Dixon is in advanced talks with several new multinational electronics component companies to form financial joint ventures to bolster its bid in the nascent component manufacturing ecosystem. A top executive said it is also set to start manufacturing smartphones for two new "global" brands in the coming months.
The company's move comes as the government prepares incentives for 12-15 component categories for domestic manufacturing to increase local value addition.
"We are looking at the non-semiconductor portion of a smartphone regarding components. In modules, we have already fructified our relationship with HKC for the display module...it's been launched into an execution mode, and we're targeting the next 10 to 12 months, and we'll be able to productionize it. The partner signed a term sheet; definitive agreements have been worked upon," Atul Lall, Managing Director at Dixon Moneycontrol, in an interaction.
The top executive added that the company is in "deep dialogues" with potential partners and is looking to strengthen the relationship through a financial joint venture for other modules.
"Other than display modules, the focus will be mechanicals, wherein we look at precision components and die cuts. We are in a very advanced discussion with a potential partner," he added.
Dixon Tech secured the Competition Commission of India's clearance to acquire a majority 50.10 percent share in Ismartu India - a subsidiary of Chinese handset maker Transsion Technology.
"The Ismartu factories have a capacity of almost 10-12 million 4G/5G smartphones. That will get added to the overall group capacity. Their revenues are around Rs 7000-Rs 8000 crores, which will start getting consolidated in Dixon numbers," Lall said.
Dixon has four plants, including the plant it runs for Samsung production.
"The three plants sans Samsung have almost 35-36 million production capacity. With Ismartu's acquisition, another 12 million capacity is being added. The overall capacity could reach up to 50 million depending on the SKUs or models," the executive said.
Lall said the company will add two new global brands to its portfolio in the coming months, with one of them associated with Ismatru. The company already makes phones for Motorola, Samsung, HMD, Realme, Xiaomi and Transsion-Ismartu brands like Techno, iTel, and Infinix.
Dixon is also setting up a new campus in Chennai to produce laptops for four leading notebook brands in India. The factory is expected to be operational within 8-10 months.
The contract manufacturer, one of the nation's largest, is currently producing notebooks for Acer and has initiated the new product introduction (NPI) process for Lenovo laptops. Full-scale production is slated to begin in the third financial quarter of FY25. Lall said it has also secured partnerships with two "large global brands" without revealing their names.
Dixon is following a similar strategy for its IT hardware production strategy to that of smartphones. "The overall strategy always has been that when we get into any product category, we start with an anchor customer. But we try to push for a large scale because only that generates an operating leverage. And we keep acquiring more customers to create a large capacity, generate operating leverage, and deepen manufacturing," he explained.
He said IT hardware, including laptops and tablets, has different local production economics than mobile handsets. "There was a 20 percent duty for mobiles, which resulted in a manufacturing business case. For IT products, there is no duty arbitrage. The only support we have is in the form of PLI. He said that PLI conditions are also not easy because you have to keep deepening the value addition."
For this new IT Hardware category, Lall said that acceptance of large and global brands and financial and technical bandwidth is needed to develop an ecosystem.
On the Ministry of Electronics and Information Technology's plan to introduce a scheme for electronics components, Lall said the industry has made a concrete proposal to the government on non-semiconductor components; while positive, the government is more inclined towards a PLI route.
"Let's see then what happens when it happens and what the structure of that scheme is. One has to wait and watch and keep the fingers crossed," said Lall, also the president of the industry body Electronic Industries Association of India (ELCINA).
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