The Electronics Sector in India
The Indian electronics industry is one of the most rapidly growing industries worldwide. Electronic products have continuously impacted and shaped our lifestyles in the current digital era. The advent of technology has led to seamless activities and accelerated the digital revolution to the next level. Furthermore, demand for electronic devices is anticipated to rise steadily and continue to be a key economic driver worldwide.

Global market share of key product segments in 2020-21 (US$ billion)

Source: Vision Document on Electronics Manufacturing

The global electronics industry was estimated at US$ 2.9 trillion in 2020. The Indian government has widely recognised the strategic importance and growth potential of this industry in its National Policy for Electronics (NPE) 2019. NPE was unveiled with a vision to make the country a comprehensive hub for Electronics System Design and Manufacturing (ESDM) by developing a supportive environment for the industry to compete with global peers. Moreover, the ESDM industry is one of the top 25 priority sectors in the government's Make in India initiative; therefore, it is a crucial contributor to economic growth. Indian policymakers have put great emphasis on developing sustainable manufacturing and exports of electronic devices. Overall, electronics manufacturing saw exponential growth to reach US$ 67.3 billion in 2020-21 from US$ 37.1 billion in 2015-16. However, the COVID-19 pandemic caused serious disruptions across the globe, but the industry has shown strong signs of recovery.

According to the ‘A call to action for broadening and deepening electronics manufacturing’ report by the Ministry of Electronics and IT, India aims to achieve electronics manufacturing worth US$ 300 billion by 2026. Furthermore, the report highlights various segments established to add substantially to this objective, including contributions from India's electronic goods exports. The report demonstrates an execution strategy by proposing short and long-term actions required to achieve the desired goal.

India has been one of the pioneers of the Local Goes Global movement. The country is focusing on developing its share in the global value chain, establishing export hubs in different states, constructing a high-quality and seamless supply chain, and increasing its overall market share in the electronics export market.

India's electronic goods exports and production by value (US$ billion)

Source: Vision Document on Electronics Manufacturing (Electronics Production in India)

Importance of India in Global Electronics Market
The Indian economy accounts for nearly 3.2% of the global economy, and its population is almost 3.2% of the total global population. The Government of India aspires to make the country a substantial manufacturing and design hub for electronics as part of its Aatmanirbhar Bharat scheme. The Digital India Programme has led to a paradigm transition towards digitisation and e-governance in India. India's market share in the global electronics manufacturing industry increased to 3.6% in 2020 from 1.3% in 2012. The Production Linked Incentive (PLI) scheme has effectively enticed international champions while giving an impetus to domestic manufacturers and creating national champions with global ambitions. India's electronic manufacturing industry has witnessed a sharp transition in the last few years with various initiatives to market electronics manufacturing. The government's lucrative plans and initiatives have led the electronic manufacturing industry to a high growth trajectory. Additionally, the availability of skilled labour, large domestic market and low-cost labour have contributed to its sharp rise.

Technology has been a crucial driver across industries, influencing all spheres of life. The electronics market share in India is on the rise. In the past few years, India has captured a sizeable market share of the electronics manufacturing ecosystem that drives the technology sector. For the country to be the global electronics production unit of the future and become a US$ 5 trillion economy by 2025-26, it shall aim to be a US$ 1 trillion digital economy. Furthermore, special focus will be given to exports in order to accomplish the objectives.

India's Vision for Exports and Electronics Manufacturing
The electronics industry growth in India is on an upwards trend, and the government has announced short- and long-term visions (A call to action for broadening and deepening electronics manufacturing report) to make India a hub for electronics exports and manufacturing.

