Electronics Manufacturing Industry in India

October 2017
Indian Electronics System Design Manufacturing (ESDM)
Market Overview
Consistent local demand for electronic products, along with increasing manufacturing investment, is
anticipated to catapult the industry into a high growth phase. Overall industry growth is also a reflection of
the ecosystem development.

Total Indian ESDM Industry, Forecasts ($ Billion)

278
CAGR 2014-2020: 17.5%
233
197
167
142
122
106

2014 2015 2016 2017 2018 2019 2020

• In comparison to the global ESDM industry that exhibits below 5% year-on-year growth trends, the
Indian ESDM industry is expected to have one of the highest growth rates, representing a CAGR of 17.5%
from 2014 to 2020.
• The Indian ESDM industry currently characterized by the low value addition is expected to witness
investment in manufacturing and thereby is likely transform to a high value-adding sector by 2020.
Source: Frost & Sullivan

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Indian ESDM Industry Segments
The electronic product market dominates with approximately 81% share in the ESDM industry in 2017,
whereas component and Electronic Manufacturing Services (EMS) markets are expected to witness high
growth rates between 2014 and 2020.

Electronic Product Market Forecasts ($ Billion) EMS Market Forecasts ($ Billion)

CAGR 2014-2020: 19..5% CAGR 2014-2020: 34.1%

8.3
216.2
182.9 6.2
136.1 157.8 4.7
101.4 116.7 3.5
87.9 2.6
1.4 1.9

2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020

Component Market Forecasts ($ Billion) Semiconductor Design Market ($ Billion)

CAGR 2014-2020: 34..9% CAGR 2014-2020: 17.0%

33.1
20.5 27.6
16.3 23.0
16.7 19.2
11.6 12.9 14.5
6.1 8.2
3.4 4.5

2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Source: Frost & Sullivan

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SWOT of ESDM Industry

Advantages
• Huge demand potential in the country
• Strong design and R&D capability in select
product markets; resident design talent
• Government schemes such as NKN, NOFN, and
Digital India initiative
• Adequately developed EMS industry to be a
significant enabler
Opportunities
• Huge local demand to be an influencer in
attracting investment
• Rising manufacturing costs in China leads to
search for alternate manufacturing hubs
• Significant export potential in neighboring
markets such as the MENA region
• “Make in India” initiative to accelerate
investment activity in core and allied sectors

Weaknesses
• Reliance on imports for critical electronic
components
• Convoluted duty structure; imports cheaper
locally manufactured products in select cases
• Inadequate testing facilities and standards
implementation leading to presence of low-
quality grey market goods
• Debilitating Free Trade Agreements with
Thailand and Japan
Threats
• Emergence of robust manufacturing ecosystems
in East Asian countries and Mexico
• Inadequate local manufacturing ecosystems for
components and other raw materials
• Infrastructure inadequacy for industries; lack of
access to reliable power and clean water
• Depreciation of the Indian Rupee as a short-
term threat
Source: Frost & Sullivan

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Indian Electronics Product Market
Original Equipment production (OEP) expected to grow at 1.6X the Original Equipment Market (OEM).
Effective implementation of policy measures is expected to be a crucial element defining the electronic
product manufacturing market’s growth.

Electronics Product Market Forecasts ($ Billion)

CAGR 2014-2020
OEM: 16.2% 216.2
OEP: 25.4% 182.9 173.7
157.8
116.7 136.1 129.2
88.0 101.4 99.1
62.0 77.0
44.6 50.8

2014 2015 2016 2017 2018 2019 2020

OE Market (USD Bn) OE Production (USD Bn)

Key Electronics Product Market Segments ($ Billion)

Automotive
28.7 55.7 Consumer
2020 16.4 25.6 54.6 18.0 11.5 Industrial
5.7 216.2 Billion IT/ OA
Mobile Phones
Telecom
2018 25.6 40.5 19.2 30.3 16.1 8.5 Lighting
14.9 Others
2.6 157.8 Billion

Source: Frost & Sullivan

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Indian Consumer Electronics Industry
The TV market represents the biggest category in the consumer electronics market with overall penetration
of 60% in the country. The appliances market is a mix of high-volume, low-value products that have
different levels of adoption across the country.

Consumer Electronics Market – By Segment Consumer Appliances Market – By Segment

7%
11%
3% , 2% 0.2% 5%
3%
7%
11%
9%
36% 20%
2%
1%

3%
12%
6% 2%

5%

11% 5%

14% 11%
14% Microwave ovens Mixer Grinders Blenders
Toasters Electric Kettles Electric Rice Cookers
TV Refrigerators Set top Boxes OTG Juicer/Extractor Food Processor
Digital cameras AC Washing machines Roti Makers Coffee Makers Induction Cooktop
AV Players Water purifiers Air Coolers Sandwich Makers Others
Note: This information is for base year 2016 Source: Frost & Sullivan

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Growth of Domestic Manufacturing in India
Business-friendly policies of the Government of India, stable political leadership, and turmoil in certain
economies around the globe have together created a conducive investment climate in India, further
boosting the domestic manufacturing.

