Table of Contents
Ecosystem Development and Capability Upgradation to Transform the Indian EMS Market
•With low operating costs, a low competitive scenario, and ample potential for penetration by original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) in key industry verticals, India promises to emerge as a hotspot for electronics manufacturing among in South Asia.
•The Indian EMS market clocked a revenue of $xx billion in 2013 and is expected to grow at a CAGR of xx% from 2013–2018 to reach a market size of $xx billion in 2018.
•The Indian electronics industry, one of the fastest growing sectors in the country, is making concerted efforts to move from a consumption driven to a manufacturing driven industry.
•Telecommunication was the leading segment, contributing around xx% of the total EMS market revenue in 2013. However, the growth rate of the telecom segment is expected to decline with the steady growth of other segments such as aerospace and defense (A&D), automotive, and healthcare in the coming years.
•Consumer goods contributed around xx% of the total market revenue and the segment is expected to grow steadily in future, as the demand for electronics is on a constant rise and is estimated to reach a market size of $xx billion by 2020.
•The contribution of the industrial segment was similar to that of the consumer segment, owing to the growing demand for energy-efficient power products such as energy meters, compact fluorescent lamps (CFLs) and light emitting diode (LED) lights, and other power supply products such as uninterruptible power supply (UPS), inverters, etc.
•Ongoing efforts of the government, as well as the industry, to frame forward-looking policies and initiatives are expected to propel the EMS market to greater heights.
•Development of the electronics ecosystem has been given priority, as currently electronic components are entirely imported due to the absence of an indigenous ecosystem.
oTwo consortia of technology collaborators have been finalized to set up semiconductor fabrication plants in the country, with the total outlay of $xx billion.
oModified Special Incentive Package Scheme (MSIPS) policy has been put on fast track to increase investment in the electronics manufacturing sector.
oStrategies for strengthening of existing capabilities of the printed circuit board (PCB) industry, semiconductor design industry, etc., have been put forth to capitalize on future revenue generation opportunities.
oInitiatives to build the local ecosystem of the top components—power electronics and supplies, processors, transformers, memory, and PCBs that contribute to the highest bill of material (BoM) in most of the finished products.
•The revenue of most EMS companies declined in 2012–2013, owing to slow recovery of the economy from the recession and delayed investments. There is a shift in services offering, as companies are trying to provide design and manufacturing services to OEMs in order to attain higher value addition.
- Forward looking policies such as MSIPS, Electronic Manufacturing Clusters (EMC), etc., have been framed for the development of the industry and the component ecosystem.
- The government has cleared investments worth $xxbillion to set upxxfoundries to kick start the electronic component ecosystem.
- India is expected to focus on being an export hub, as the demand volume in the export market has been rising.
- There is more focus on conducting higher value addition activities; the government has set a target of achieving xx% value addition from indigenous manufacturing by 2020.
- To improve profit margins and generate higher revenues, companies must transition from offering low to high value added services such as design and development, intellectual property (IP) creation, product innovation, etc.
Government Initiation to Boost Domestic Electronics Manufacturing
Consumption of electronics in Indian has been steadily on the rise. Moreover, the constantly changing cost and electronics manufacturing dynamics around the world has turned the attention of global companies toward India to build local capabilities to serve both the domestic and export markets. This has necessitated the building of indigenous capabilities across the electronic system design and manufacturing (ESDM) value chain and the government has taken several initiation to boost domestic electronics manufacturing scenario.
Growing Demand for Electronics
The Indian electronics industry is attracting global attention on account of its tremendous consumption potential and uninterrupted growth. Factors contributing to the increasing electronics demand are:
•Intense competition driving availability of choices and declining prices of products
•Rising income and affordability of consumers, especially the youth
•Changing purchasing behavior and aspiration levels of the people to own high-end, branded, and technologically advanced products
A Stable Economy
The acumen of keeping the economy unaffected by the global crisis has shown to the world that India is the next destination for making investments and reaping gains. India offers global OEMs a bigger market, as markets in the United States and Europe are increasingly getting saturated and are the worst affected during an economic crisis, thereby, shifting the focus toward Asian giants. Stability in business has led many global OEMs to look at India in setting up their manufacturing plants.
Abundance of Technically Skilled Resources
India has already achieved notable success in creating a skilled workforce and has the potential to become the global hub for skilled labour. Efforts are on to up-skill the present lot to add xx to xxmillion Indians onto the job market every year for the next xx years. To increase the skills of Indian workers, the National Policy for Skill Development was adopted in 2009, which aims to create a skilled workforce of xx million people by 2022.
Impending Electronics Ecosystem Development
Electronics is the third highest imported product in the country, after crude and gold, and the trend is expected to continue in the coming years. With more than xx% of the total electronics imported into the country, the total value of electronics imported in 2012 was around $xx billion and is forecasted to scale past $xx billion by 2015. This electronics demand-supply gap is expected to reach $xx billion by 2020 and thus, arises the need to develop a local electronics ecosystem to narrow down the trade deficit in the future.
Labor Cost Advantage
As the cost of labor is steadily increasing in China and Taiwan, the overall cost of manufacturing is also going up. Thus, OEMs now find Indian shores much more profitable for investment, owing to lower labor and manufacturing cost, thereby, bringing in higher profitability.
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