 India's Long-term Vision

• Make in India for the world
• Make India the number one exporter and manufacturer of electronics
• Become a substantial player in the global value chain
• Build a comprehensive ecosystem of more than US$ 1 trillion in the next decade for mobile phones, consumer electronics and IT hardware

India's Short-term Vision
The government aims to make electronics one of the top three export categories by 2025-26. A US$ 1 trillion digital economy target is projected to boost demand for electronics, which may stand at around US$ 180 billion by 2025-26. If India can accomplish the manufacturing goal of US$ 300 billion for electronics, the local market requirement may be fully met by such manufacturing. The US$ 300 billion target also requires US$ 120 billion of exports in the global market. Global competitiveness with optimum scale would be pivotal in achieving the aforesaid targets. Adequate fiscal measures, along with policy measures, would help in meeting the objectives of NPE 2019.

Categories of Electronic Manufacturing

Smartphone Manufacturing
India is one of the largest mobile handset manufacturing countries globally and the second-largest smartphone market in the world. Manufacturing of mobile phones rose to 290 million units in 2020-21 from 60 million units in 2014-15; thus, making the domestic manufacturing of cellular phones and its sub-assemblies one of the core sectors under the Make in India initiative. The Ministry of Electronics and Information Technology (MeitY) unveiled the Phased Manufacturing Programme (PMP) for cellular handsets and other sub-assemblies with an aim to scale up domestic value addition.

Information and Communication Technology (ICT) Hardware
The first use of electronics was in the communication and computing domain. With the rise of integrated circuits, the world witnessed the evolution of the digital computing era. With the introduction of microprocessors, the world saw significant growth in the ICT industry. The advent of ICT has been such that many countries have declared it an indispensable commodity. With a pool of skilled technicians and massive manpower, India has proven its design capabilities for numerous global hardware companies. Additionally, the country is ready to be a worldwide leader and an end-to-end player in the ICT hardware design and development space. India has considerable opportunity for export-led manufacturing and import substitution in the ICT hardware domain.

Moreover, ICT hardware will add high value to India's electronics manufacturing. Emerging domains of artificial intelligence, machine learning and the internet of things, among others, are becoming more popular and are responsible for driving the growth of the ICT hardware segment. Such domains require developing and designing specialised sensors, servers and semiconductors. Large-scale data centres have also evolved in recent years.

In 2020, India witnessed a surge in ICT hardware demand due to COVID-19-led disruptions. Due to the remote working trend, households and individual customers purchased tablets and computers. Enterprises have heavily spent on their data centre infrastructure (to ensure steady demand amid work-from-home and online dealings), and telecommunication service providers have been modernising their infrastructure to cater to surging broadband demand.

Consumer Electronics
Consumer electronics covers any device that contains an electric circuit board that is handy in everyday use by people for the purpose of recreation, entertainment and communication. This encompasses a large category of electronic products, including cameras, digital cameras, visions, calculators, audio devices, clocks, headphones and various home products. Prominent drivers for this market's expansion are easier access, rising awareness, changing lifestyles, dropping unit price and increasing disposable income. Television is a useful device in the home consumer electronics segment and has been recognised as one product for which the country can become the global manufacturing hub. According to the Federation of Indian Chambers of Commerce & Industry (FICCI), India's television production was US$ 4.24 billion in 2020-21 and is anticipated to reach US$ 10.22 billion by 2025-26, expanding at a Compounded Annual Growth Rate (CAGR) of 20%. The kind of television sets available in the market includes a wide variety of LCDs, plasma, LEDs and so on, offering high resolution and sharp picture quality. Additionally, a decreasing trend in the pricing of LED and LCD televisions is fuelling the penetration of such televisions in the market. A few initiatives taken by the government include increasing the basic customs duty on multiple consumer electronics goods in order to push companies into replacing imported goods. Furthermore, the government has permitted 100% Foreign Direct Investment (FDI) in the consumer electronics manufacturing segment through the direct route and offered capital expenditure subsidy under the Modified Special Incentive Package Scheme (M-SIPS). Such efforts have attracted foreign companies to establish manufacturing facilities in the consumer electronics domain without establishing a joint venture or other forms of partnerships with domestic entities. A domestic partner is practically and legally needed to distribute consumer electronic goods to end users.

