By Srabani Sen
The US$ 45 billion Indian electronics market is quite small when compared to the global electronics market of US$ 1.8 trillion. Despite its current status as the minnows, the Indian electronics market has attracted global attention for the immense opportunities it holds. A burgeoning domestic market and its increasing export opportunities place India’s electronics industry in an enviable position on the global map. “From its current contribution of about 2.5 per cent to the global electronics industry, India’s contribution is expected to spiral to over 15 per cent by 2020,” says Deepa Doraiswamy, industry manager, electronics and security, Frost & Sullivan.
According to a Frost & Sullivan report, ‘2010-2020: Indian Electronics Industry’s Golden Decade’, which was released on February 17, 2011, at the Electronics For You Expo 2011, the Indian electronics industry will cross US$ 350 billion by 2020. While domestic consumption will continue to be the primary driver, export opportunities are expected to witness an exponential growth, driven by a favourable policy climate. The main segments contributing to this growth are expected to be wireless, consumer electronics, aerospace and defence, medical devices, and identification and security solutions.
According to the report, India’s electronics industry has traversed a long journey but is far from reaching its zenith. Despite the significant growth in consumption volumes, the country is yet to make its mark in high volume manufacturing.
“The current focus of the electronics industry is to rejuvenate India’s hardware manufacturing. The huge local demand and the prospects for exports are being marketed to attract investments into manufacturing. Efforts are under way to develop the ecosystem, as it is pertinent for manufacturing investments to fructify. The government is expected to renew the semiconductor policy and encourage setting up of fabs and ATMP units, thereby creating an electronics ecosystem. Due impetus to hardware manufacturing needs to be provided in the form of a National Electronics Mission that encompasses preferential tax treatment, land subsidies, financial incentives, etc,” explains Deepa Doraiswamy, author of the Frost & Sullivan report.
Quantitative outlook
The past decade has been remarkable for the Indian electronics industry. The tremendous growth in all segments of electronics has given the industry a key position on the global map. Manufacture of mobile phones rose from 18 million units in 2003 to 172 million units in 2010; shipment of 3 million PCs in 2003 rose to over 8.2 million PCs in 2010; and from a non-existent market in 2003, the LCD TV market witnessed sales of 3.5 million units in 2010.
“The Indian electronics industry has been growing at a CAGR of over 25 per cent over the past five years and the major reasons that can be attributed to this growth are GDP growth rates in excess of 8 and 9 per cent, revival of the global economy following the 2000-01 dotcom bubble burst, a rapidly expanding middle class with increasing disposable income, and the continual decline in prices of most electronics goods (a camera mobile that cost over Rs 15,000 five years back is available for less than Rs 5,000 today),” points out Deepa Doraiswamy.
According to the report, other factors that have contributed to this growth are the presence, expansion and/or entry of all major electronic OEMs and suppliers into the country, which has created greater visibility for brands and products, a steady increase in exports, and exemption of custom duty on 217 products that come under the ITA-1 list.
Looking ahead
Needless to say, the domestic electronics market has been growing by leaps and bounds. This has drawn attention towards developing the local hardware manufacturing sector. Capitalising on the existing strengths to attract investments is a short term strategy, however, the long term vision of developing and sustaining a world class electronics industry needs more concerted efforts and a planned strategy at the national level. “Thus, for the electronics industry to grow in India, there is an immediate pertinent need for the government to come up with a National Electronics Development Plan (NEDP). The NEDP needs to encompass strategies to develop the ecosystem, provide export subsidies, create centres of excellence, identify target markets and develop the skillsets needed for the electronics industry,” opines Deepa Doraiswamy. The NEDP, if made up of the right constituents, can result in direct and indirect employment for over 20 million people; growth in India’s intellectual property, opportunities worth many billions for EDA and design companies; development of India’s physical infrastructure to world class levels that would make electronics an enabler for GDP growth.
