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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 Mar, 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 FY19, imports accounted for US$ 75 billion, which was 35% of the electronics market demand; is expected to decrease to 12.6% (US$ 68 billion) of the total electronics market by FY25.
  • Between April 2020 and October 2020, exports of electronic goods stood at US$ 5.05 billion.
  • Smartphone shipments in India increased by ~8% y-o-y to reach 50.0 million units in the first-quarter of 2020, driven by positive shipments of all smartphone vendors in the market. Samsung led the Indian smartphone market with 24% shipping share, followed by Xiaomi at 23%.
  • 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.

Investments

According to the Department for Promotion of Industry and Internal Trade, from April 2000 to September 2020, Foreign Direct Investment (FDI) equity inflows stood at US$ 2,941.91 million.

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

  • 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.
  • On November 26, 2020, the Ministry of Electronics & Information Technology (MEITy) and IBM India Pvt Ltd. collaborated to create an education and skilling ecosystem for the next-generation of innovators through the Common Services Centre Academy.
  • In October 2020, Tata Group announced plans to invest Rs. 5,000 crore (US$ 673.20 million) to set up an Apple phone component plant in Hosur, Tamil Nadu.
  • In October 2020, Sahasra Electronics announced plans to invest Rs. 350 crore (US$ 47.13 million) over the next four years to assemble mobile phone memory chipsets, laptop hard drives and motherboards in India with two new manufacturing facilities in Rajasthan and UP.

Government Initiatives

  • 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.
  • These initiatives improved the country’s Ease of Doing Business Index (EoDB). In 2020-21, the total budget allocation towards the Digital India Programme is ~US$ 530 million.
  • 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.

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 December 2020 is Rs. 1 = US$ 0.014

References: Media reports, Ministry of Electronics and Information Technology (MeitY), Make in India, Invest India

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

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