Amid the digital revolution, the need for countries to establish a self-sustaining and robust electronics manufacturing sector has never been more urgent. It plays a pivotal role in economic growth by creating job opportunities, spurring entrepreneurship, and driving technological advancements that transcend the manufacturing sector. India, with its burgeoning population, economic potential, and technological aspirations, finds itself at a crucial crossroads in realising this need.
From reducing dependence on imports and trade deficits to generating employment opportunities and fostering innovation, the need for electronics manufacturing in India is multi-dimensional. As the digital era accelerates at an unprecedented pace, nations that can control their technological destiny will emerge as leaders in shaping the global narrative. India's journey towards electronics manufacturing self-reliance is not just a matter of economic prosperity; it's a strategic step that safeguards its autonomy, fosters domestic innovation, and helps build supply chain resilience for the world.
Important pre-requisites to electronics manufacturing
The domain of electronics manufacturing presents itself as a low-hanging fruit, signifying an accessible and promising avenue for progress. However, to evolve beyond mere assembly and truly embark on the journey of comprehensive electronics manufacturing, a holistic approach is imperative.
While India has been engaged in sub-assemblies and making finished goods for a considerable period of time, there is now an opportunity to manufacture key components and become self-reliant across all production tiers. This entails establishing a robust ecosystem that spans from the foundational board level upwards. The initial strides in this direction are being facilitated by the government’s Production-Linked Incentive (PLI) scheme, which aims to incentivise domestic production.
One of the catalysts for this journey is the burgeoning local demand for IT hardware. Presently, India's IT hardware market is valued at around $9 billion, with projections indicating a valuation of $25 billion by 2025-26. While these figures paint an optimistic picture, the demand still remains relatively modest for the potential our country offers. Despite India generating approximately 20% of the world's data, it possesses a mere 2% of the world’s data centres. Recognising this opportunity, the government is increasingly committed to keeping the data it generates within the country's borders. This strategic focus will not only allow India to harness its domestic data generation capabilities but also play a pivotal role in accelerating demand, which will be a key trigger for driving manufacturing growth.
Advancing electronics manufacturing also entails upskilling the workforce, and equipping individuals with the necessary technical expertise to drive this industry forward. Addressing barriers that impede seamless production becomes a pivotal undertaking, necessitating a comprehensive evaluation and effective resolution of bottlenecks. Furthermore, the injection of capital to incubate and nourish the budding ecosystem industries is essential, propelling the growth and self-sufficiency of the sector.
Diversifying global supply chains
In the larger context of global supply chains, the process of diversifying component supply to new regions, including India, is gradually unfolding. Despite the existence of over 1,000 Electronics Manufacturing Services (EMS) companies globally, a 53% market share is concentrated among 10 firms situated in China, Taiwan, and the US. Companies and nations are actively exploring avenues for diversifying supply chains – steering global enterprises towards India, recognising it as a pivotal player in securing critical components and enhancing supply chain resilience.
The nation is actively engaging with international IT and electronics players, employing enticing policy measures and incentive schemes. Leveraging its formidable talent and skill base, vibrant market, and facilitative policies, India is strategically positioning itself to capture a significant share of the investments directed towards electronics production and global value chains. Notably, the PLI scheme for large-scale electronics manufacturing has attracted investments of ₹6,887 crore (approx. USD 830 million) till June 2023. This figure surpasses the ministry's initial target, which had aimed for an investment of ₹5,488 crore (approx. USD 660 million) by the end of FY24.
The future is ours to build
Presently, India's electronics manufacturing industry stands at nearly $100 billion while the sector's workforce comprises approximately 2.5 million individuals. A pivotal factor driving its upward trajectory is the nation's rising electronics consumption. Bolstered by increased demand, the Indian Government has set forth a target of achieving USD 300 billion in domestic electronics manufacturing by the fiscal year 2025–26.
India's demographic landscape also plays a pivotal role in this context. With a median age of 28, India shares a parallel with China's position in 2008 when it was on the cusp of rapid industrial and economic growth. This similarity accentuates India's potential to emulate China's trajectory and evolve into a powerhouse within the electronics manufacturing domain.
Moreover, India's conducive policy framework, the synergistic collaboration between central and state governments, and comprehensive operational policies have catalyzed a migration of manufacturing activities. Remarkably, India has emerged as the world's second-fastest-growing market for laptops, tablets, servers, and data centres, trailing closely behind China.
In conclusion, the evolving landscape of electronic manufacturing in India signifies a promising journey marked by growth, diversification, and significant potential. With a burgeoning electronics consumption, ambitious government targets, and a youthful population, India is poised to carve its niche as a prime hub for electronics manufacturing on the global stage.
(Santhosh Viswanathan is the VP & MD of India region Intel)
