The Indian Information Technology sector has played a pivotal role in bringing a mark for the country on the global map as a sector that has contributed to the growing economy with a long standing image of being a “developing country”. The current hot topic however has shifted towards the future of the Electronics industry in India pertaining to the sluggish scenario of the demand and generation gap over the years. With many players in the market aiming to bring a paradigm shift with respect to the Indian Electronics sector in design and manufacturing, the government of India has also brought some historical moves to evangelize the advent of the electronics industry. Several factors and research suggest that such a vision is achievable with the help of current and the future technical grads of the country.
The Indian Government’s Initiatives
“The electronics industry in India is currently growing at a CAGR of 9.5%.” (Ministry of Electronics & Information Technology, 2018). The Digital India Program and several initiatives by the central electronics department of India like the National Policy on Electronics suggests that the Indian government has defined well on the objectives to better this sector in the country along with attracting investments to contribute to the growth. For example, the most important objective of the National Policy on Electronics is to achieve a turnover of $400 Billion involving investments of $100 Billion and employment to 28 million people by the year 2020. With an adequate level of backing, the atmosphere looks positive for tech giants as well as the electronics start-ups. It is imperative to note that the same policy also proposes to set up 200 manufacturing clusters in India to promote India being an export hub than an importer. This also includes achieving a turnover of $55 Billion in the embedded software and chip design industry. (Ministry of Electronics & Information Technology, 2018). Several steps have already been taken to achieve this goal in India and it is very interesting to be in a time wherein both the government and the industry players in the country have realized this opportunity and are working together to achieve the impeccable.
While considering the Indian Consumer Electronics sector, mobile/smartphone usage in the country is more than any other sub-vertical usage would have. In recent times, the component sector i.e. the manufacturing industry has been in the limelight. In terms of users, India has become the largest smartphone market in the world and the adoption of smartphones by the common man in India at this date is steadily growing at a CAGR of 23%. Astonishingly, this current scenario has been overtaken from what it is in the US and this definitely calls for being an opportunistic quotient. The past two years has also seen 42 mobile manufacturing plants and 15 component units being setup in India and pertaining to this development in setting up mobile manufacturing and component units, the industry has reaped benefits from the newly introduced reforms from the government especially under the differential duty scheme in the Union budgets that started from 2016. (Maier Vidorno, 2018). Over the years the incentives and reforms introduced by the government are such that electronics businesses can make optimum use of governmental support which will in turn strengthen the position of the Indian mobile manufacturing industry on the global map thereby providing a feasible platform for the country to be an export hub against the likes of Vietnam and China.
Key Drivers to Growth
Implementation of GST further contributed to break the secondary grey market of the electronics in India which indirectly promotes legitimate manufacturing of components and units in the country. With this growing opportunity in India, even the international players such as Samsung, Apple, Xiaomi are now focusing on having their own manufacturing and operational units in India as the costs involved in the overall setup (including production, labor costs and more) is relatively cheaper than what is in the USA and China.
The already established Indian players have however developed and have successfully maintained their stature in the country as they have a good clientele globally for electronics design and development. For the developing enterprises, there are a few impediments that need to be addressed before achieving the goal. The situation is favorable for the growth of the electronics design sector, however, it is very vital to note that over the past few years the design industry has shifted its focus to assembly from manufacturing. What most companies do is that they find it convenient to import semi-finished components from let’s say China for an assembly to be done in India. Such a practice was widely popular in mobiles, however it doesn’t continue as closely in this vertical now, compared to smart TV’s. Only very few local brands design in India rest mostly would go about being designed in China and then assembled in India. In my experience, the reason for such a practice in notion is lack of investments in the R&D. The margins are also not very thick if it were the other way round, hence companies prefer shopping and importing for components and have them assembled in India.
While this remains a challenge, at the same time certain other opportunities have also risen that boost the demand of electronics in India. Technologies such as IoT, Augmented Reality/Virtual Reality and Artificial Intelligence all need well-fetched electrical components for the hardware. Though in recent times there has been a great deal of hardware accelerators in the country that support design manufacturing, the ecosystem for prototype development is yet to mature. In terms of the talent pool too, there is still a significant gap in the skill set of graduates as the knowledge acquired by them at the University level is not well-matched as to what is expected at an industry level. Most companies today have recently launched collaboration programs between Universities and Industries to cater to this challenge that restores our faith in beating this knowledge gap effectively. Long story short, while there shall be innate challenges and hurdles coming across, there are steady pick points too and with initiatives too from the government at the same time, the vision doesn’t look hazy anymore.
The Indian Advantage
With such positive reforms in observation by the government and the Indian electronics industry players such as attracting substantial R&D investments, start-up/entrepreneurship promotional initiatives and creation of job opportunities, India definitely has set a stage for it to become the “Electronics Design & Manufacturing Hub”. The Indian advantage lies in the fact that country is the largest democracy in the world, its demographics and the demand generation potential. In order to make manufacturing and design costs competitive, it is important that it is incentivized. While central government has provided welcome measures in providing a healthy regime to the growth sector, it is time that the state governments also incentivize logistics and operational expenditure. As we highlight this aspect, only a few state governments have shown the dire need and enthusiasm to pace up with the central government’s efforts as majority of the approvals to setup a manufacturing unit is done by the legislature at the state level. For example, “Andhra Pradesh has framed a manufacturing policy like other states, complete with power subsidy, training facilities and capital expenditure (CAPEX).” (Make in India, 2018). With such power packed reforms by states and government the future of the chip design ecosystem also looks holistic. As innovation is much aligned with customization involving Internet of Things, Artificial Intelligence, Machine Learning and more, there is a very strong potential for India to be the top noted choice in the semiconductor economies globally in 2020.
With relevant initiatives by the government to rollout policies and measures to ease the setup of electronics manufacturing and design component units in India, we are talking of a country where there has been a successful track record of e-commerce businesses, fintech business and more. Such success stories and positive developments happening today in the country decimates my belief that India has a very strong potential to be a manufacturing and design hub in 2020 in the world surpassing the dependencies we currently have from the east, in-turn, promoting and catering to unemployment in the country.
Let’s see where year 2020 takes India in Electronics Design and Manufacturing Sector.
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References
Maier Vidorno, 2018. India to be the next big Electronics Manufacturing Hub. [Online]
Available at: https://www.maiervidorno.com/india-to-be-next-big-electronics-manufacturing-hub/
[Accessed 2019].
Make in India, 2018. Fuelling Electronics Manufacturing in India. [Online]
Available at: http://www.makeinindia.com/article/-/v/fuelling-electronics-manufacturing-in-india
[Accessed 2019].
Ministry of Electronics & Information Technology, 2018. Electronic System Design & Manufacturing. [Online]
Available at: https://meity.gov.in/esdm
[Accessed 2019].
