With the Indian government deciding to ban the import of laptops, servers and other consumer electronic devices, the industry is left in shock. While the Ministry of Commerce and Industry may have delayed the order’s implementation until October 31, there are still looming questions about how manufacturers can get their devices to a country already behind in technology.
The move hopes to boost local production — a great thing if it happens. In May 2023, the Modi-led NDA government announced a $2.1 billion scheme to help businesses produce hardware, including PCs, laptops, servers and related computing technologies. This was a follow-up to a previously announced scheme where the government was willing to shell out $892 million.
History suggests the restriction might play out in India’s favour. A similar move was made in July 2020, when the government imposed restrictions on smart TV imports. While this was mostly done to curb imports from China, it did boost local production. In August 2022, a report by market researcher Counterpoint showed a 74% year-on-year growth in Q2, mostly driven by the launch of affordable products and a rise in consumer demand.
But TVs aren’t the same as laptops and computers, and setting up local facilities in this short time might not be practical for every manufacturer. In a country where the IT sector employed 5.1 million people and generated US$ 227 million in revenue in the 2022 financial year, having access to cutting-edge computing is far more important than watching TV in 4K.
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Ban explained
According to the official government notification, “Import of laptops, tablets, all-in-one personal computers, and ultra-small form factor computers and servers falling under HSN 8741 shall be restricted”.
Imports are allowed under a valid import license, and the restriction doesn’t apply to travellers carrying the aforementioned devices in their baggage.
The government hasn’t given any official notice as to why the sudden ban was imposed, but it has relaxed the deadline to October 31, allowing manufacturers time to comply. Regardless, major manufacturers like Apple, Dell, HP, and Samsung have frozen imports at the time of writing.
The ban also aligns with PM Modi’s “Make in India” vision, which heavily incentivises local manufacturing and production. The electronics import market raked up $19.7 billion from April to June alone. As mentioned, this is in line with the government’s smart TV ban, where imports had grown to $1 billion per year in 2019.
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Why does India lag in technology?
As internet penetration increases to around 850 million subscribers in 2022-23, more and more Indians are buying electronic devices. In contrast, India remains one of the most lucrative smartphone markets in the world; laptop and computer sales aren’t behind as well.
According to IDC, India’s PC market has already declined 30% in Q1 2023. While demand for desktops remains strong, laptops have now seen two poor demand quarters in a row, with premium devices falling 65.6% and 59% in the commercial and consumer segments, respectively.
What is the reason for this decline? Slowing demand and low market sentiment. The market hoped to recover with the incoming academic year and the festive season ahead, where sales of electronic devices and appliances often skyrocket.
However, with a ban hovering over their heads, manufacturers are in a pickle to get their ageing inventory out that they’ve been carrying for the last two quarters. As the desktop and laptop industry moves at a breakneck pace, making huge performance advantages over each generation, this leads to a domino effect where partners and sales outlets find it increasingly harder to acquire new hardware and sell their old inventory simultaneously due to falling market sentiment.
Is banning imports the solution?
Banning imports is by far the strictest measure the government can take to boost local production. There are advantages to local production, including lower costs for the consumers, which can be immensely helpful, especially considering the ludicrous taxes Indians have to pay on electronic devices.
However, everything comes down to manufacturers being able to set up local manufacturing facilities and bring new technologies to India. HP and Dell, two companies with the largest and third-largest market shares in the sector, with 33.8% and 13.9% in the country, have already frozen imports.
As Intel and AMD gear up to announce their next-generation chips in 2024, the electronics sector will fall further behind unless manufacturers can develop manufacturing facilities to produce these next-gen computers.
In the meantime, while indigenous players pick up steam enough to replace the titans of the industry in India, old tech already in the country might find more demand in the short term, potentially raising prices.
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