Samsung and India Clash Over $110 Million Manufacturing Incentives

Samsung Electronics Co. is having difficulty obtaining the manufacturing incentives it believes it is entitled to from India, demonstrating the intricate nature of such government initiatives.

The Indian branch of the smartphone giant is asking for approximately 9 billion rupees ($110 million) in incentives for the fiscal year ending in March 2021, according to people familiar with the situation. However, the government is only willing to grant 1.65 billion rupees unless the South Korean company can provide additional information and documents to back up its request, the people said, who wished to remain anonymous as the matter is not public.

Incentives are a major part of Prime Minister Narendra Modi's mission to make India a hub for electronics manufacturing. In 2020, the country declared $6.7 billion in production-linked incentives (PLIs), offering money to companies for sales of domestically produced smartphones. This plan has motivated Samsung to construct devices worth billions of dollars in India, making it the biggest exporter of smartphones from the South Asian nation in the most recent fiscal year.

Samsung is engaging in talks with the government regarding the incentive payout, according to a company representative who stated in an email that the phone manufacturer is collaborating with various parties to ensure the PLI program is successful.

The Ministry of Technology in India did not provide a response when asked for a comment.

The disagreement is about Samsung's involvement in the incentive program during its first year. On the other hand, Foxconn Technology Group's India branch, which is a supplier for Apple Inc., has already been granted 3.6 billion rupees of benefits for the fiscal year that concluded in March 2022. Wistron Corp., another major Apple contract manufacturer, is in the process of having its claims evaluated.

Unlike contract manufacturers like Foxconn and Wistron, Samsung both manufactures and distributes its products to retailers and customers. This could have caused different accounting estimations of the worth of each device, according to the people. The government grants the financial incentives based on the cost of manufacturing the device.

India is a major market for Samsung's smartphone business, and is essential to its growth. The company has a large phone factory near New Delhi, and exported around $3 billion worth of devices from India in the year ending March 2022.