India is preparing to launch a new initiative aimed at strengthening its electronics manufacturing sector, particularly for components used in mobile phones, laptops, and tablets. The initiative seeks to replicate the success of the country’s mobile phone production and reduce reliance on imports.
Key Details:
- Investment Plans: The central government plans to allocate INR 400 billion (US$4.7 billion) to the initiative, which is expected to attract INR 820 billion (US$9.6 billion) in private investments.
- Projected Output: The initiative could generate a total production value of INR 1.95-2 trillion (approximately US$23-23.6 billion) during its tenure.
- Goals: The primary objectives are to strengthen local manufacturing of key components such as printed circuit boards (PCBs), displays, and capacitors, aligning with the ‘Self-Reliant India’ (Atmanirbhar Bharat) initiative. This aims to create jobs, boost economic growth, develop a resilient supply chain, and reduce import dependence.
Growth Drivers for Electronics Manufacturing
India’s electronics manufacturing sector is expanding, driven by mobile phones, automotive electronics, and industrial electronics. Several factors contribute to this growth:
- Government Policy Support:
- Production Linked Incentive (PLI) Scheme: Encourages domestic production of high-priority components such as batteries, Printed Circuit Board Assemblies (PCBA), and displays.
- Semicon India Program: Supports semiconductor design and manufacturing.
- R&D Incentives: Exemptions on import duties for research and development (R&D) to foster innovation.
- Expanding Markets:
- Electronics production is expected to grow at a compound annual growth rate (CAGR) of 26 percent from 2023 to 2030, with a projected value of US$500 billion by 2030.
- Focus on Automotive Electronics:
- The automotive electronics market, valued at US$10.6 billion in FY 2023-24, is expected to grow to US$74 billion by FY 2032, driven by electric vehicles (EVs) and advanced automotive systems.
Path to Value-Added Manufacturing
India’s electronics industry is undergoing a shift from an import-reliant, assembly-driven model to one focused on value-added component manufacturing. In 2023, India’s electronics production reached US$102 billion, supported by a demand for components and sub-assemblies worth US$45.5 billion. This demand is expected to rise to US$240 billion by 2030. Key components such as PCBs, lithium-ion batteries, and camera modules are becoming increasingly important.
The demand for PCBs and other essential components is growing rapidly, with projections for the PCBA segment to grow at a CAGR of 30 percent, reaching a demand of US$139 billion by 2030. These components currently represent 43 percent of total demand, which is expected to increase to US$51.6 billion by 2030.
Establishing a Local Semiconductor Ecosystem
India is making significant moves to become a key player in the global semiconductor industry. With the growing demand for semiconductors in various technologies, including smartphones, EVs, and telecommunications, India is focusing on developing a domestic semiconductor manufacturing base.
Key Projects Driving India’s Semiconductor Industry:
- Micron Technology’s Facility: A US$2.75 billion plant in Gujarat, set to be operational by 2025, which will generate over 5,000 jobs and reduce India’s reliance on imported chips.
- Tata Electronics Ventures: Focused on manufacturing silicon carbide chips for electric vehicles, aligning with global semiconductor standards.
- CG Power and Industrial Solutions: Producing semiconductor components for industrial and automotive applications.
- Kaynes Technology: Expanding its operations to include semiconductor component design and manufacturing.
India is also collaborating with countries like the U.S., Japan, and Taiwan to strengthen its semiconductor capabilities, including technology transfer and supply chain resilience.
Increasing Electronics Exports
India’s electronics exports have surged significantly, growing from INR 382.6 billion (US$4.5 billion) in 2014-15 to INR 2.41 trillion (US$28.45 billion) in 2023-24. One of the fastest-growing sectors is mobile phone manufacturing, which now accounts for 99.2 percent of the mobile phones sold in India. Exports of mobile phones have increased from INR 15.66 billion (US$184.9 million) in 2014-15 to INR 1.2 trillion (US$14.1 billion) in 2023-24.
The Production Linked Incentive (PLI) scheme for mobile manufacturing has played a key role in this growth, helping India become a major global player in the mobile phone market. By 2023-24, mobile phone production under the PLI scheme reached INR 6.66 trillion (US$78.6 billion), generating over 122,000 direct jobs in the sector.
Challenges in the Electronics Manufacturing Sector
Despite the growth, India faces several challenges in scaling its electronics manufacturing sector. A significant issue is the continued reliance on imports for critical components like PCBs, sensors, and advanced displays. This dependence raises costs and creates vulnerabilities in the supply chain.
Additionally, manufacturing costs in India are higher than in countries like China, Vietnam, and Mexico, making it difficult for Indian manufacturers to compete globally. There are also gaps in indigenous research and development (R&D), which limits the ability to design and manufacture advanced components domestically.
Addressing Challenges with Policy Initiatives
The Indian government has introduced several programs to address these challenges, including the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which provides financial incentives to promote domestic production. Collaboration between the government and private companies is also being encouraged to support technology transfer, skill development, and innovation.
Other initiatives, such as SPECS 2.0, aim to support the production of high-priority components like PCBs and lithium-ion batteries. Investments in R&D infrastructure, including centers of excellence, are being made to bolster domestic design capabilities.
Outlook
India’s electronics manufacturing sector has significant growth potential. By focusing on reducing import dependency, lowering production costs, and fostering innovation, India is positioning itself as a competitive global hub for electronics manufacturing. The rollout of 5G, the growth of the electric vehicle market, and increasing demand for IoT-enabled devices are expected to drive further expansion. With the right policies and continued investments, India aims to achieve a production value of US$500 billion by 2030, securing its place in the global electronics supply chain.
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