It's not about factories anymore in the newest bid to build an Indian smartphone champion by the Delhi government. It's about ownership of design, of intellectual property, of the little things that make a phone feel like a top-tier phone or a run-of-the-mill phone. The switch, which most people will never see in a scheme on their own, could prove to be more significant than any other action taken by the electronics ministry in the past ten years.

The latest wave of attention that the minister of electronics and IT Ashwini Vaishnaw had garnered on Wednesday came after he said three Indian companies are in advanced discussions with the ministry to establish domestic brands for smartphones, with a timeline of 10-18 months for products to hit shelves. They won't be named but the ministry has explained to them what it values: designs that are not just competitive in price but in quality, and product lines that are not selected for their convenience but for good reason. On the other side, all three have made a statement to the market about their interest in the high-volume mass segment, the same field in which Chinese brands established their dominance 10 years ago. The likelihood of government support will be determined by the ministry's evaluation of their design capability and, perhaps most importantly, who is the owner of the intellectual property rights for the device.

It's the last one that's an actual change from last year's policy. The new scheme, titled the Mobile Phone Manufacturing Scheme, which will benefit companies with Indian brands through the scheme from 2016-17 till 2030-31, has made an unambiguous condition of the scheme: that the company's core design IP must be owned by at least 51 percent by an Indian entity. Eligible manufacturers can avail 5 percent incentive on eligible sales, 3 percent incentive for design and R&D in India and up to 1.5 percent incentive for procurement of key components from domestic sources. The other part of the scheme focuses on scaling up manufacturing in general and offers incentives ranging from 2.5% to 5%. It requires large players to have a turnover of at least ₹10,000 crore and majority Indian-owned contract manufacturing units to have a turnover of at least ₹1,000 crore. The government had hoped that the total production under the scheme would go up to nearly double the current level of ₹20 lakh crore when compared with the previous PLI scheme, to roughly ₹39-40 lakh crore, with 60,000 direct job creation expected in the process, with mobile exports expected to reach ₹15 lakh crore.

The figures behind the aspiration are rather impressive. Mobile phone production has increased by 33-fold from ₹18,900 crore in 2014-15 to over ₹6.27 lakh crore by 2025-26 and exports have increased by more than 165 times in the same time period to top ₹2.60 lakh crore mark. The country is the largest exporter of smartphones after diesel and cut diamonds and about 99 per cent of the country's phones are manufactured here. In fact, India has found a solution to half of the equation, the manufacturing part. But it hasn't solved the branding side of the equation the side in which the company determines what the phone is supposed to be, rather than where it comes from.

The space has a history to remember. In the previous years prior to 2014, the combined market share of Micromax, Lava, Karbonn and Intex was a significant portion of the Indian phone market. Then, within a couple of years, the share was all but erased by a host of Chinese contenders, all of which matched or outdid them on specs and, crucially, outspent them on the retail network, service centres and marketing. While it went under, largely due to the pivoting to contract manufacturing and PLI-based production for others, Lava was unable to recover the ground it lost as a consumer brand. In 2020, Micromax tried to recover from the nationalist sentiment in the wake of border issues with China but the comeback failed due to similar competitive pressures. The industry veterans who experienced that collapse have been very hesitant in the current push, citing India's phone market entry ceiling, which had been raised by the years-long penetration in Indian supply chains, financing relationships, and after-sales support by the Chinese industry, may just be too high for any new player to break through without subsidy. Consumer trust and a retail network can't be built in a day and neither can the cost competitiveness of the product.

Although, the market structure today is different than it was in 2014. Indian smartphone makers Vivo, Oppo, Xiaomi including POCO accounted for about 55 percent share of shipments in the country in the April-June quarter this year, while Samsung and Apple held a combined quarter of the market and Indian companies Lava, Jio and the newer company Ai+ at the bottom with a thin sliver of market share. That concentration is the very thing the ministry is aiming for, but not by limiting who can be on the bench, but by attempting to create a true domestic challenger that will be designed from the outset as such, not a rebranded assembly product.

There's more to the signal here, as well. The government is hoping Apple will eventually be able to make anything other than an iPhone in India, and that Google would start to get more product off the back of its production facilities.The government has welcomed the possibility of Apple moving more of its manufacturing away from China for products other than the iPhone down the road and hopes Google will get even more off its Indian production facilities. It also comes on the heels of the brand-building effort and signals that New Delhi is attempting to do two things at once: gain its footing as a global assembly line for the world's largest tech firms, and foster at least one domestic brand with its own intellectual property instead of licensing others. On paper both aspirations are possible. If one of the two survives contact with a market that has proven to be ruthless to Indian brands one time before, is the question no one in Delhi can definitely answer.