Make in India: Electronics Manufacturing

Growth of Electronics Sector: (Source: MeitY Annual Report 2015-16)

The Electronics sector has several verticals in terms of its main constituents. At present the availability of data on the production from this sector is limited to the information provided by various industry Associations including ELCINA. Based on the same the production profile of the Electronics Sector is as follows:-

Consumer Electronics

As per estimates of CEAMA, the overall production of this segment of electronic industry was INR 55,806 crore in 2014-15 and grew at about 17.24% over INR 47,599 Crore in 2013-14.

A notable feature of growth in Consumer Electronics has been a rise in imports over the years in respect of certain items like LCD/ LED TVs. The government had accordingly stopped duty free import of such items as baggage and imposed a 36.5% duty on the same in 2013-14.

As per estimates from the industry association (CEAMA), the production of LCD/LED TVs has been estimated to have increased to 12.0 million numbers valued at INR 21,000 crore in 2015-16, from 8.75 million numbers valued at INR 16,200 crore in 2014-15 exhibiting a growth rate of 37% and 30% in quantity and value terms respectively. This segment has also witnessed a reduction in the average prices during this period.

In contrast to the LCD/ LED segment, the conventional TV (with Picture Tube) continued to register negative growth with production declining from 3.5 million valued at INR 1400 crore in 2014-15 to 2.5 million valued at INR 1000 crore in 2015-16.

Similarly, production of DVD players also continued to decline due to rapid growth of DTH sector, digitalization of cable TV network and use of set Top Boxes (STB). Public Address systems in the Consumer electronics industry has exhibited a growth rate in production of about 12% with a production of INR 1000 crore in 2015-16, vis-à-vis the growth rate of 5% during the previous year.

Industrial Electronics

Industrial electronics sector is closely linked to the investment taking place in infrastructure and industry including the power sector. Process Control Equipment, industrial control systems, Test & measurement devices, Power Electronics, Automated / automation equipments and Analytical Instruments, agriculture electronic instruments, environment monitoring instruments etc. are some of the key segments of this industry. Critical hardware technologies and Information Technology are playing a major role in value added Industrial Electronics.

Most of the domestic demand is catered to by the local manufacturing, whereas, about 10% of the sophisticated products are imported. The total production of Industrial Electronics during 2014-15 (as per estimates provided by ELCINA) is estimated to be about INR39,374 crore as against INR 33,600 crore during 2013-14 showing a growth of about 17.2%. During the year 2015-16, this sector is estimated to have grown by about 14 % with the production estimated to reach INR 45083 crore. Some recent trends in the Industrial electronics segment which could potentially change the landscape of the sector are as under:-

  • Availability of products with Artificial intelligence. This would help the industry to be more efficient, improve quality control and reduce manual supervision costs.
  • Integration of production and business operations:
  • Newer software are being launched to help the companies integrate their production and business operations so as to maximize production, manage labor and reduce overheads.
  • Introduction of robotics to manage process and equipments for sensitive industries like Chemical industry, Nuclear power generation, etc.
  • Some of the other notable trends are Decision
  • Analysis, 3-D co-ordinate systems, Smart Image processing, Nanotechnology, Nanoscale assemblies, Distributed control systems, etc., which are also being increasingly made available.

Automotive Electronics

With the growth in the Automobile industry and the increasing digitisation of automobile controls, Automotive Electronics has come to occupy an important segment of the industry. As per available estimates, the production of Automotive Electronics Sector was placed at INR 7278 crore in 2013.

Computer Hardware

The value of production arrived by aggregating the different segments falling under category of Computers and peripherals amounted to INR 18,691 crore in 2014-15 (as per estimates by MAIT), as against INR17,484 crore in 2013-14 thereby registering a growth of about 6.9%.

