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Manufacturing and Process Management

Electronics in India - Are We Almost There?

Recently, India’s Prime Minister Narendra Modi launched the ambitious ‘Make in India’ campaign to make India a manufacturing hub. The announcement couldn’t have come at a better time for India’s expanding electronics industry.

India is one of the fastest growing markets for electronics products. It is poised to surpass the United States to become the second largest smartphone market by 2019, according to the latest report by Boston-based global market research firm Strategy Analytics. India’s burgeoning middle class coupled with the Government’s own digitization efforts are boosting electronics demand. The proliferation of smart devices, wearables, and the advent of the Internet of Things (IoT), are also playing a role in increasing demand. And yet, there are still hardly any electronic products that can claim to be designed in India for India.

This is despite India’s inherent strengths in electronics design. Almost every electronics vendor worth mentioning has a pretty extensive R&D/engineering facility in India, delivering great work. However, most of the work being generated is still directed at the global, export audiences, with barely any ‘made for India’ products. Indian consumers usually have to settle for minor customization such as language fonts or Nokia’s ‘made for India’ phone with features such as a torch and dust-proof exterior, released in the early 2000s. But by and large, most electronics goods in India are made for global audiences.

This is in sharp contrast to the FMCG industry, for example, where there is a deluge of products made exclusively for India. From Quaker Masala Oats to Danone Lassi to Pepsico’s Kurkure, there are several examples. I compare these two industries because much of volume based electronics market in India is expected to be in the fast moving consumer goods category such as mobile phones and handhelds.   On the enterprise front too, there have been some popular examples such as GE India’s low cost infant warmers that are designed and made in India for India.  The auto industry too has made some progress with Indian automakers taking the lead in designing products for the local market. If we delve into the reasons for this contrast with the electronics industry, manufacturing is the obvious missing piece of the puzzle.  While most FMCG and auto goods are manufactured in India, a whopping 65% of demand for electronic products is met by imports!

Hopefully, this is set to change. The Government estimates the demand for electronics to increase to US$400 billion by 2020, while the production will grow to around US$100 billion by the same year.

There have been several other key policy decisions over the years, with the framing of a National Policy on Electronics (NPE) last year being the most significant. The policy proposes the setting up of over 200 Electronic Manufacturing Clusters (EMCs), both Greenfield (new) and Brownfield (existing clusters). The previous government has also introduced a Modified Special Incentive Package Scheme (M-SIPS) under which it offers a package of incentives to attract domestic and global investments into the ESDM sector within EMCs. Since then, two industry consortia have already planned chip fabrication facilities in the Indian states of Gujarat and Uttar Pradesh.  The Make in India initiative will definitely give a much needed boost to domestic electronics manufacturing.

India already has immense inherent strengths when it comes to electronics manufacturing.  Besides being a huge consumption market, India has a strong design and R&D capability, especially in auto electronics and industrial applications.  Its enormous resident talent in semiconductor design and embedded software is a big plus. The heady combination of effective government policies and incentives; domestic and global investments and the sheer magnitude of home-grown demand is all set to propel the Electronic System Design & Manufacturing industry to become the next growth driver for India. However players in India who enter this growing market will have to prepare themselves well and invest in computer based engineering simulation and product life cycle solutions early in the development process to boost product innovation, cost competitiveness and shortening time to market. Electronics business environment in particular is already rife with several competitive challenges, rapidly changing customer requirements and financial pressures. With the right mix of innovation and execution, India could be well on its way to cross the huge chasm that separates early adopters from the mass market that is still waiting to be tapped.

Between the rapidly growing demand and favorable policies, the electronics industry can find the perfect sweet spot to grow its business in India. It probably won’t be long before we see the emergence of products that are designed to meet the needs of this unique country.

 

Kaustubh Nande, Ph.D., is Manager at ANSYS Software Pvt. Ltd

 


 Sources:

http://businesstoday.intoday.in/story/ge-launches-new-low-cost-infant-warmers/1/201483.html

http://www.businessweek.com/articles/2014-02-27/india-wants-to-build-its-own-chips-to-satisfy-electronics-demand

http://timesofindia.indiatimes.com/tech/tech-news/India-to-become-worlds-second-largest-smartphone-market-by-2019-Study/articleshow/43220658.cms

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