Electronic Manufacturing Services, How it Works & Opportunities in India

Electronic manufacturing service (EMS) is a kind of contract service that offers a

variety of core manufacturing capabilities.

EMS i.e. Electronic Manufacturing Services are associated with designing,

manufacturing, testing of electronic components and PCBs & EMS companies are
those who provide manufacturing services including design & development,
assembly & testing of electronic components, parts or products to OEMs (original
Equipment Manufacturers).

EMS companies can be chosen to provide specific services too, like, some
companies require only designing of product from EMS companies however some
require only development and provide their own design to EMS companies. Some
require only production of electronic components rest they do it on their own
likewise EMS companies can also be specialized in specific fields and not necessarily
provide one stop solution to OEMs. EMS companies who are experts in PCB
assembly may need design and components or a product sample from OEMs. EMS
companies can also provide additional services through some other contractors too.

EMS Companies & OEMs:

EMS companies and OEMs work very closely in order to achieve the desired results.
OEMs largely rely on EMS partners for services like designing, prototyping, final
assembly, tools & die Manufacturing, PCBA and even after sale services. Working
together is win win situation for both EMS companies and OEMs as EMS companies
get the revenues out of it however OEMs concentrate on their core competencies
such as research & innovation, Brand positioning & increasing sales network. EMS
companies can provide reverse logistics (after sale service) & play a significant role
in e-waste management too. This also helps OEMs to manage their capitals as they
don’t need to invest on heavy machineries, human resources, manage huge
inventories & many other direct or indirect expanses required for manufacturing of
products. A strategic partnership is very necessary between them to the success of
the products to be developed.

Today technology is growing with a very fast pace and so is manufacturing of

innovative products. The increasing demand for cost effective and innovative
products propels OEMs to come up with products that full fill the demands of end
users. As a result, OEMs contract EMS partners for manufacturing products on their
behalf. This association helps both OEMs as well as EMS partners to achieve profits
and market share.
EMS companies, now days, are acting in a much smarter way and adopting
various techniques in their business practices considering the growing
competition in the market. These practices include hi-tech infrastructure with
upgraded technologies, adopting better manufacturing policies & resources, on
the other side equal focus is being given to understanding customer (OEM)
needs, making a stronger communication system with them and providing with
best of the products & services within the timeline.

EMS Models:

Electronic manufacturing services can be operated under below 2 models.. 

1. HIGH-VOLUME, LOW-MIX (HVLM)

2. HIGH-MIX, LOW-VOLUME (HMLV)

HVLM: these type of electronic manufacturing systems produce products in large

quantities. Computers and peripherals, Consumer device, Telecommunication,
Storage devices come under HVLM.

HMLV: This type of manufacturing system keeps a high focus on technology,

quality & customization as per the requirement. Here the complexity of the process
is much more important hence OEMs prefer to pay higher prices for desired quality.
Industrial, Medical, Aerospace & Defense etc come under HMLV.

EMS & Opportunities :

Given the fact that India’s domestic production of electronic goods, for the first
time, exceeded the imports in 2016-17. If sources are to be believed, the domestic
production in 2016-17 was US$49.5 billion as compared to import of US$43 billion.
This was definitely the outcome of favorable Government policies & Make in India
initiative. In addition to this, one of the key factors is mounting labor cost in China
and other countries compelled OEMs to outsource manufacturing instead of
investing heavy on own infrastructure & inventories. Many domestic and global
companies are already working under MAKE IN INDIA initiative & a lot more are
wishing to relocate their facilities from china and other countries to India
considering India’s potential in manufacturing sector.

Being a developing country, India have lots of opportunities here and is a hot
market for electronic products such as Mobile Phones, PCs, LED lights, Consumer
Electronics, Medical Equipments, Defense Electronics, Automotive Electronics, IOT,
Power Electronics and Strategic Electronics sectors (including aerospace, defence
 and railways) & much more. These sectors have had a significant impact on EMS
sector and will continue to have in future too.

Growth Driving Factors:

Let’s just check out some growth driving factors having a direct demand with EMS
and making it one of the most promising sectors in electronics manufacturing.

