Historical Developments:
The Electronics Industry in India took off around 1965 with an orientation towards space
and defence technologies. This was rigidly controlled and initiated by the government. This
was followed by developments in consumer electronics mainly with transistor radios, Black
& White TV, Calculators and other audio products. Colour Televisions soon followed. In
1982-a significant year in the history of television in India - the government allowed
thousands of colour TV sets to be imported into the country to coincide with the broadcast
of Asian Games in New Delhi. 1985 saw the advent of Computers and Telephone
exchanges, which were succeeded by Digital Exchanges in 1988. The period between 1984
and 1990 was the golden period for electronics during which the industry witnessed
continuous and rapid growth.
From 1991 onwards, there was first an economic crises triggered by the Gulf War which was
followed by political and economic uncertainties within the country. Pressure on the
electronics industry remained though growth and developments have continued with
digitalisation in all sectors, and more recently the trend towards convergence of technologies.
After the software boom in mid 1990s India's focus shifted to software. While the hardware
sector was treated with indifference by successive governments. Moreover the steep fall in
custom tariffs made the hardware sector suddenly vulnerable to international competition. In
1997 the ITA agreement was signed at the WTO where India committed itself to total
elimination of all customs duties on IT hardware by 2005. In the subsequent years, a number
of companies turned sick and had to be closed down. At the same time companies like
Moser Baer, Samtel Colour, Celetronix etc. have made a mark globally.
Current Scenario:
In recent years the electronic industry is growing at a brisk pace. It is currently worth US$ 32
Billion and according to industry estimates it has the potential to reach US$ 150 billion by
2010. The largest segment is the consumer electronics segment. While is largest export
segment is of components.
The electronic industry in India constitutes just 0.7 per cent of the global electronic industry.
Hence it is miniscule by international comparison. However the demand in the Indian
market is growing rapidly and investments are flowing in to augment manufacturing capacity.
The output of the Electronic Hardware Industry in India is worth US$11.6 Billion at present.
India is also an exporter of a vast range of electronic components and products for the
following segments
• Display technologies
• Entertainment electronics
• Optical Storage devices
• Passive components
• Electromechanical components
Corporate Catalyst India A report on Indian Electronics Industry
• Telecom equipment
• Transmission & Signaling equipment
• Semiconductor designing
• Electronic Manufacturing Services (EMS)
This growth has attracted global players to India and leaders like Solectron, Flextronics, Jabil,
Nokia, Elcoteq and many more have made large investments to access the Indian market. In
consumer electronics Korean companies such as LG and Samsung have made commitments
by establishing large manufacturing facilities and now enjoy a significant share in the growing
market for products such as Televisions, CD/DVD Players, Audio equipment and other
entertainment products.
The growth in telecom products demand has been breathtaking and India is adding 2 million
mobile phone users every month! With telecom penetration of around 10 per cent, this
growth is expected to continue at least over the next decade. Penetration levels in other high
growth products are equally high and growth in demand for Computer/ IT products, auto
electronics, medical, industrial, as well as consumer electronics is equally brisk. Combined
with low penetration levels and the Indian economy growing at an impressive 7 per cent per
annum, the projection of a US$150 Billion+ market is quite realistic and offers an excellent
opportunity to electronics players worldwide.
Electronic Manufacturing Services:
India is well-known for its software prowess. But on the hardware front, the progress is
rather slow. However, the country has been making gains in this sector also. Already, 50
Electronics Manufacturing Services (EMS)/Original Design Manufacturers (ODMs)
providers are operating in India, ranging from global players including Flextronics and
Solectron to indigenous firms including Deltron, TVS Electronics and Sahasra. Further
moves by international players are expected to add production in India in the coming years.
India’s contract-manufacturing business is expected to nearly triple in revenue over the next
five years, a development that will present both opportunities and potential pitfalls for the
worldwide electronics supply chain. Revenue generated by Electronics Manufacturing
Services (EMS) providers and Original Design Manufacturers (ODMs) in India will expand
to $2.03 billion in 2009, rising at a CAGR of 21 per cent from $774 million in 2004. Indian
EMS/ODM revenue grew by 20.8 per cent to reach $935 million in 2005.