The Indian computer Hardware Industry has been undergoing a change in its product composition. The production of notebooks registered growth of about 17% from a level of INR 9010 Crore in 2013-14 to INR 10542 Crore in 2014-15. Production of Tablet PCs also registered robust growth of 27% to grow from INR 1126 Crore in 2013-14 to INR 1430 Crore in 2014-15. In contrast to the foregoing, the production of Desktop PCs registered negative growth of 16%, from INR 4309 Crore in 2013-14 to INR 3620 Crore in 2014-15. The sale of Monitors registered a growth of 2% from INR 2466 Crore in 2013-14 to INR 2515 Crore in 2014-15.

Mobile Phones

India has the Second largest wireless network in the world. As on 31st June 2015, the gross telephone subscribers in the country was 1007 million covering total wireless subscribers of 981 million and wire-line subscribers of 26.15 million respectively. The overall tele-density was about 80 per cent with overall urban and rural tele-densities being 149.7 and 48.6 respectively. The break-up of the Tele-density with respect to wireline and wireless are 2.08 and 77.9 respectively. The total domestic broadband subscriber base was 99.2 million as 31 March 2015.

India witnessed a rise in manufacture of mobile handsets during the past decade. As per ICA estimates, at its peak India was producing approximately 155 mn units of mobile handsets in 2011-12, whereas domestic demand stood at nearly 180–200 mn units during that period. Almost 85% of the domestic demand was produced locally. However, the production activity went down with the Nokia manufacturing facility closing down in 2014-15. As a consequence, the production of mobile handsets stood at only 60 mn units during 2014-15 compared to 130 mn units in 2013-14. The value of production of Mobile Handsets for 2014-15 was estimated at INR 18900 crore as against INR 26650 crore in 2013-14, i.e., a negative growth of about 29%.

With the drop in production in 2014-15, there was substantial reduction in exports of mobile handsets compared to the preceding years. In 2014-15, the export of mobile handsets declined to 14 mn units compared to 72.5 mn units in 2013-14 with a negative growth rate of about 81%. With a rise in domestic demand accompanied by a significant drop in domestic production, the market shifted to the import route to meet domestic demand.

Following several initiatives taken during 2015-16, based on the Make in India and Digital India programmes and the outreach to various ESDM destinations, enhancing duty differential benefits in favor of domestic manufacturers vis-à-vis importers from 5% earlier to 11.5% vide Budget

2015–2016, significant new manufacturing operations got established in India during 2015–2016. It is estimated that at the end of 2015–16 the total production of mobile handsets in India is expected to reach 110 mn units

compared to 60 mn units, produced in 2014–15, with a growth of approx. 83%.

Strategic Electronics

The strategic electronics segment consists of Military Communication systems, Radars and Sonars, Network Centric systems, Electronic Warfare systems, Weapon systems, Satellite-based Communication, Navigation and Surveillance systems, Navigational aids, underwater electronic systems, infra-red based detection and ranging system, disaster management system, internal security system etc.

The Indian strategic electronic industry is dominated by BEL and has some contribution from DPSU’s such as HAL, ECIL and BDL. More recently, a few domestic small and medium scale companies have emerged as they have capability to absorb technology and meet stringent requirements of strategic equipment. Some of these companies provide EMS services and meet critical supply requirements of MNCs as well as DPSUs. The estimated production figure for this segment for 2014-15 is INR 15700 Crore as against INR 13800 Crore in 2013-14, with a growth of about 13.77%.

Medical Electronics

Another growth area in the field of electronics pertains to Medical Electronics. The growth of this segment is closely linked to the need for diagnostics in the health care sector. Therefore it is now classifiable as a separate vertical. However, there are no separate estimates on the production of Medical Electronics.

Electronic Components

Rapid growth in domestic manufacturing of electronic components is vital for supporting the growth in electronics manufacturing. The estimated production figure for this segment during 2014-15 is INR 39,723 crore (excluding LED) as against INR 32,102 crore in 2013-14, showing a growth of about 23.74 per cent.

