By 2025, the electronics industry in India is set to reach $400 billion. Some of the major factors driving this growth is development of smart cities and consumers demanding more intelligent products that are able to perform advance functions.

The biggest category at present is mobile devices but in near future it is likely to be overtaken by the ‘smart ‘ electronic products.

• Definition / Scope
• Market Overview
• Top Market Opportunities
• Market Trends
• Industry Challenges
• Technology Trends
• Regulatory Trends
• Other Key Market Trends
• Market Size and Forecast
• Market Outlook
• Distribution Chain Analysis
• Competitive Landscape
• Key Market Players
• Strategic Conclusion
• References

Definition / Scope

The term ‘electronics’ deals with circuits made up of components that control the flow of electricity.

Electronics industry in India and anywhere in the world mainly deals with two broad categories, electronic products which are everyday use products (utility products) enabled by electricity energy other electronic products are mostly used in cars, telecommunications and automation of manufacturing plants.

Electronic components are the core of the electronics or raw materials used to make electronic products.

• Electronic Products:
  • Mobile devices: A mobile device is an electronic product, which runs on in-built batteries and are portable. The batteries are charged with help of electric chargers and thus, don’t require electric wires. The segment holds largest market share in the industry. Most of the devices in the segment is represented by smartphones which are able to connect to other devices via Bluetooth.
  • Industrial electronics:
    • IT Automation: The segment consists of equipment, tools or processes that involve electrical tools in an industrial setting. The automation could be a laboratory, automotive plat, power plant or construction site etc. It is also used extensively in petroleum plants, mining and processing units, chemical processing plants among others. Some of the common types of products used include, variable frequency converter, inverter drives, human machine interfaces, hydraulic positioners and microprocessor-controlled robots.
    • Automotive electronics: Some of the common products include, electronic headlights, AV systems, LED lights, electronic controllers among others. At present the segment accounts only 8% of the total market in India.
  • Consumer electronics: These products are mainly used by the households, which is why they are also called consumer electronics. The segment is highly concentrated in India with top 5 players accounting more than 75% of the market. The average penetration of consumer electronic goods in India is 10%, which is much lower, compared to other country markets such as US and China. These products can further be divided into two sub-segments:
    • Brown goods: In this segment products include, television, laptops, camcorders, digital cameras, electronic accessories, personal computers and audio video systems.
    • White goods: The common products include, AC’s, microwave ovens, refrigerators, washing machines, electric fans, cleaning equipment, kitchen appliances, home improvement appliances among others.

Electronic components:

They are branch of electronic industry as a whole and mostly deal with powerful electronic systems such as sensors, analyzers, load cells, AC/DC drivers, data recorders, semiconductors, transistors, wave guides, scopes, amplifiers, circuit boards, timers, counters among others.

These products are either sold by the manufacturer of electronic products to other types of manufacturers of simply to other industries such as for construction purposes.

Market Overview

The Indian Electronics Industry is one of the biggest industries in India. It is being driven by factors such as rising-middle class population and rising disposable income. Also, fall of electronics prices and adoption of high-end technology devices is leading to rise in consumption of electronics devices.

India’s electronics market is growing at 26% annually and is expected to become 5^th largest in the world and reach an astounding $400 billion in value by 2025. By then, the industry will also create more than 400,000 jobs.

Top Market Opportunities

In India, connected products or devices adoption is increasing rapidly. The users mostly belong to tier 1 cities while tier 2 and tier 3 cities will witness the same in near future.

In addition to government’s focus on ‘Digitalization’, ‘Increase in internet penetration and data usage’ and ‘increased awareness’ in 20-55 age bracket will further help proliferate adoption of smart devices. The biggest growth is to be witnessed by home automation systems at 61.4% CAGR between 2018-2022 periods.

The major aspects of home automation systems are heating, ventilation, lighting, audio/video, air-conditioning etc. these segments are likely to benefit the most as they will get opportunity to open new streams of revenues through new products.

Another opportunity for electronic product manufacturers is bought by advanced technologies such as IoT. IoT can help industry manufacturers in area of inventory management.

The industry procures different raw materials from different suppliers. IoT will thus assist players to ensure than all carriers from shipping containers to trucks carrying the goods are connected.

Another advance technology such as GPS, Bar coding & RFiD tags also known as tracking technologies could help manufacturers trace real-time actions, improved safety levels and carefully deploy selective technologies mostly focused on driving better controls and inventory management.

Market Trends

Growing digital penetration: In India 13% of the population use smartphone where 91% search what products to buy on their device and 54% of that figure complete a purchase via that device.

The level of digital maturity in the country is higher compared to that in China and US and it is growing at 31% annually. Thus, growing digital presence and interest of consumers has led to rise in sales of electronic products or smart products in the country.

Policy Support: In India, government allows 100% FDI in electronics hardware manufacturing under automatic route. Approval of 51% multi-brand which is a policy just passed would further fuel the growth of this sector.

In addition, ‘Make in India’ initiative, M-SPIS scheme and National Electronic Policy has further boosted investment into the sector.

Technology transformations: major technology transformation such as 4G/LTE network rollouts and IoT is driving adoption of new or smart electronic products in India. Initiatives such as ‘Digital India’ and several ‘Smart City’ projects have also risen demand for IoT in the market.

In addition, digital banking sector like wallet players and payment banks will raise demand for POS and VSAT-enabled mobile ATMs, which is likely to further, add on fuel to the growing industry.

Income as demand driver: There has been increase in discretionary income of the Indian people, which has aided shortened product replacement cycles, and evolving lifestyles where electronic products are perceived as utility items rather than luxury possessions.

