PLI Powerplay: Why India is Betting Big on Passive Electronics

Look at the device in your hand—whether it’s a smartphone or laptop, under its sleek shell is a bustling metropolis of microscopic parts: passive electronic components. Resistors, capacitors, inductors—these unsung heroes rarely make headlines, but without them, your gadgets wouldn’t work as smoothly as they do now. 

Now, in a first-ever initiative, India has launched a plan to start making these tiny components on a grand scale at home. The government’s new ₹22,919 crore Production-Linked Incentive (PLI) scheme is focused on boosting domestic manufacturing of passive (non-semiconductor) electronic components. The scheme will run for 6 years (with an initial gestation period of 1 year for companies to set up). So roughly from FY 2024-25 through 2030-31 is when the action happens.

Passive Components 101: Why Should We Care?

So, what exactly are passive electronic components? Think of them as the supporting cast in a movie — they are not as flashy as the main characters (like microprocessors or memory chips), but you need them for the plot.

1. Resistors – These are like tiny electrical gatekeepers that control the flow of electric current. 
2. Capacitors – Imagine small rechargeable batteries that can store and release energy quickly. Capacitors smooth out power supply fluctuations and release bursts of energy when needed. 
3. Inductors – These coil-shaped components store energy in a magnetic field when current passes through them. Ever wonder how your phone switches from battery to charger power smoothly? It’s because of these indicators.

In plain language, modern electronics pack hundreds or thousands of such passive components on their printed circuit boards. They are why your devices don’t overheat, your audio sounds clear, and your battery lasts as long as it does. With that context, you can see why having a robust supply of these tiny workhorses is essential. 

Why the PLI Scheme Matters

Cutting the Import Bill: Electronics are India’s second-largest import after crude oil, with gadget imports topping $20 billion each quarter in FY 2024-25. Passive components alone form a hefty slice of those costs. Heavy reliance on imports drains cash, clouds our trade balance, and leaves us at the mercy of global supply snarls (remember the recent chip shortages and shipping delays?).

Source: Business Standard

Make in India Goals: The government’s “Make in India” and “Atmanirbhar Bharat” initiatives aim to turn the tide, to make India a manufacturing hub rather than just a market. Take Apple, for example. It has announced plans to shift all iPhone assembly for the US market to India by next year to diversify away from China amid tariff uncertainties.

Investment and Job Creation: The government estimates this PLI scheme will attract about ₹59,350 crore in investment from companies (both domestic and global) over the next few years. These investments could create over 91,000 direct jobs – think factory engineers, technicians, assembly line workers – and many more indirect jobs. 

Who Stands to Gain? Sector by Sector Breakup

If India starts churning out more resistors, capacitors, or display modules at home, who gains? The short answer: Almost every sector. Here are some of the big ones poised to benefit:

1. Consumer Electronics: This is the obvious one. Smartphones, TVs, laptops, refrigerators, washing machines – you name it. These products consist of countless passive components and sub-assemblies. Local availability of components can lower costs and improve supply chains for manufacturers of consumer gadgets.
2. Telecommunications: As 5G towers and routers proliferate, telecom gear makers need printed circuit boards, power modules, and more. Homegrown components will help companies like Tejas Networks—and global firms operating here—source critical parts quickly and securely.
3. Automotive & Electric Vehicles (EVs): Modern cars are computers on wheels, loaded with sensors, control units, infotainment systems—all packed with passive parts. EVs, especially, lean heavily on high-power capacitors and controllers. 
4. Industrial Electronics & Power Equipment: Factory robots, solar inverters, power-grid transformers, and smart meters are beneficiaries too. An indigenous supply chain boosts renewable-energy sectors and overall power utilities.
5. Medical Devices: Diagnostic machines, ventilators, MRI scanners—they’re all electronic. The pandemic showed India needs to manufacture ventilators at home; now there’s a push to make the electronics inside all medical gear locally too.
6. Defence & Aerospace (Indirectly): Radar arrays, avionics, and battlefield comms require top-tier components. Though not explicitly cited in the PLI announcement, defence and space outfits will benefit from a robust domestic ecosystem. Over time, India might even export precision parts to allied nations.

In essence, any industry weaving electronics into its DNA stands to gain. Analysts foresee the PLI jump-starting higher value addition, luring system-product investments, and enabling just-in-time manufacturing.

Macro View

Global Supply Chains & Exports: As Apple, Samsung, and others expand in India (Apple already has 64 local suppliers), they’ll scout for quality, cost-effective parts here. Over time, “Made in India” resistors could find homes in gadgets worldwide.

Infrastructure & Capex Ripple: The expected ₹59,000+ crore capex will fund new plants and upgrades, benefiting construction, machinery suppliers, and engineering services. Already, hubs in Pune, Coimbatore, Rajkot, and Bengaluru are emerging as electronics equipment clusters, which will soon be joined by new “electronics parks” in other regions.

Skills & Innovation: Building precision-component factories demands skilled technicians, quality engineers, and R&D teams. Training programs and incubators could spring up, fueling India’s innovations—improved capacitor materials or smarter inductor designs, for example.

Riding the Trend: Investor Takeaways

All this talk of manufacturing and policy is exciting, but what does it mean for you as an investor? Significant shifts in policy and industry often open up new opportunities. Companies capitalising on PLI incentives may see revenue and profit surges. This is where thematic investing through curated portfolios can come into play.

Investing through these thematic baskets can be a smart way for both beginners and experienced investors to capitalise on the trend without needing to pick and monitor dozens of individual stocks. 

That said, there are a number of opportunities and pitfalls to take into account:

Green Flags

• Component Manufacturers with proven execution and strong balance sheets.
• Industrial Real Estate: Cities like Hosur and Vadodara, with existing electronics clusters, could see land prices rise 12-15% annually as factories expand.
• Export Companies: With global firms diversifying from China, India, too, is a growing manufacturing destination with the potential to export $1 trillion’s worth of goods by 2030, as per a McKinsey report.

Red Flags

• Bureaucratic Bottlenecks: Reports noted that only 63% of the ₹1.97 lakh crore PLI kitty from 2021 was utilised.
• Skill Gaps that could choke fast-ramping factories.
• Global Price Wars that might undercut nascent domestic players.

Final Thoughts

India’s ₹22,919-crore PLI for passive components is a strategic masterstroke. In the years ahead, you might start to see more “Made in India” tags on the tiny parts inside your devices. 

For investors, it presents an opportunity to ride the wave of India’s electronics manufacturing revolution.