Not $300 billion, but India can achieve $500 billion in electronics production by 2030! However, cost and supply chain issues continue to linger. Combatting challenges as their automated test offerings thrive, N. Ramachandran of MEL Systems and Services looks at India’s tech future with EFY’s Nijhum Rudra.
Q. Do you think India can now meet the target of $300 billion in electronics production by 2030? Where is the challenge?
A. The idea of India competing globally in the electronics value chain seemed unimaginable, even fifteen years ago. Initially, the $300 billion production target by 2030 was set by the government. However, this target can be reached by 2026, thanks to the revised National Policy on Electronics (NPE) 2019 and production-linked incentive (PLI) schemes. We are now aiming for a total production volume of $500 billion by 2030, which is well within our grasp.
Of course, there is a challenge regarding supply chains. The government is working to address this, and it will not take much time. However, for the foreseeable future, we will remain dependent on China. You see, there is always a delicate balance between affordability, investment capability, and market demand, which we must navigate carefully. Here comes another challenge the Indian industry faces: competition with Chinese prices. This will require coordinated efforts with the government to ensure the right support systems are in place, similar to what the Chinese government provides to its industries.
Q. Which sectors do you think will contribute majorly to the growth?
A. The EV (electric vehicle) market will contribute substantially to the growth. This market, which did not exist on a meaningful scale earlier, will boom with new opportunities. Combined with other sectors like consumer products like mobile phones, electric vehicles, and exports, a $400 billion target is also achievable within this timeline. The foundations we are laying today will help us meet this ambitious goal.
Q. Would India be completely self-reliant in electronics production?
A. We must acknowledge that no country can be entirely self-sufficient. For instance, China is heavily reliant on its semiconductor imports, which surpass even its oil imports, despite its concerted efforts to build a domestic semiconductor industry. This is a global challenge, and India is no exception. In the next two to three years, India-made semiconductors will emerge as the OSAT (outsourced semiconductor assembly and test) segment will pick up momentum. This will help reduce our reliance on imports to a considerable extent.
Q. How will India navigate the challenge of sourcing key natural resources and manufacturing equipment, given that these are fully outsourced right now?
A. When it comes to semiconductors, let us break this down step by step, starting with OSAT and fabrication units (fabs). OSAT will, for now, remain dependent on wafers coming primarily from overseas until fabs are well-established in India. This reliance will prevail for a short time. Companies like Tata are heavily investing in OSAT manufacturing equipment, where a few key players in the capital equipment segment are sufficient. Tata, for example, is already making progress, and some parts of this equipment manufacturing could be integrated into electronics manufacturing in India soon. MELSS also plans to contribute to this ecosystem.
On the other hand, fabs are a very different ballgame. The equipment required for fabs is extremely sophisticated, and their accuracy levels are critical, making capital expenditure (CapEx) a significant factor in the success of these projects. Developing this capability will also take a much longer time. Globally, the number of manufacturers producing fab equipment is limited. Like EUV (extreme ultraviolet) lithography machines for advanced semiconductor nodes like 3.5 nm or even 7 nm, are produced exclusively by ASML.
Q. How is the Indian government assisting in terms of CapEx in growing equipment production?
A. CapEx businesses require abundant support from the government. Initially focussing on mobile phone manufacturing, the centre has made noteworthy strides, and now they are gradually shifting attention to higher-level manufacturing segments. There is hope for an upcoming PLI scheme specifically for components, which would be a positive step. Discussions are underway between the government and industry stakeholders regarding challenges faced in the capital equipment sector, and the former has shown a strong willingness to support this industry. Realistically, I believe the major developments in this sector will happen after 2030. Unlike phone assembly, which can be set up in six months, establishing component manufacturing takes two years. Designing, approving, and setting up capital equipment is a much more complex and time-consuming process.
Q. In 40 years, how has MELSS worked to grow the ecosystem and help spearhead the global value chain?
A. MELSS operates in two key areas. First, we specialise in electronics and develop automated test equipment (ATEs), including custom solutions for applications across defence, civilian, and transportation sectors. This is one of our core strengths, and we are witnessing significant growth in this segment. The second area is our automation division. Historically, we did not focus much on the electronics manufacturing sector, as most of their equipment—like chip shooters, ovens, and production lines—were imported.
Q. Is that focus changing now? Please tell us more about your automation segment.
A. We now see a strong opportunity to offer automation solutions, particularly in robotic system integration, where we can contribute to the EMS (electronics manufacturing services) industry. Additionally, there is growing demand for special purpose machines (SPMs) and visual inspection equipment. While these machines are often sourced from China, cost competitiveness remains challenging. We are actively working on strategies to reduce costs to compete and capture this market. Leveraging our experience in building SPMs and inspection systems for non-electronic industries, we aim to bring this expertise into the electronics sector. While customers may integrate some imported equipment, we can deliver end-to-end line automation solutions. With these strengths, we are optimistic about contributing to and growing alongside the expanding electronics industry.
