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Electronics System Design & Manufacturing (ESDM)
The ESDM sector plays a key role in the government’s goal of generating US$ 1 trillion of economic value from the digital economy by 2025

Electronics System Design & Manufacturing (ESDM) Industry in India

    Last updated on Sep, 22 2021

Introduction

India witnessed a substantial spike in demand for electronic products in the last few years; this is mainly attributed to India’s position as second-largest mobile phone manufacturer worldwide and surge in internet penetration rate. The Government of India attributes high priority to electronics hardware manufacturing, as it is one of the crucial pillars of Make in India, Digital India and Start-up India programmes.

The Electronics System Design & Manufacturing (ESDM) sector plays a vital role in the government’s goal of generating US$ 1 trillion of economic value from the digital economy by 2025. With various government initiatives aiming to boost domestic manufacturing, India has already started witnessing initial movement with increased production and assembly activities across products such as mobile phones and other consumer electronics.

Market Size

  • Electronics market has witnessed a growth in demand with market size increasing from US$ 145 billion in FY16 to US$ 215 billion in FY19—the market witnessed a growth of 14% CAGR from 2016-19.
  • In FY20, imports accounted for US$ 50 billion, wherein China and Hong Kong accounted for ~US$ 28 billion, or ~57% of India’s total electronic imports.
  • India’s exports of electronic goods were valued at US$ 11.7 billion in FY21. In May 2021, exports of electronic goods were valued at US$ 950.17 million.
  • In India, smartphone shipments reached 150 million units and 5G smartphone shipments crossed 4 million in 2020, driven by high consumer demand post-lockdown.
  • The Electronics System Design & Manufacturing (ESDM) is broadly segregated into—electronics system and electronics design.
  • Electronics system market is expected to witness 2.3x demand of its current size (FY19) to reach US$ 160 billion by FY25.
  • Electronics design segment, growing at 20.1%, was 22% of the ESDM market size in FY19; it is anticipated to be 27% of the ESDM market size in FY25.
  • In FY20, the production value of mobile devices reached US$ 30 billion from US$ 3 billion in FY15
  • The consumer electronics and appliances industry in India is expected to become the fifth largest in the world by 2025.
  • The electronics manufacturing services industry in India is projected to reach US$ 152 billion by 2025.

Investments

According to the Department for Promotion of Industry and Internal Trade, from April 2000 to March 2021, Foreign Direct Investment (FDI) equity inflows stood at US$ 3,166.43 million.

The following are some recent investments and key developments in the Indian electronics and ESDM sector:

  • As of March 03, 2021, 19 companies have filed for the production-linked incentive (PLI) scheme for IT Hardware. The scheme was open for applications until April 30, 2021; its incentives will be available from April 01, 2021. Over the next four years, the scheme is expected to lead to total production of ~Rs. 160,000 crore (US$ 21.88 billion). Of the total production, IT hardware companies have proposed production of >Rs. 135,000 crore (US$ 18.46 billion); and domestic companies have proposed production of >Rs. 25,000 crore (US$ 3.42 billion).
  • In April 2021, Japanese electronics brand AIWA, which registered its India subsidiary in February 2021, is relaunching with five products in the TWS (True Wireless Stereo) and audio segments at a total investment outlay of US$ 10 million for Phase-1 of operations.
  • The government has set a target to get ~Rs. 18,000 crore (US$ 2.4 billion) investments in the electronics manufacturing segment by 2021-22.
  • In January 2021, Panasonic Life Solutions India, a wholly-owned subsidiary of Panasonic Corporation, announced that it will invest Rs. 600 crore (US$ 82.34 million) to set a up a new electrical appliances manufacturing facility in Sri City, Andhra Pradesh.
  • On February 16, 2021, Amazon announced that it will commence manufacturing of electronics products from India with Cloud Network Technology, a subsidiary of Foxconn in Chennai, later in the year. The device manufacturing programme will be able to produce ‘Fire TV Stick’ devices in large quantities every year, catering to demands of customers in India.
  • In January 2021, boAt, a earphones and smart wearable manufacturer, received an investment of US$ 100 million from Warburg Pincus, a key private equity firm.
  • In December 2020, Lenovo announced its plan to start manufacturing tablets in India and expand its laptop manufacturing by 10x. The company is also expecting to grow by 25-30% in the current fiscal year, due to increase in demand from the education segment and large enterprises.
  • In December 2020, to establish the required ecosystem at Noida, the Indian Cellular and Electronics Association (ICEA) proposed the establishment of a centre of excellence in Noida for product-based Li-ion cells (post-cell). This has been approved and groundwork will begin as soon as the Government of India receives sanctions. In partnership with the Ministry of Electronics & Information Technology and industrial associations, the government will create three centres of excellence.
  • In November 2020, to explore incubation and mentoring opportunities for infrastructural funding and international visibility for Semiconductor Fabless Accelerator Lab (SFAL) start-ups, an MoU was signed between the Semiconductor Fabless Accelerator Lab (SFAL) and US-based Applied Materials, Inc. The agreement aims to accelerate existing fabless SMEs to the next level and promote domestic innovation and create more job opportunities in the electronics device design and manufacturing (ESDM) market.
  • In July 2021, C4V, a lithium-ion cell manufacturer in the US, invested >US$ 537.15 million in the electric battery manufacturing sector in Karnataka.