 The Indian electronics market is expected to grow to $400 Bn in 2020-25 & is

one of the largest in the world. Not just that India is the third biggest start-
up hub & 1200 new tech companies were added to the list in 2018 only.
 In 2018-19 the total FDI in Indian electronics sector was valued at $451.9Mn
compared to $196.9 in 2017-18
 The smartphone market in India has grown the fastest among other major
markets including china & US and is the second largest in the world in the
category of feature phones and smartphones.
 The Indian IOT market has also shown a significant growth and is supposed
to be worth of $15Bn by year 2020, contributing for 5% of global market.

By 2020, The major Indian sub-electronics sector market size is predicted

to grow as below:
 
 Telecom equipment - $34 Bn

 Laptops, desktops, tablets - $34 Bn

 LED - $35 Bn

 Consumer electronics - $29 Bn

 Set-top boxes - $10 Bn

 Automotive electronics - $10 Bn

 Medical electronics – $8.5 Bn

As per the joint report of CEAMA & frost & Sullivan, the appliances and consumer
electronics industry is expected to be doubled to 1.48lakh Cr by FY25 at a CAGR of
11.7 percent. They also revealed that the industry had grown to Rs.76,400 Cr in
2018-19 out of which 32,200 Cr was contributed by domestic manufacturing.
There were 5 product categories taken in to consideration in the report including
air conditioners, refrigerators, washing machines, television (TV) and audio.

The report suggests to have a boost in air conditioning market size and expects it
to grow to 165 Lakh units in 2024-25 from 65 Lakh units in 2018-19 while
refrigerator to grow from 145Lakh units to 275Lakh units from FY2014-FY2025.

Likewise the TV market is to grow to 284 lakh units from 175 lakh units and
washing machines to grow to 126 lakh units from 70 lakh units in 2018-19.
 

These figures are proving that India is destined to become a manufacturing

economy in the time to come. This shows that EMS companies having linked with
these industries have a long way to go in the future. The Indian government also
intends to promote the domestic manufacturing & increase its contribution to the
GDP to 25% by FY2025 (Assocham Report).

As per the Ministry annual report 2017-18, the Electronics Manufacturing

Services (EMS) industry in India has seen rapid growth and both domestic as well
as global players are operational in the country. EMS market is expected to grow at
a CAGR of 38.1% till FY23 from the current market value of INR 56,000 Crore.

As per the national electronics policy 2018, India has set a target of USD400
billion by 2020-25 & is focused to be a global leader in Electronics Manufacturing
services (EMS). The policy also focuses on to promote skill development & improve
ease of doing business.

Statistically, the opportunities in electronics manufacturing industry are endless.

However with the presence of global MNCs, Domestic companies may face a tough
competition in the future. 

Laxmi Remote (India) Pvt. Ltd. has, in the recent past, made a considerable
progress in establishing itself as the leading EMS provider in the country. We are
manufacturing various electronic products such as Remote Controls, Set Top Boxes,
SMPS, Chargers, Door Bells, LED TV Boards and much more for our partners. The
company has got complete in-house manufacturing facilities & having 2
manufacturing plants in Noida, Phase II. We offer various services like Mould
Design & Development, PCBA, EMS, PCB Design & Manufacturing, Testing &
reverse logistics etc.

So if you are having any requirements for EMS and contract manufacturing, Laxmi
Remote can be your trusted partner.
Data References:

1. “Ministry of Finance”, The Union Finance Minister holds Pre-Budget Consultative Meeting with
the Representatives of IT Industry,  http://pib.nic.in/newsite/erelcontent.aspx?relid=155267,
accessed on 31 May 2019
2. “NASSCOM”, Indian Tech Start-up Ecosystem,  https://www.nasscom.in/knowledge-
center/publications/indian-tech-start-ecosystem-2018-approaching-escape-velocity,
accessed on 31 May 2019
3. “Department for Promotion of Industry and Internal Trade”, FDI Fact
Sheet,  https://dipp.gov.in/publications/fdi-statistics, accessed on 31 May 2019
4. “Business Standard”, India smartphone mkt grows fastest among major peers at 10% in 2018:
Study,  https://www.business-standard.com/article/pti-stories/india-smartphone-mkt-
expands-10-in-2018-fastest-among-major-mkts-counterpoint-119012501320_1.html ,
accessed on 31 May 2019
5. “NASSCOM”, IoT in India, The Next Big Wave,  https://www.nasscom.in/knowledge-
center/publications/iot-india-next-big-wave, accessed on 31 May 2019
6. https://www.makeinindia.com/sector/electronic-systems