnover threshold—and warn that criteria revisions may become inevitable by December 2026.
Main Facts: Decoding the Mobile Phone Manufacturing Scheme (MPMS)
The MPMS is structured to address structural gaps in India’s electronics supply chain by dividing participants into distinct target segments backed by tiered financial incentives.
Target Segments and Eligibility Thresholds
Target Segment-1 (TS-1):
Target Audience: Large-scale mobile phone manufacturers and EMS providers registered in India.
Financial Threshold: Minimum turnover of ₹10,000 crore in FY26.
Status: Application window officially opened on October 15, 2026.
Target Segment-2 (TS-2):
Target Audience: Mobile phone manufacturers and EMS companies, specifically aimed at nurturing "Made-in-India" and emerging domestic brands.
Financial Threshold: Minimum turnover of ₹1,000 crore in FY26.
Status: Application window not yet notified, leaving several domestic OEMs awaiting distinct operational guidelines.
Incentive Architecture
The MPMS introduces a nuanced incentive matrix designed to reward localization, indigenous design, and domestic value addition:
Base Incentive: Offers a standard 5% financial incentive specifically structured for Indian brands to help offset margin pressures.
Design & R&D Bonus: An additional 3% incentive is granted for companies undertaking indigenous design, research, and development within India.
Local Sourcing Booster: An additional incentive of up to 1.5% is available for both target segments that successfully integrate domestic sourcing for key components and sub-assemblies.
Supporting Data and Market Realities
The apprehension surrounding the MPMS is deeply rooted in contemporary market data, which presents a challenging operational landscape for handset makers.
The Consumer Demand Slump
According to recent market intelligence from Counterpoint Research, the Indian smartphone market suffered a severe 20% year-on-year slump in overall market performance. Inflationary pressures, extended device replacement cycles, and a tightening of consumer discretionary spending have forced retailers and brands to cut back on forward orders.
Interestingly, while the aggregate market contracted, the market share of domestic Indian brands registered a marginal recovery, climbing from 2% in Q3 2025 to 7%. However, analysts caution that this percentage growth is happening on a shrinking total volume base, offering little financial comfort to local manufacturers struggling to meet aggressive government turnover minimums.
Production Contraction and Component Pressures
Supply chain checks reveal a tangible contraction in the physical footprint of production lines across the country. A key component supplier servicing prominent smartphone manufacturers in India flagged a dip of at least 10% to 20% in domestic smartphone production volumes over recent quarters.
Persistent component price volatility, coupled with localized shortages in semiconductor sub-assemblies, has forced manufacturers to prioritize margin protection over volume expansion. Consequently, achieving the steep revenue thresholds mandated by the MPMS—such as the ₹10,000 crore requirement for TS-1—has become an uphill battle for all but the most dominant market titans.
Official Responses and Industry Perspectives
The reception to the MPMS is characterized by a stark divide between massive contract manufacturers, who see immediate operational value, and domestic brands, who are adopting a wait-and-watch approach.
The Voice of Domestic OEMs
An executive at a leading Indian smartphone Original Equipment Manufacturer (OEM), speaking on condition of anonymity, revealed that the brand is withholding its application until policymakers release the separate, dedicated guidelines governing Target Segment-2.
"We are actively seeking more clarity and definitive guidelines from policymakers. Evaluating whether to invest capital into meeting the strict criteria of this scheme requires transparency that we simply do not have yet under the unnotified TS-2 framework," the OEM representative stated.
Prominent market players such as Vivo, Itel, and Nothing have notably declined to comment on their immediate PLI strategies, underscoring a broader industry-wide reluctance to publicize investment commitments amid macroeconomic uncertainty. Conversely, major contract manufacturers have confirmed they are pressing forward, recognizing that their sheer scale allows them to absorb compliance costs more effectively.
Independent Analyst Assessments
Industry experts emphasize that while the intent of the MPMS is laudable, its execution mechanics may require urgent mid-course corrections.
Faisal Kawoosa, Chief Analyst and Founder of Techarc, offered a blunt assessment of the scheme’s current limitations:
"If global volumes scale down, then the targets required to apply for the scheme are also directly affected. It may happen that, much like the earlier version of the PLI scheme, the industry will formally approach the government for a revision of criteria by the end of December this year."
Echoing these sentiments, Shubham Singh, Research Analyst at Counterpoint Research, pointed out the structural dualism of the policy:
"The scheme is expected to benefit OEMs by cushioning margin pressures through continued incentives linked to revenue targets. Simultaneously, the additional incentives earmarked for local sourcing could stimulate crucial domestic component demand over the long term, provided manufacturers can survive the short-term volume crunch."
Implications for the Indian Electronics Ecosystem
The hesitation surrounding the rollout of the MPMS carries profound implications for India’s ambition to transform from a mere assembly hub into an autonomous electronics manufacturing superpower.
1. The Risk of Contractor Hegemony
Industry sources have voiced serious concerns that the structural design of the MPMS inadvertently favors global and large-scale contract manufacturers (EMS providers) over indigenous brands. Because the scheme ties benefits to massive turnover floors (₹10,000 crore for TS-1), much of the state-backed financial benefit is expected to be absorbed by a handful of giant contract manufacturers.
“The scheme largely helps increase overall aggregate manufacturing capacity, but it completely fails to assist with the current operational challenge of managing everyday volumes for local players,” noted an industry source who spoke anonymously. “While it will undoubtedly boost headline production numbers, it is unlikely to have any meaningful, long-term impact on empowering domestic brands.”
2. Supply Chain Deepening vs. Short-Term Survival
The inclusion of a 1.5% incentive for domestic sourcing is a step in the right direction, aiming to build a self-sustaining local vendor ecosystem for sub-assemblies. However, when component suppliers report a 10–20% drop in local factory output, the practical realization of domestic sourcing targets is severely compromised. Without immediate relief or a downward adjustment of volume targets, smaller suppliers may find themselves squeezed out of the supply chain before the localization incentives can take effect.
3. The Necessity of Policy Agility
The Ministry of Electronics and Information Technology (MeitY) faces a delicate balancing act. If the government maintains rigid adherence to the current FY26 turnover thresholds and delays the notification of TS-2 guidelines, it risks alienating the very domestic brands the scheme was designed to uplift.
Conversely, introducing structural revisions—such as lowering entry barriers or offering temporary volume waivers—could preserve participation rates and prevent the scheme from stalling in its infancy. Industry stakeholders widely anticipate that intense lobbying over the coming weeks will force a government review before the close of the calendar year.
Conclusion
India’s Mobile Phone Manufacturing Scheme represents a visionary blueprint for the next decade of the nation’s technological self-reliance. By prioritizing local design, R&D, and component sourcing, the policy addresses the critical shortcomings of its predecessor.
However, grand policy ambitions must contend with cold, unforgiving market realities. As long as global smartphone sales remain sluggish, component prices fluctuate, and domestic OEMs struggle to cross steep financial thresholds, the pace of MPMS applications will remain subdued. For India to realize its dream of comprehensive electronics sovereignty, policymakers must demonstrate acute agility, listening closely to industry grievances and refining the scheme’s architecture before market headwinds permanently stifle indigenous growth.