Government Initiatives

  • In May 2021, the cabinet, chaired by the Prime Minister Mr. Narendra Modi, approved a proposal by the Department of Heavy Industries and Public Enterprises to implement the production-linked incentive (PLI) scheme 'National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ to achieve manufacturing capacity of 50 GWh (Giga Watt Hour) of ACC and 5 GWh of ‘Niche’ ACC, with an outlay of Rs. 18,100 crore (US$ 2.47 billion).
  • As per Union Budget 2021-22, the Ministry of Electronics and Information Technology (MeitY) has been allocated Rs. 9,720.66 crore (US$ 1.33 billion). In the allocated budget, revenue expenditure allocation is Rs. 9,274.66 crore (US$ 1.27 billion) and capital expenditure allocation is Rs. 446 crore (US$ 61.34 million).
  • The key government initiatives such as ‘Make in India’ and ‘Digital India’ improved the country’s EoDB. In 2021-22, the total budget allocation towards the ‘Digital India’ programme is Rs. 6,806.33 crore (US$ 936.19 million).
  • In January 2021, the India Cellular and Electronics Association (ICEA) proposed a RoDTEP rate of 2% on smartphones, 2.4% on featurephones, 2% on tablets/laptops, 3.4% on battery chargers and 1.48% on battery packs.
  • In December 2020, the Government of India issued expression of interest (EoI) to set up or expand the existing semiconductor wafer/ device fabrication (FAB) facilities in the country or acquire semiconductor FABs overseas.
  • To accelerate quantum computing-led research & development and enable new scientific discoveries, the Ministry of Electronics and Information Technology (MeitY), in collaboration with Amazon Web Services (AWS), will establish a quantum computing applications lab in the country.
  • On November 11, 2020, Union Cabinet approved the production-linked incentive (PLI) scheme in 10 key sectors (including electronics and white goods) to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.
  • On December 02, 2020, 'Hubli ESDM Exchange' (HEX), an incubation centre for the development of electronic device design (ESDM), backed and funded by the state government's Karnataka Innovation & Technology Services (KITS) and managed by the India Electronics & Semiconductor Association (IESA), was launched at the KLE Tech Park of the KLE Technical University (KLETU) in Hubballi.
    • A fund of Rs. 3.2 crore (US$ 433.46 thousand) for three years has been approved by the Department of Electronics, IT, BT, Science & Technology.
  • As per the Union Budget 2020-21, Ministry of Electronics and Information Technology (MeitY) has been allocated ~US$ 920 million. In the allocated budget, revenue expenditure allocation is ~US$ 870 million and capital expenditure allocation is US$ 50 million.
  • In October 2020, the government approved applications of 16 electronics companies including 10 mobile phone manufacturers for reward under the product-linked incentive scheme for a total disbursement of Rs. 40,000 crore (US$ 5.44 billion). The international mobile phone manufacturing companies approved to avail incentives for manufacturing mobile phones with invoice value Rs. 15,000 (US$ 204.35) and above are Samsung, Foxconn Hon Hai, Rising Star, Wistron and Pegatron.
  • The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in the ESDM sector. In case of electronics items for defence, FDI up to 49% is allowed under automatic route and beyond 49%, government approval is required.
  • Under the PLI scheme for IT Hardware, the approved enterprises are estimated to manufacture equipment worth >US$ 21.62 billion over the next four years. Of the total production, foreign companies have suggested production worth US$ 11.38 billion, whereas domestic enterprises have planned a production of US$10.20 billion. 

    Road Ahead

    Fueled by strong policy support, huge investments by public and private stakeholders and a spike in demand for electronic products, the ESDM sector in India is predicted to reach US$ 220 billion by 2025, expanding at 16.1% CAGR between 2019 and 2025.

    Note: Conversion rate used for June 2021 is Rs. 1 = US$ 0.01355

    References: Media reports, Ministry of Electronics and Information Technology (MeitY), Make in India, Invest India, Union Budget 2021-22

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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