Electronic Components
According to statistics presented by the Global Industry Analyst Inc., the worldwide market for electronic components is estimated to reach US$ 191.8 billion by 2022, of which Asia Pacific is expected to capture a significant share. In line with global trends, India's electronic components market is ready to grow considerably. Consumer electronics, mobile phones and industrial electronics contribute 82% to demand for electronic components in India. This is observed by the need for electronic components in strategic electronics, computer hardware and light industry sectors. Industries such as mobile phones, strategic electronics and industrial electronics are likely to see significant growth in the near future.

Growing Focus on Electronics Exports
The Electronics Manufacturing Services (EMS) industry is rapidly advancing, and prominent global leaders and domestic companies see India as an emerging manufacturing and operations hub. A strong component manufacturing foundation is necessary for a sustainable ESDM environment. This segment requires very high operating efficiency to stay profitable. Moreover, the availability of components and an effective supply chain are essential for EMS companies to grow. India, with its strong demographics and skilled employees, has the potential to be one of the leading exporters of electronics in the world. The government is highly focused on reaching the US$ 300 billion electronics production target by 2026. Moreover, the government has emphasised boosting its domestic manufacturing ecosystem to help India be able to withstand supply chain disruptions. The country aims to gain renown as a trusted and reliable partner in the global value chain.

India has clearly drafted its ambition to achieve US$ 120 billion worth of exports by 2026. The electronics sector’s journey has been very interesting. For instance, in 2014, India was highly focused on electronics import. Systematically, the Prime Minister of India, Mr. Narendra Modi, has strengthened the electronics sector over the past few years.

Source: Vision Document on Electronics Manufacturing (Electronics Production in India)

To grow its presence and exports in the global supply chain, India is rapidly opening its doors and exploring developed markets such as the US and Europe to align its ambitions of consensual Free Trade Agreements (FTAs) by taking into consideration electronics exports as the main item when negotiating/selecting. It is crucial to review and leverage the current trade pacts to provide enhanced opportunities for investors, and India is doing it diligently.

India's transition to an export-oriented economy has been highly remarkable. In 2022, the government's approach and strategy witnessed a change and transitioned to a global mobile and electronics manufacturing hub. The transition enhances the country's competitiveness, upskills citizens and creates several opportunities for the masses.

This transition is evident as shown below:

• NPE 2019 envisions a robust linkage with global trade, framework and policies to improve exports and integration with international value chains. The policy targets to transition India into a destination for exports and manufacturing.
• In August 2021, Mr. Narendra Modi, while addressing the heads of Indian Missions Abroad, made a clarion call to concentrate on export-driven policies to improve the country's share in global value chains. Particularly, he cited the example of exports and mobile manufacturing.
• The Ministry of Commerce and Industry is conducting a substantial restructuring exercise to direct India's outlook towards exports and FTA. The trade policy is discovering six new bilateral FTAs with the UK, the UAE, Canada, Australia and the EU in 2022. Furthermore, it unveiled a renewed India-US trade policy forum in November 2021.

According to ‘A call to action for broadening and deepening electronics manufacturing’ report, India's local electronics market is expected to reach US$ 150-180 billion from US$ 65 billion in the next 4-5 years. Therefore, exports of US$ 120-140 billion are vital to reach US$ 300 billion worth of electronics manufacturing. This will be the key to achieving US$ 5 trillion worth of digital economy and the US$ 1 trillion export goal set by the MeitY and Ministry of Commerce and Industry, respectively.

The government has permitted 100% FDI for electronic manufacturing through automatic routes (barring countries sharing a land frontier with India), subject to security, laws, regulations and other conditions. Between April 2000 and June 2022, the electronics sector attracted FDI of US$ 3.7 billion, equivalent to 0.6% of the total FDI inflows in various sectors. The steep rise in FDIs will help build the country's domestic capabilities and boost exports of electronic goods, making India a reliable export partner.