The emerging high growth areas for domestic manufacturing are LED Lighting, Automotive electronics, energy meters, solar energy and IT products such as Tablets. These products are now driving the growth of electronic component manufacturing. These products are an addition to existing segments such as telecommunications, consumer electronics and industrial electronics.

The Indian electronic component market is dominated by components like electromechanical components (like relays, switches etc.) with 29% share, passive components (like capacitors, resistors, etc.) with 24% share. Further Active components (like ICs, Diodes, Transistors, Picture Tubes, etc.) and the Associate Components (like optical disc, magnets, RF Tuners etc.) constitute 18% and 29% share of the components respectively. While the industry composition is not predicted to change substantially, there is a rapid decline in products such as Cathode Ray Picture Tubes and CD/DVDs which had till recently constituted a significant share of the manufacturing base and market. This is an outcome of advancing technology and consumer preferences.

Consumer Durables and Telecommunications account for about 60% of the demand for electronic components in India. This is followed by IT & Office Automation and Automotive industries which contribute 22%. Other application industries like Industrial electronics, Medical electronics, Strategic electronics and Lighting industry contribute the balance of the market. Industries like lighting and strategic electronics are expected to witness substantial growth in the near future.

Light Emitting Diodes (LEDs)

One of the driving forces for growth in electronics manufacturing and for growing component demand is the Indian Lighting market. The demand for energy efficiency has brought forward an immediate need for more energy efficient products and also has pushed market towards more efficient products such as Light Emitting Diodes (LEDs). Over the years, opportunities for Light Emitting Diodes (LEDs) in Indian lighting markets have increased in automobiles, communications, signage, signalling, architecture and entertainment sectors. The opportunity for LEDs in the general space illumination segment of residential and commercial buildings has also emerged and expanding very rapidly. As per ELCINA, LED manufacturing in India has grown by 11.9% to reach INR2100 Crore in 2014-15 and is projected significantly to reach INR 3590 crore in 2015-16.

Imports 2014-15

Total import of Electronics into India in 2014-15 was USD 36,857 million. The overall import of electronics exceeds domestic production thus making India dependent on imports. Import of electronics accounts for over 8 % of total imports by India.

Import of electronics showed strong growth of 13.8 per cent in 2014-15 driven largely by growth in telecom instruments followed by computer hardware & peripherals. A breakup given below shows that telecom instruments accounts for a large share in total electronics imports (39.9 per cent) followed by computer hardware (19.7 per cent).

Imports 2015-16 (April-December) grew by 11.5 per cent compared to 12.1 per cent during the corresponding period of the previous year. Telecom instruments which grew at 13.4 per cent, compared to 30.6 per cent last year, continued to be the largest item in the basket of electronic imports. Growth in import of electronic components turned strongly positive compared to the negative rate experienced in 2014-15 (Apr.-Dec.). On the other hand, consumer electronics imports declined by 2.6 per cent during Apr.-Dec. of 2015-16.

Exports (2014-15)

The total export of electronics from India in 2014-15 was of the order to USD 6009 million. Electronics exports account for a very small proportion of total exports from India accounting for just about 1.94 per cent. Electronic exports showed a sharp decline in 2014-15 with a growth rate of (-) 21 per cent with the sharpest decline being in telecom instruments.

In terms of composition, export of electronics comprises of electronics instruments and electronic components having a share of around 31 per cent each with the balance accounted for by consumer electronics and computer hardware.

Exports 2015-16 (April-December) continued to decline by 9.8 per cent on top of the declining trend witnessed in the previous year. Growth in export of computer hardware turned positive compared to negative rate experienced in 2014-15 (Apr.-Dec.). On the other hand, growth of electronic components turned sharply negative during Apr.-Dec. of 2015-16. Growth in telecom instruments which was negative during 2014-15 continued to remain so during Apr.-Dec. of 2015-16.

(Source: MeitY Annual Report 2015-16)