India’s electronics sector is a promising one. Yet, the industry is highly dependent on imports of components for domestic manufacturing. Dr. Satya Gupta, chairman, India Electronics & Semiconductor Association, shares vital insights, on the current scenario in the sector.
Tell us about IESA. How is the association guiding the consumer electronics ecosystem in the country?
In 2005, a few of us (industry leaders) got together and mooted the idea of creating a platform for the semiconductor industry and startups in the sector. Initially, the focus was on semiconductors. Later, electronics was also included. Electronics and semiconductor product development, manufacturing, capacity- and capability-building, where we work with academia and design companies, are our areas of focus. In terms of verticals, electronics in healthcare, agriculture, education, mobility, and telecommunication, are our concerns.
In terms of electronic products, components, design, systems, manufacturing services, what is the current situation?
The process of electronics manufacturing begins with semiconductor wafers. Second, comes the chip, then systems, systems help in offering solutions to the market. There are domains where we are strong as a country. Certain areas need attention, like semiconductor manufacturing. We are certainly good when it comes to chip-design talent and embedded software, a part of electronics. In the last seven years, we have done well when it comes to creating systems using chips. The government is keen on taking care of points where we need to do better like Chips & Electronics Product Companies and Semiconductor Manufacturing. We are working closely with the government on such points.
Tell us something about buying behaviour and consumer trends across categories. Which consumer electronics categories, you think, will get a significant push in near future?
Electronics products at the individual- and at the business-level are a kind of a meta resource. These are an essential part of the personal domains of consumers. Personal devices, namely, mobile phones, tablets, and laptops, are leading. We are witnessing a significant growth in-home devices. Homes are fiber-connected. Home appliances like washing machines, refrigerators and microwaves are not uncommon. Automobiles, these days, are also utilizing a large amount of electronic components. Even in traditional cars, there are 30 to 40 microprocessors. Automobiles are largely becoming tech-driven. Internet of Things, automation – things are rapidly changing at homes and in the industry. I feel, there is a steep rise in demand for electronics.
A report prepared by IESA last year projected that electronics production has the potential to reach up to $260 billion in future. How soon is this likely to happen in your opinion?
The report was prepared before the pandemic broke out. Things got pushed down. But, based on indicators we are observing in India and abroad, we are observing a strong demand. The demand for semiconductors is at an all-time high. There are significant investments being made worldwide. Countries like the USA and Taiwan have announced packages for the industry. The European Union has also announced a similar large investment. There is a realization that growth in this sector is a strategic need and will be as important a factor as a defense between countries having strategic relations. The projections in the report may get pushed out by a year, however, there’s growth. Ideally, we should be able to hit the $350-$400 billion mark by 2025 in terms of consumption.
We are highly dependent on imports for the manufacturing of electronics. Can this turn into a bottleneck in the future? Will the import of input-goods be insufficient for our domestic demand?
Around five years ago, we were in an 80-20 situation, in terms of fully developed products. We caught up in 2019-20 when domestic manufacturing began catering to almost half of the domestic demand. In a few years, domestic manufacturing should be able to meet 70 percent of the demand. A decade ago, the gap between consumption and import of ingredients was big. This dependency on complete product import is reducing. However, we still depend on imports for components that go inside the products. We need to address this issue.
The government has taken several policy initiatives to encourage growth in the sector. How are these policies facilitating growth?
Several steps have been taken in the last few years. Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Electronics Manufacturing Clusters (EMC 2.0) scheme are major initiatives. I think that the PLI Scheme is one of the most brilliant schemes. Globally, mostly tax rebate is offered. This scheme, however, offers incentives for revenue. Thus a five percent PLI on revenue is as effective as a 200 percent rebate on income tax. It’s a gamechanger.
Any point on the wishlist of the industry?
The value-addition through manufacturing is around 15 to 17 percent. We need to raise this to 40 percent. We have to move more into the product ownership domain. We are working closely with the government. How to create Chips & Electronics Product companies? How to encourage semiconductor manufacturing? It’s a heavy investment. If large business houses get involved, it will give a boost to the industry. For electronics products as well, seed funding, growth funding and working capital are the needs.
How much time can it take for us to be self-reliant?
I believe it’s a horizon of five to seven years. We should see a substantial movement. The domestic value addition needs to grow. Also, there’s great potential when it comes to exports of electronics. In five to seven years, if we do extremely well in exports, it will be a big story.
Did the pandemic affect the electronics sector?
The impact was transitory. We saw very little impact as manufacturing is driven mostly by machines when compared to other sectors. The design process is virtual. We have not observed negative sentiment or results.