Q. Which are some of the latest machines you have introduced? What is their uniqueness?
A. We currently work with industries to provide fully automated testing (AT) solutions, including automated product handling. Traditionally, in transformer manufacturing, a large amount of manual labour is involved in the testing process. We can completely automate this workflow, eliminating the need for manual intervention. Our solution handles the entire process, including transporting the transformers, picking them up, testing them, rejecting those that do not meet standards, and even automating the packing and palletising stages. This end-to-end system can be implemented with minimal workforce, offering considerable efficiency gains. This is particularly beneficial for products like transformers, capacitors, and similar components, providing industries with a highly efficient and reliable setup.
Q. How many verticals are you providing solutions and products for? What is in store other than testing solutions?
A. We provide AT solutions for a wide range of products requiring final testing. This includes chargers, inverters, and various automotive electronic end products. Our solutions extend to specialised applications, such as those for ISRO and defence sectors. Whether the end product is a PCB (printed circuit board) or an LRU (line replaceable unit), we deliver tailored testing solutions to meet diverse needs.
Q. What is preventing the expansion of your solutions and product range?
A. Our activities are highly manpower-intensive, requiring highly qualified and skilled individuals. Since our component requirements are relatively small, the cost of acquiring inputs for building custom ATEs is quite high. Large EMS companies purchase components in bulk and benefit from lower prices, whereas we pay a lot more due to our smaller volumes. When we procure finished test equipment for building our ATEs, the smaller quantities also lead to higher prices.
There is another challenge of value addition requirement, particularly with government projects. Sometimes, the standard is as high as 50%. In our case, building ATEs often involves purchasing instruments from overseas manufacturers, as high-quality instrument manufacturing in India is limited. We usually rely on standard global brands like Keysight and others. This creates a unique challenge, as meeting local value-addition criteria can become difficult under such circumstances.
Q. What is your customer base, and whom are you looking to target?
A. Our ATE solutions cater to various customers, including EMS companies and manufacturers working on products for the space and defence sectors, which are important markets for us. Additionally, we serve industrial electronic manufacturers to test their finished goods. We also develop ATEs for the electrical industry, particularly where electronics are integrated into their products. Regarding automation equipment, we collaborate with the EMS industry and other electronic component manufacturers who require AT service. These are the five to six key areas where our expertise is widely applied.
Q. What are the potential cost savings or return on investment (ROI) do your machines offer customers?
A. It depends on the application, but generally, our automation solutions provide customers with an ROI within two to four years.
Q. How many projects have you done in total? Are there any specific or notable case studies you wish to highlight?
A. Regarding automation, we have completed over 1500 projects across various industries—not limited to electronics but spanning diverse applications. Regarding ATEs, earlier, we used to manufacture an in-circuit tester called Mel’s Result, and approximately 800 units were sold before discontinuing it due to changes in the concept and market demand. For custom ATEs, we have sold over 200 units—potentially even more—given our extensive experience of over 30 years. Including the 800 tabletop in-circuit testers, our total count for ATEs exceeds 300 units.
Q. What are the semiconductor solutions you are currently providing? Do you also plan to design semiconductors and electronics?
A. We currently provide both CapEx solutions and materials to the semiconductor industry. We also act as Indian distributors for several leading overseas companies. As this industry is relatively new in India, we are presently observing its growth and development closely.
Q. Which are the semiconductor companies you are currently working with?
A. We currently work with Teradyne, a global company in semiconductor testing equipment, and COHU, a renowned manufacturer of handlers essential for the testing process. Additionally, we represent a US-based company specialising in plasma cleaning solutions that clean wafers and components during the OSAT process. Furthermore, MELSS also represents a Japanese company that provides accelerated temperature processing ovens, which are again crucial during OSAT operations. We have even started providing cleaning agents and bonding materials, further supporting semiconductor manufacturing processes. Overall, we represent over 10 companies in this field.
Q. What are the opportunities you are exploring for automation in OSAT?
A. We are exploring opportunities for automation in the OSAT segment through our in-house automation group. We are in the study phase, as most semiconductor players in India are initially opting for imported production lines dictated by their customers’ requirements. However, once these facilities are operational, we plan to collaborate with our customers to design and develop custom automation solutions for future production lines. The goal is eventually to replace imported equipment with locally developed automation systems. This positions us to support the growing Indian semiconductor industry with cutting-edge technology solutions and locally tailored innovations.
