Friday, October 16, 2014: LInformation Communication Technology & Electronics (ICTE) is the world’s largest and fastest growing industry. The competitiveness of various industries is fashioned by their ability to integrate ICTE in their business processes. The world over, ICTE is now recognised as a meta-resource.
The ICTE industry is among the various verticals that is expected to significantly contribute to increasing the manufacturing sector’s contribution to India’s GDP. The national objective is to boost manufacturing to the extent that it accounts for 25 per cent of the nation’s GDP by 2022.
Currently, ICTE manufacturing accounts for about 10 per cent of the overall manufacturing turnover. It can grow to 33 per cent by 2022 and become the key driver behind creating employment and growing the manufacturing sector.
The production of the ICTE industry in 2013-14 in India was estimated to be about US$ 35 billion. This sector registered a compound annual growth rate (CAGR) of about 15 per cent over the last decade. India accounts for a mere 1.5 per cent of global electronics production.
India has not been able to adequately leverage the opportunities provided by the global electronics hardware manufacturing industry. At present, over 50 per cent of the domestic demand is met through imports. India cannot afford large scale continued dependence on imports—of both the end equipment as well as the components. The manufacturing base for ICTE needs to be strengthened.
Considering the increasing importance of the ICTE industry to the economy, it has been identified as a thrust area. The government is taking up a number of initiatives to promote the electronics hardware manufacturing sector.
With a vision to create a globally competitive electronics manufacturing industry to meet the country’s needs and serve the international market, the National Policy on Electronics was announced in 2012.
The policy addresses issues raised by the industry from time to time.
The strategies outlined in it are aimed at creating an ecosystem for the globally competitive electronics system design and manufacturing (ESDM) sector to achieve a turnover of about US$ 400 billion by 2020, involving investments of about US$ 100 billion and employment for around 28 million people.
As India is one of the fastest growing markets for electronics in the world, there is potential to develop this sector to meet its domestic demand as well as to use the newly developed capabilities to successfully export from the country.
The underlining focus of the policy is on attracting investments for manufacturing in India, achieving progressively higher value additions, and reducing the dependence on imports.
Components are the basic building blocks when manufacturing equipment. When India signed the WTO-ITA-I agreement, customs duties on 217 tariff lines were brought to zero over a seven-year time frame (from 1998-2005). The tariff lines included a large number of components. With this progressive reduction of import duties, Indian ICTE manufacturers are increasingly meeting their component requirements through imports. These years have seen the erosion of ICTE manufacturing in the country, and this is especially so in the components sector. The domestic manufacturing base for electronic components has, as a result, dramatically shrunk over the years. Based on the annual sectoral production data, it is estimated that the use of domestically manufactured components in Indian-made equipment has declined from 50 per cent in 1999-2000 to about 24 per cent in 2013-14. Besides the elimination of duty, factors such as changing demand patterns (from leaded to chip mounted components), changing form factors and the low level of demand have all led to erosion in components manufacturing.
Component manufacturing is driven by volumes. The targeted growth in demand is expected to create the high volumes that will make manufacturing components in India viable. Dependence on imported inputs increases the lead time, freight costs, inventory levels, and the requirement for finance—all of which add to the cost of the component, without adding value to the end consumer. In order to achieve progressively higher levels of value addition and to support domestic design and development activity, a competitive, diversified component manufacturing base and a developed supply chain are essential.
To achieve the demand target set out for 2020, in the National Policy for Electronics (NPE), it is estimated that components worth USD 100 billion would be required—a 20 fold increase from the present production level of USD 5 billion.
Constant innovation and changing market forces have transformed the electronics industry into the most competitive business in the world economy. No other industry is challenged by a combination of mass customisation, rapidly shrinking product life cycles, rapid inventory depreciation, supply and demand misalignment, complex multi-sourced supply chains, and the rising expectations of retailers and consumers.
With pressure to create shareholder value and strengthen market share, electronics companies have increasingly turned to supply chain management to provide the improved speed, flexibility and superior customer service necessary to remain competitive.
As the electronics industry continues to abandon the traditional, vertically integrated structure in search of greater efficiencies, flexibility and responsiveness, a variety of multi-stage supply chain configurations have evolved.
The growth of the electronics industry is constrained by the availability of the materials that it needs. New products are constantly being introduced and older ones are being redesigned to use components with enhanced functionality. All of this occurs in an environment in which consumer demand is extremely difficult to predict. To succeed in this marketplace, manufacturers must work in collaboration with suppliers to fulfil demand, similar to how they need to work with retailers to predict demand.
With ‘time-to-market’ being the cornerstone of success, manufacturers that use collaborative planning techniques are the ones best equipped to succeed. In the present scenario of hyper competition, the supply chains compete rather than the companies.
In the above context, the Confederation of Indian Industry (CII) is organising a seminar on the ‘Development of Domestic Supply Chains for ICTE Manufacturing’ on October 17, 2014, Silver Oak, India Habitat Centre in New Delhi. This seminar will provide a platform for taking the subject forward.
——————————————————————————————————————————————————
For registration contact: Ms Kartika Sekar, Ph:+91-11-24653305(D), 2469223035, Ext 503, s.kartika@cii.in
