By Pankil Sheth
India’s Directorate General of Foreign Trade (DGFT) has recently announced new restrictions on the import of various electronic devices, including personal computers, laptops, tablets, “ultra-small form factor” computers, and servers.
These regulations were put in place to promote domestic manufacturing and were originally set to take effect immediately on 3 August 2023. However, after facing resistance from businesses and suppliers, the implementation date was shifted to 1 November 2023. As a result, obtaining a license will now be required for importing these devices into India, creating barriers for those looking to bring in products manufactured elsewhere. Although some limited exceptions have been outlined for individuals and specific situations, these would not apply to most enterprise PC purchasing. However, based on recent briefings and advisory from the government, acquiring the license will be more like a rubberstamp exercise as government indicated on faster processing and no restrictions on license acquisition whatsoever.
The restrictions, however, include some networking equipment, including Ethernet switches, under separate import categories. Since most network equipment at least contains a central processing unit (CPU), these restrictions could be interpreted differently, resulting in a much wider impact than intended.
The extensive limitations will require PC and server manufacturers to either seek the special import license or increase their local production, as some may not have sufficient resources to meet the demand in the Indian market. There remain uncertainties surrounding it such as the level of difficulty in obtaining the license, potential restrictions, and cost implications.
As a result, Gartner analyst mention that there may be some disruptions to deliveries in the upcoming quarters, and customers should plan accordingly.
Impact on Manufacturers
The large PC manufacturers present in India have their own production facilities or partnerships with local manufacturers. Therefore, they remain confident about sustaining their supply of systems in India despite possible disruptions in the near future. On the other hand, manufacturers like Apple and Microsoft, who do not have similar arrangements for their Mac or Surface devices may get affected by licensing restrictions.
Even for those players with in-country manufacturing, it is unclear whether there is a limit on which models they can produce, or how rapidly these factories can be ramped up to meet Indian demand. It is also unclear whether component supply chains can be redirected from current factories with sufficient volumes and turnaround times to satisfy demand.
Gartner predicts there will be some impact on PCs (delays on deliveries, shortages, unavailability of select models and configurations), but it is expected that those to be mostly dealt with by early 2024. There is also a likelihood that for at least the next few quarters, PC prices on some models and from some vendors will rise.
Key Insights and Recommendations for Enterprises
Through the remainder of 2023, disruptions in PC availability within India are likely to occur. This will impact both local Indian companies and multinational companies with operations in India. Here are some recommendations for manufacturers to successfully navigate this phase.
- Immediately contact current suppliers to get their latest updates on the situation and how orders will be affected for any in-progress or planned purchases. Engage with suppliers frequently and work with them to accelerate critical orders as much as possible, as the situation is fluid and might keep changing.
- There may be some delays, and you may need to change models and configurations, or even suppliers, if critical needs cannot be met. Some models and configurations manufactured in India may be less affected than others that need to be imported.
- Understand how suppliers’ models are affected and adjust plans accordingly. Check with local resellers for any overstocked items or utilize certified refurbished systems as a stopgap measure.
- Finally, plan for higher prices within India, at least in the next few quarters. While it is impossible to predict exactly what impact the license will have on device costs, it is prudent to assume that it could potentially be significant. Work with suppliers to determine what pricing impacts might occur and how best to mitigate them.
Additional analysis on governments trends will be presented during Gartner IT Symposium/Xpo 2023, Kochi, November 28-30.
(The author is Pankil Sheth, Principal Analyst at Gartner, and the views expressed in this article are his own)
