Components manufacturing requires automation and highly-skilled technicians on a large-scale, which for Indian MSMEs are extremely difficult to deploy.
After several rounds of discussions in the union cabinet regarding the separate Production Linked Incentive (PLI) scheme to build the electronic (non-semiconductor) components ecosystem, industry insiders now believe that the ecosystem will not be able to provide more direct employment as it requires more cutting-edge, expensive equipment along with automation. Also, the output ratio of electronic components is meagre compared to the EMS (electronics manufacturing services) or assembly operations.
According to industry executives, the ratio of investment to employment is relatively low compared to the assembly business. For instance, in the EMS business, around ten jobs are created for every Rs 1 Crore of investment, while it is around 4 for components. Most importantly, component manufacturing requires more technically skilled workers and mass recruitment is a difficult task, as is cell phone assembly.
The question is why industry executives are now trying to sideline component manufacturing. Over the past year, industry bodies and manufacturers have been demanding a separate PLI scheme to boost component manufacturing. Achieving self-reliance in electronics manufacturing requires bolstering the significant component ecosystem. Keeping in mind the situation, the cabinet hinted at a separate incentive scheme for the concerned ecosystem a couple of weeks back.
According to Vinod Sharma of Deki Electronics, they have tried convincing component makers to start manufacturing in India. Although labour is cheap in India, when it comes to the EMS/component industry, they could be more effective because they are highly unskilled, and a lot of basic education is needed. Also, component manufacturing requires automation on a large scale, which is extremely difficult to deploy for Indian MSMEs.
Despite the current reliance on China for around 80 percent of key raw materials, India’s electronics industry is poised for a significant shift. As S Krishnan, Secretary of MeitY, points out, the majority of PCBs and sensors are still imported from China. However, with the resurgence of the electronics industry, India is on track to lead the global value chain, marking a promising future for the sector.
The job creation discussion appeared during a meeting in the ministry between the cabinet and industry stakeholders. The government hinted that Rs 40,000 crore would be unleashed to solidify the ecosystem. According to industry insiders, this is the industry where India will be competing directly with China and Taiwan, where capex requirements are similar but workforce requirements are nanoscopic.
In China and Taiwan, the government’s substantial subsidies and incentives play a crucial role in supporting their domestic companies in skilling, education, machinery, and automation. The question that arises is whether India will follow suit. The current situation may seem challenging, but it underscores the urgent need for similar government support in India.
With the mobile phone PLI scheme set to conclude in FY 26, the government has set a target of creating around 2,00,000 direct jobs in the next five years. Industry leaders emphasize the need for impeccable fabrication in the manufacturing of motherboards, display modules, and sub-assemblies, which requires top-notch equipment and skilled professionals. For the manufacturing of other non-semiconductor components such as PCBs, transistors, and capacitors, automation is key. Therefore, the government’s focus should be on incentivizing automation and training the workforce to handle these advanced procedures.
