What are the key trends and opportunities that may impact the Indian electronics industry and influence business strategies in the coming year? Here are some perspectives and insights shared by key industry experts.
By the ComConnect Consulting research team
The Indian electronics system design and manufacturing (ESDM) industry seems to be on track to achieving its full potential of manufacturing and designing capabilities. A significant milestone on the path towards becoming a manufacturing hub was achieved in 2016-17, when India’s domestic electronics production exceeded imports of electronic goods into the country.
This is noteworthy, as oil and electronic products constitute a sizeable chunk of India’s import bill. According to government sources, the domestic production of electronic goods for 2016–17 stood at US$ 49.5 billion, higher than the US$ 43 billion spent on the import of these goods. So the ‘Make in India’ initiative seems to be bearing fruit. Favourable business policies for the domestic electronics sector have undoubtedly played their part, in addition to the wide scale application of electronic components and products in sectors such as lighting, automotive, communications, etc.
However, to unlock the full potential of the Indian electronics industry, it is imperative to create a supportive ecosystem to facilitate manufacturing competitiveness, and this should be backed by strong domestic R&D.
A growing customer base and increased penetration of consumer durables have provided enough scope for the growth of the Indian electronics sector. Consumer electronics is expected to be the major driver for the Indian electronics industry in the coming financial year.
In addition, increased broadband penetration in the country will open up further avenues of growth for the electronics industry. Considering the huge demand for communication and broadband equipment, including mobile handsets and their accessories, this segment is also likely to drive the demand for electronic components and products.
The market will also see significant demand from emerging application areas like automotive electronics, including electric vehicles and connected mobility related applications. According to the survey participants, the top three demand generating sectors (Figure 2) that will fuel the growth of the Indian electronics industry are:
1. Consumer electronics
2. Communication and broadband equipment (including mobile handsets)
3. Automotive (including electric vehicles and connected mobility)
Figure 1: Distribution of survey participants
The Indian electronics industry is going through an exciting phase due to revolutionary changes in technology, the launch of innovative products and the challenge of global competition. This means electronic product and component manufacturers must focus on continuously improving their products. Survey participants shared some insights about the trends that will shape the market in India. Here is a collation of their views along with our analysis.
Electric vehicles and connected mobility related applications have already opened up huge opportunities for power electronics devices and components, including power management semiconductors, etc. However, the desire for a longer driving range between charges, faster battery charging times, increasing electronics integration for infotainment, safety and security, and other applications will further tech advances, increasing the total electronics content of EVs.
A key challenge for the domestic manufacturing ecosystem is the low cumulative value
Figure 2: Demand generating sectors for the Indian electronics industry
addition in the production cycle, which according to a PwC study is less than 40 per cent for most new age consumer electronics appliances and 7 per cent for smartphones, far lower than the global average. This can be attributed to a limited domestic components manufacturing ecosystem, the high cost of finance and power, and inefficient infrastructure. For domestic manufacturing to flourish in the electronics industry, India needs to focus on critical enablers such as large scale demand creation, cost competitive domestic manufacturing and ease of manufacturing.
Large scale demand can be generated by easing the tax structure and encouraging financial institutions to provide easy finance for electronics manufacturing companies. In addition, it is important to facilitate exports by reducing the cumbersome paper work, increasing the Merchandise Exports from India Scheme (MEIS) incentives for high domestic value added products, and expanding the free trade coverage to enable exports to regions such as Africa.
Domestic manufacturing can be made cost effective by reducing the cost of capital, creating a phased manufacturing plan for all electronic products (similar to that for mobile phones) in which incentives are linked to value addition in India, and by ensuring low sourcing costs through the development of a good supplier ecosystem.
Ease of manufacturing can be achieved by providing easy access to skilled manpower, providing better connectivity through roads and railways to reduce transit time and logistics costs on key industrial corridors, and by creating a strong intellectual property rights framework for IoT, among others.
The domestic electronics manufacturing ecosystem does not require government subsidies. Instead, it expects the government to be a catalyst for growth. Take the case of the Indian automotive industry—the government discourages automotive imports with its high duty structures and complicated registration process, compelling automotive companies to manufacture in India, resulting in a proper manufacturing ecosystem with high domestic value addition. The government should create a similar environment for the electronics industry as well, to facilitate long-term sustainable growth in line with the Make in India initiative.