Obvious allure of locating electronics production in India is the nation’s low labor costs.
Labor costs for conducting electronics manufacturing in India are between 30 to 40 per cent
less than in the United States or in Western Europe. Other equally important benefits from
operating in India include a fast-growing domestic market, an excellent education system, the
nation’s technology parks and the recent improvements in the country’s transit and utility
infrastructure.
However, the Indian contract-manufacturing industry is not expected to pose a significant
threat to China’s position as the epicenter of electronics manufacturing in the short term.
India’s contract manufacturing activities primarily serve the nation’s indigenous demand.
Corporate Catalyst India A report on Indian Electronics Industry
OEMs primarily outsource manufacturing to cater to the Indian domestic market, although
export of Indian-assembled electronic goods does occur. In the longer term, i.e. 2009
onward, it is predicted that India may compete with the Chinese providers in select products
as the nation’s share of the global electronics market increases.
For OEMs, using contract manufacturing services in India can help them penetrate the local
market. However, OEMs face specific risks associated with using contract manufacturers in
India. Fluid exchange rates combined with volatile oil and component prices lead to
unpredictable costs. Changing government policies along with shifting government regimes
also contribute to an unpredictable political environment. Doing business in India is often
disjointed, with an inefficient bureaucratic system that causes frequent delays. However, for
OEMs able to manage these risks, the opportunity in India is significant.
The semiconductor fabrication segment has a small existing base in India with only two
fabrication units, which both are developing chips for the defense and strategic sectors.
However, semiconductor suppliers are expanding their manufacturing activities in India to
serve the growing contract-manufacturing industry in the nation. As evidence of this trend,
groundbreaking commenced on a 200 mm fabrication unit in Hyderabad operated by Nano-
Tech Silicon India Ltd.
The Growth Drivers:
Behind the impressive growth of the electronics industry is the robust and consistent growth
in Electronic Hardware market of approximately 25 per cent due to a stable economy &
large middle class of 350 million people. The fastest growing segments are demand for
telecom services particularly cell phones, internet subscribers & growth in demand for it
products with increasing penetration of computers, falling prices & Government support to
rapidly encourage usage of IT in all sectors. Within next 5 years penetration of telephone
users (both landline & mobile) is projected to increase from 100 to 500 per thousand while
PC's increase from 10 to 30 plus per thousand. Some of the other factors are
• Highly talented workforce, especially for design and engineering services with good
communication skills.
• Rising labor costs in China.
• Presence of global Electronics Manufacturing Services (EMS) majors in India and their
plans for increased investments in India.
• More outsourcing of manufacturing by both Indian and global Original Equipment
Manufacturers
Production Trend of Different Segments:
1) Consumer Electronics
Consumer electronics (durables) sector continues to be the main stay of the Indian electronic
industry contributing about 32 per cent of the total electronic hardware production. By the
end of 2005-06, the market for consumer durables (including entertainment electronics,
communitarian and IT products) was Rs 180 billion (US $4.5 billion). The market is
expected to grow at 10 to 12 per cent annually and is expected to reach Rs 60 billion
(US$13.3 billion) by 2008. The urban consumer durables market is growing at an annual rate
Corporate Catalyst India A report on Indian Electronics Industry
of seven to 10 per cent, the rural durables market is growing at 25 per cent annually. Some
high-growth categories within this segment include mobile phones, TVs and music systems.
2) Computer Industry
With sound macroeconomic condition and buoyant buying sentiment in the market, PC
sales touched 6.5 million units during 2006-07. The high growth in PC sales is attributed to
increased consumption by Industry verticals such as Telecom, Banking and Financial
Services, Manufacturing, Education, Retail and BPO/IT-enabled services as well as major e-
Governance initiatives of the Central and State Governments. Significant consumption in
the small and medium enterprises and increased PC purchase in smaller towns and cities was
witnessed during the year. It is expected that increased Government focus on pan-India
deployment of broadband at one of the lowest costs in the world will soon lead to
accelerated PC consumption in the home market.