Government Schemes to Boost Manufacturing and Exports

• The Government of India's ambition is to make India a substantial manufacturing and design hub by deepening and broadening its electronic manufacturing capabilities. Measures taken by the government to market the electronics hardware manufacturing sector include the development of NPE 2019, a policy crafted by the MeitY that envisions to position the country as the global hub for ESDM by driving and encouraging capabilities in India for developing core elements as well as enabling and creating an environment for the industry to contend globally.

To incentivise and attract large investments and promote exports, the government has notified the following schemes:

• Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): The scheme offers an incentive of almost 25% of capital expenditure for a select list of electronic goods that make up the downstream value chain of electronic goods including semiconductors, components specialised sub-assemblies and capital goods for production of aforesaid goods.
• Modified Electronics Manufacturing Clusters (EMC 2.0): The scheme offers support for developing state-of-the-art infrastructure with common amenities and facilities such as ready-built factory sheds, assistance for developing common facility centres and EMC projects across the nation.
• Display manufacturing scheme and semiconductors: The central government, under the leadership of the prime minister, granted the comprehensive programme with an outlay of Rs. 76,000 crore (US$ 9.2 billion) for creating a strong and sustainable display and semiconductor environment in the country, whereby the government introduced a few schemes.

The schemes for developing semiconductor and display fabs are listed below:

• The semiconductor and display fabs scheme expands fiscal aid for developing semiconductors and display fabs, which targets to attract large investments for setting up display panels and semiconductor wafer fabrication hubs in India, therefore providing assistance in establishing trusted value chains.
• Silicon photonics/compound semiconductors/sensor fab and semiconductor assembly, ATMP/OSAT scheme offers fiscal support of almost 30% of capital expenditure for establishing the aforementioned facilities.
• The design linking incentive scheme provides design infrastructure support and financial incentives across the stages of deployment and development of semiconductor manufacturing for chipsets, integrated circuits, system of chips, semiconductor linkage design and IP cores.
• The government granted approval for making India Semiconductor Mission (ISM) an independent business unit within the Digital India Corporation, having financial and administrative autonomy to enhance India's strategy for making a display manufacturing and semiconductors ecosystem. With a vision to be directed by global professionals in the semiconductor and display industry, ISM will serve as an elite agency for coherent, efficient and smooth implementation of the schemes revolving around the display and semiconductor ecosystem, in consultation with the departments, agencies, ministries, academia and industry.

Other prominent schemes that will help in driving exports and boost manufacturing include:

• EMC scheme: The scheme was notified in October 2012 to help provide support for developing a state-of-the-art infrastructure with common amenities and facilities for luring investments. Under the scheme, around three common facility centres and 19 greenfield EMCs with a total area of 3,464 acres and a cumulative project cost of Rs. 3,732 crore (US$ 451.1 million), including government grant-in-aid of Rs. 1,529 crore (US$ 184 million) have been granted.
• Electronics Development Fund (EDF): The EDF scheme had been established as a fund of funds to take part in professionally handled daughter funds, which will facilitate risk capital to companies developing new technologies and launching start-ups in the field of IT and electronics. The fund is estimated to provide research, development and innovation in such technology-driven sectors. Additionally, EDF is likely to invest in eight daughter funds. The total target amount of these eight daughter funds was Rs. 2,176 crore (US$ 263.0 million), and the amount pledged by EDF to these funds was Rs. 271.3 crore (US$ 32.9 million).
• PMP scheme: For boosting the domestic value addition of sub-assemblies and mobile phones, India has been attracting investments in the electronics sector, and has established manufacturing capabilities. The development of mobile phones has been moving to the completely knocked down stage from semi knocked down stage, enhancing the domestic value chain. The scheme has been notified to market domestic value addition.
• Public Procurement: To encourage the Make in India movement and promote the design, production and manufacturing of goods and services with the aim of boosting employment and income, the government passed a Public Procurement Order 2017 vide the Department for Promotion of Industry and Internal Trade. In line with this order, the MeitY reported the structure for determining local subjects for 13 electronic products:

• Thin clients
• Computer monitors
• Desktop PCs
• Laptop PCs
• Contact and contactless smart cards
• Tablet PCs
• Dot matrix printers
• Authentication devices/biometric access control
• LED products
• Biometric sensors
• Cellular mobile phones
• Servers

• Compulsory Registration Order (CRO): The MeitY notified the Electronics and Information Technology Goods Order, 2012, which states mandatory compliance for ensuring the safety of Indians by reducing imports of unsafe and substandard electronic goods in India. Almost 63 product types have been notified under the CRO.
• Creation of Gallium Nitride (GaN) Ecosystem Incubator and Enabling Centre: The government approved the project for establishing the GaN ecosystem. This project is being executed by the Centre for Nano Science and Engineering, the Society for Innovation and Development, and IISc Bengaluru.

PLI Scheme
Notified vide the Gazette Notification No.CG-DL-E-01042020-218990 for large-scale electronics manufacturing, the scheme provides 4-6% incentive to qualified companies on incremental net sales engaged in the production of specified electronic components and mobile phones such as marking and packaging units, assembly and testing for a period of five years. Additionally, the PLI scheme for IT hardware vide Gazette Notification No.CG-DL-E-03032021-225613 provides incentives of 4-2% or 1% on incremental net sales of products made in India and included in the target segment to appropriate companies for a period of four years. Under the PLI scheme, the target segments include tablets, laptops, servers and all-in-one PCs.

The total spending under the scheme is Rs. 38,645 crore (US$ 4.7 billion). Furthermore, almost 16 companies (five global mobile phone companies, five domestic companies and six companies) under specified electronics components, were permitted under the scheme.

After the successful completion of the first round of the scheme, the second round is targeting certain segments of specified electronic components. The second round will provide incentives of approximately 5% to 3% on incremental sales to appropriate companies for a period of four years. Moreover, 16 companies were granted consent by the Competent Authority under the second round of the PLI scheme.

The duration of the scheme has been extended by one year (from 2024-25 to 2025-26). Of the 16 companies approved under the scheme, almost 15 have opted for the approval.

The PLI scheme forms the basis of the central authority's push for achieving the Aatmanirbhar Bharat vision. The target of this scheme is to create domestic champions in manufacturing and make domestic production competitive worldwide. The scheme will offer financial incentives to boost the electronics manufacturing sector. The PLI scheme for large-scale electronics has emerged as one of the government's most successful schemes. As of June 2022, the scheme has resulted in total production of over Rs. 1,67,770 crore (US$ 20.3 billion), including exports worth Rs. 65,240 crore (US$ 7.9 billion). The PLI scheme has also created employment opportunities for 28,636 people. Over the past three years, smartphone exports witnessed an astronomical surge of 139%.

Leading Indian Competitors in the Export of Electronic Goods

The Future of the Electronics Industry in India
The importance of the electronic industry in India is significant. Global demand for electronic components is currently met by manufacturers based out of India. Considering India's skill set, expertise, demographic dividend and favourable government policies, these manufacturers are encouraged to establish component ecosystems in India. This will help the country in showcasing its technical prowess and setting an example to attract other foreign investors. India's FDI norms have been investor-friendly and will open doors to multiple global manufacturing companies. Additionally, India has been focusing on increasing its research and development capabilities while developing digital and technical proficiency among the people.

Electronics manufacturing needs large-scale operations to be competitive globally. Moreover, different processes in electronics manufacturing are labour intensive and, therefore, would require adequate labour in developing the requirement for plug-and-play facilities like dormitories with optimum facilities. For reducing turnaround time and ensuring rapid operationalisation of electronics manufacturing units, it is essential for the government to construct dormitories on the lines of plug-and-play simulation. Such challenges bring in opportunities for countries like India and will help set the right foundation for its US$ 5 trillion economy goal. India has the potential to be among the top electronics exports by country, and the government is dedicated to making India a global hub for exports.