Automotive
2020 29.0 11.7 37.3 8.6 66.7 10.9 4.5 $173.7 Consumer
Billion Industrial
5.0
IT/ OA
Mobile Phones
Telecom
2018 3.2 $99.1 Billion
23.8 8.5 25.5 6.8 20.4 8.8 Lighting
2.1
Others

Electronics Segment Key Products to Drive Manufacturing till 2020 and Beyond
Automotive HVAC, ECU, Airbags, ABS, AMT
Consumer FPD TVs, Washing Machines, Set Top Boxes
Industrial Process Machinery, Boilers, Printing Machinery, Machine Tools
IT/ OA Notebooks, Desktops, Servers
Mobile Phones Feature Phones, Smart Phones
Telecom Media Gateways, BTS, Enterprise Routers, IP PBX
Lighting LED Lighting
Other Electronics Smart Cards, PoS Terminals, Medical Devices, ATM
Source: Frost & Sullivan

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Programs/Policies and Their Positive Impact on Electronics
Manufacturing Growth in India
Program/Policies Impact on Electronics Manufacturing

Investment in downstream segments creating demand

Make-in-India Industry 4.0/ Smart manufacturing practices and greater usage of electronic
systems

Digital India Demand for desktops, notebooks, mobile phones, telecom products

Jan Dhan Yojana Boost to smart cards, ATMs, PoS terminals

Swachh Bharat Abhiyan Automation systems, instrumentation for water and waste management

Domestic Efficient Lighting

LED lighting
Programme

IT/ OA products, automation systems, power management products,

Smart Cities
automotive and transportation systems

Modified Special Incentive

To bridge the viable gap in manufacturing investment levels
Package Scheme

Higher Customs Duty on Key

To encourage local sourcing and ecosystem development
Products/Components
Source: Frost & Sullivan Analysis
Source: Frost & Sullivan
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Electronics Manufacturing Value Chain and Role of EMS
Favourable government policies, Make-in-India initiative, and rising costs in China are the key factors for
rise in local outsourced manufacturing, especially in the consumer electronics segment.

Total EMS Market Forecasts (USD Billion)

CAGR 2014-2020: 34.1% 8.83

6.64
5.03
3.87
2.27 2.87
1.53 1.90

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Presence of EMS companies across value chain

Component Packaging, Marketing

Manufactur Configurati
R&D, IP Design s Distribution & Sales
e/System on &
Ownership Services Fabrication & Repair
Assembly Testing
& Sourcing Services

Low Maturity Medium Maturity High Maturity EMS Capability

Source: Frost & Sullivan

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 India Versus China
India gaining traction as a competitive alternate to China for electronics manufacturing

China India Ranking Based on These Factors China India

Component ecosystem
Economies of scale, profit margins
Economic growth
Domestic market demand
Regulations and policies
Logistics and infrastructure
2016

2020
Design and engineering capabilities
Ease of doing business
Testing facilities
Labor cost
Availability of skilled workforce
Currency fluctuation
Export competitiveness
HIGH MEDIUM LOW
Source: Frost & Sullivan

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Distinct Advantages Give India an Upper Hand
Manufacturing Competitiveness in China
• Stable and substantial supply chain in China
with large economies of scale helped China
maintain low costs and high margins production
of electronic goods in the last two decades.
• Its dominance in electronic manufacturing
arises from incredible government support the
stakeholders receive primarily in the form of
capital subsidy and relaxation of taxes.
• The economy transformed into an export
destination for global electronic giants as the
country supplied large qualified workers at low
wages.
• As China’s economy slows down, it struggles
with currency devaluation and rising labor
wages, the ‘low-cost manufacturing’ tag has
started to loose its sheen, making other
emerging economies, such as India, Vietnam,
and Malaysia, more attractive for investment.
Manufacturing Competitiveness in India
• On the other hand, India’s manufacturing
competitiveness is set to soar further as the
economy is on growth trajectory.
• Huge electronics domestic demand will be a
key driver necessitating the development of
local ecosystem.
• Growing investment and increasing local value
addition levels will also see manifold jump as
more OEMs look toward localization of their
products from India.
• Regulatory framework made more investment
and business friendly to attract investment
through foreign and domestic investors.
• India possesses superior design capabilities and
availability of talented workforce at
approximately 150% lower wages than China,
which strengthens its position as a futuristic
domestic-cum-export-oriented manufacturing
destination for the globe.
Source: Frost & Sullivan
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