The growing domestic IT market has now given impetus to manufacturing in India. The year
witnessed not only capacity expansion by the existing players, but also newer investments in
hardware manufacturing. India is also high on the agenda of electronics manufacturing
services companies.
3) Control, Instrumentation and Industrial Sector
This is now a matured industry sector in the country at least as far as various application
segments is concerned. State-of-art and reliable SCADA, PLC/Data Acquisition systems are
being applied across various sections of the process industry. Latest AC drive systems from
smaller to very high power levels also find application in large engineering industries like
steel plants and/or metal industries. World class UPS systems are being manufactured in the
country to cater to the need of the emerging digital economy. However, it appears there is
really no manufacturing base in the country for the whole range of the latest test and
measuring instruments which are invariably procured from outside. A good number of
Indian companies in the control and instrumentation sector are able to acquire orders for
export systems through international competitive bidding.
However, the creation of knowledge base in the country through industrial R&D in this
critical sector has not been improving as desired. There is still lack of needed R&D activities
by the industry looking at the global market. On the part of Department of Information
Technology some of the latest technology development and applications in this area include
Intelligent SCADA Systems for monitoring and control of Mini Hydel plants, Advanced
Traffic Control System for urban transportation, Intelligent Power Controllers for
improvement of quality of electric power, etc. These systems have been successfully
developed and applied in real field conditions.
4) Communication & Broadcasting Sector
The telecommunication industry has gained tremendous recognition as the key driver for all
round development and growth. With about 256 million telephone subscribers (as on
Corporate Catalyst India A report on Indian Electronics Industry
February, 2007) India has emerged as one of the largest in the world and second largest in
Asia.
The share of private sector in telecom industry has increased to more than 57 per cent and
the contribution of mobile telephony has gone upto 63 per cent on December, 2007. Buoyed
by the better-than-expected teledensity in 2005 (11.4 per cent against 8.6 per cent in 2004)
due to the mobile boom in India, Department of Telecommunications (DoT) has revised the
upwards the target of 22 per cent teledensity by 2007.
Broadband connectivity is holding tremendous potential in the country. It is expected that
the number of broadband subscribers would reach 20 million by 2010.
India has emerged as the second largest market for mobile handsets. Following the
unprecedented growth in the mobile market, a number of companies are planning to set up
production base for mobile hand sets in the country for meeting local as well as export
markets.
Direct to Home (DTH) broadcast service has gained more and more popularity during 2005.
DTH service is available through National Broadcaster and private DTH service provider.
Better quality digital broadcast reception is now available almost everywhere in the country
to the common people on their TV sets through the use of small dish antenna and a Set-Top
Box (STB).
5) Strategic Electronics
Though the government has started the process of getting private sector involved in the
production of strategic electronics equipments, the private involvement is at its nascent
stage. The estimated market for strategic electronics in India during 2005-06 was Rs.32
billion and 95 per cent of this was done by the public sector unit Bharat Electronics Limited
(BEL).
6) Electronic Components
The total production of components was estimated at Rs. 88 billion during 2005-06. The
colour picture tube production is likely to be around 11 million, a decline from 11.2 million
in the last year. The production of B&W picture tubes declined further due to decreased
market for B&W TVs.
The components with major share in the export are CD-R, CPTs, PCBs, DVD-R,
connectors, semiconductor devices, ferrites, resistors, etc.
Significant developments took place during the year in the area of colour picture tubes and
colour glass parts. Another CPT manufacturer successfully launched manufacture of pure
flat tubes, leading to availability of flat tubes from three indigenous sources. The CPT units
continued expansion of capacities to improve further their global competitiveness. Two
more lines were commissioned during the year, one for manufacture of large size flat colour
Corporate Catalyst India A report on Indian Electronics Industry
picture tubes and the second for small size. Two more lines are likely to come up next year.
Keeping pace with the downward trend in prices of color TVs, the prices of CPTs also fell.
