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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 Analysis

    Last updated on Dec, 3 2021

Currently, India is undergoing a digital revolution leading to a surge in the consumption of electronics devices in India. This growth is mainly attributed to increasing middle-class population, rising disposable incomes and declining electronics prices in the country. Besides, India has been one of the largest consumers of electronic products, specifically in Asia-Pacific, owing to rising per capita disposable incomes and consumption in the past decade.

With this spike in demand for electronic products, the electronics system design & manufacturing (ESDM) sector in India is predicted to reach ~US$ 220 billion by 2025, expanding at a 16.1% CAGR between 2019 and 2025. The ESDM was valued at US$ 90 billion in FY19 and is segmented into electronics system (78%) and electronics design (22%). The electronics manufacturing services industry in India is projected to reach US$ 152 billion by 2025. The high internet penetration rate and India’s position as the second-largest smartphone manufacturer worldwide boosted the penetration of electronic products, which in turn is driving ESDM market. The government intends to incentivise and attract investments to set up semiconductor FABs (fabrication plants) in India. According to the IESA (India Electronics & Semiconductor Association), more than 90% semiconductor companies globally have their R&D centres in India. The semiconductor R&D generates about US$ 2.5 billion in revenue and 6 lakh jobs in India.

To support the ESDM sector and its growth path, the government has made electronics production as a vital pillar of many initiatives such as 'Make in India', 'Digital India' and 'Start-up India'. The ESDM sector holds a position of crucial importance in the government's goal of generating US$ 1 trillion of economic value from the digital economy by 2025.

In India, smartphone shipments reached 150 million units and 5G smartphone shipments crossed 4 million in 2020, driven by high consumer demand post-lockdown. In Q3 2021 (from July to September), the smartphone shipments from India are expected to reach 52 million.

The electronics sector is expected to nearly double in contribution to the GDP in the next few years, owing to increased support from the government to domestic manufacturing.

In August 2021, exports of electronic goods stood at US$ 1.14 billion.

The demand for electronic products will rise to US$ 400 billion by 2025 from US$ 33 billion in FY20.

India has a goal of producing 1 billion mobile handsets worth US$ 190 billion (Rs. 13,00,000 crore) by 2025, with 600 million handsets worth US$ 110 billion (Rs. 7 lakh crore) targeted for exports.

For defence electronics, FDI inflows in this sector up to 49% are allowed under automatic route and beyond 49% through government approval. From April 2000 to June 2021, Foreign Direct Investment (FDI) equity inflow stood at US$ 3,176.29 million. The government allows 100% FDI in the ESDM sector through an automatic route to attract investments, including original equipment manufacturers (OEMs) and integrated device manufacturers (IDMs). 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.

Under Union Budget 2021-22, 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. It has also allocated Rs. 2,631.32 crore (US$ 361.50 million) to promote electronics and IT hardware manufacturing programmes (Modified Special Incentive Package Scheme (M-SIPS), Electronics Development Fund (EDF) and Manufacturing Clusters).

On April 1, 2020, the government announced three new schemes to position India as a global hub for the ESDM sector and push further the vision of the National Policy on Electronics (NPE) 2019. These schemes include Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters scheme (EMC 2.0). Of these, the PLI, one of the significant incentive schemes, is aimed at boosting domestic manufacturing of mobile phones and their components, including Assembly, Testing, Marking and Packaging (ATMP) units. As a part of this scheme, ~US$ 5.7 billion (Rs. 420 billion) will be extended as an incentive of 4-6% on incremental sales (of goods manufactured locally) for a period of five years.

In January 2021, India Cellular & Electronics Association announced its plan to create a smartphone design, R&D and application ecosystem in India.

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).

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.

For growth industries, such as consumer electronics, electric vehicles and renewable energy, ACC battery production represents one of the biggest economic opportunities. PLI scheme for the ACC battery would allow key domestic and international players to set up a competitive ACC battery plants in the region.

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.

Indian Electronics System Design & Manufacturing (ESDM) Industry Report (September, 2021)
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