Online retailing is also key factor in reaching out new channel for buyers with increase in demand. Also, per capita GDP in India is expected to be $3274 in 2023 up from $2135 in 2018 and this rise in income will be the major factor in driving demand for electronic products mainly consumer durables.

For the domestic manufacturing ecosystem of the industry, the key challenge is low cumulative value addition in production cycle which is less than 40% for most new age consumer electronics, 7% for smartphones. These figures are lower than global average.

The major reason can be attributed to limited domestic components manufacturing system, high cost of financing and energy consumed, inefficient infrastructure among others.

For the domestic manufacturing to rise in electronics in India, the country needs to focus on critical driving factors such as large-scale demand creation, ease of manufacturing, cost competitive manufacturing etc.

There are two problems plaguing the industry- complex tax structure and unavailability of finance for electronic manufacturing companies.

Another problem, which is hindering exports of domestic products, is cumbersome paper work, lack of incentives and schemes for high value added domestic products and lack of expansion to regions such as Africa.

Finally, the manufacturing process is much complex due to lack of easy access to skilled manpower, lack of better connectivity through roads to reduce transit time and logistic costs, lack of strong IP rights framework, lack of use of technologies such as IoT in production process among others.

India needs to solve all these problems to gain competency and competitiveness in their products and encourage domestic production in the industry more as it has great potential to flourish if stated problems are addressed.

Industry Challenges

High manufacturing costs: Although India has advantage in terms of highly skilled workforce but that is often offset by the high manufacturing cost structure and lack of economies of scale.

The cost of finance, power and transportation together would add disability of 7-8%. Interest rates in India range from 10-14% compared to only 5-6% in other countries such as China, South Korea & Japan.

In addition, logistic challenges such as lack of availability of ports and quality of infrastructures add extra cost of manufacturing for the industry.

FTA or Free trade agreements: India has signed FTA with several countries namely Singapore, Thailand and others in ASEAN region. Under FTA, each country is required to slowly reduce and eventually eliminate tariff rates on other country’s goods (including electronic goods) according to the stated timelines for implementation.

For instance, FTA signed by India are with production-driven economies resulting in finished products from these countries being imported into India at a cost lower than what it would have cost to manufacture the same products in India.

This factor along with the fact that in most cases, components of the finished products are subject to import duties at rates higher than the duties applicable on finished products, the FTA has contributed moreover to the decline of the manufacturing of products in India.

Technology Trends

At present, the industry is going through an evolution due to advancement in technology, launch of innovative products and challenge of global competition. The players in the industry are focused on continuously improving their products and some of the technology trends shaping the innovation are:

One of the common trends in the industry is miniaturization of products. The demand for products to be made so has come from the consumers as they intend to reduce the size of the products to make them easy to manage.

The greater density of components required to make the product small comes from a technology called VLSI designs. The traditional components in electronics products will also be soon replaced by integrated circuits to make them more efficient and small in size

Consumers are also demanding for products that are in-built with AI abilities. This has led to development of electronics and consumer durable products that come with intelligent functions.

For instance, washing machines are able to sense the load and decide the appropriate washing cycle. The AI will soon move beyond consumer durable segments and will be available in several medical, industrial and automotive electronic products.

Another trend that is on constant rise is use of integrated circuits and modules for high frequencies will be in demand considering the large data that needs to be transmitted in a short time.

Advances in integrated circuits is driving packaging and interconnect designers for large products that are able to perform high frequency applications.

Smart and connected devices in the market is further going to shape the electronics industry where such devices will be required to add intelligence to the device and sensors in turn will allow data collection. The connected devices will require other semiconductor players such as integrated microchip designs to enable interconnection.

The new sensors based on micro electromechanical systems (MEMS) technology will also rapidly be developed for IoT products and will have applications beyond image sensing and motion. Those products will be able to measure humidity, food calorie composition, human health indicators and other advance functions.

Regulatory Trends

The Ministry of Electronics and IT have released a National Policy on Electronics in October 2018.

The main goal of the policy is to create an ecosystem for a globally competitive electronic manufacturing sector and achieve a turnover of about $400 billion by the end of 2024 including $100 billion investment and provide employment to 28 million people.

After GST came into effect in 2017, the general tax on electronic products has been set at 18%. In addition, the government has also reduced duty on certain raw materials such as wires, cables, compressor parts that will promote production of consumer electronics in India.

Also, certain policies have provision of duty waiver and tax incentives to companies so that they can replace certain imports with local manufacturing.

According to revised FDI regulation in 2015, single brand retail companies in the market if willing to sell on e-commerce platform would be allowed to do so if they have licenses for setting up physical outlets.

For FDI above 51%, 30% sourcing must be from SME’s. Finally, any additional product categories to be sold under single brand retail must first receive additional government approval.

The GOI has also introduced incentive schemes such as M-SIPS, which was introduced to offset disability and attract investments in electronic manufacturing.

The concept has been accepted well by the industry players and has also helped them reduce disabilities in manufacturing processes. The scheme also provides capital subsidy that is an important aspect of making manufacturing cost efficient in India.

Other Key Market Trends

Some of the major market trends in the industry are as follows:

Contract manufacturing: Some of the leading companies in the market have begun to outsource manufacturing to local contract manufacturers such as Dixon, Amber and Jabil. For instance, Amber contract manufactures ACs for Voltas, Hitachi, Daikin, Godrej and others while Dixon contact manufactures mobile devices and other products for several brands.

Increased affordability of products: Technology advancement and higher competition are the major factors behind price reductions across several electronic product segments such as automotive electronics, consumer durables, telecom segment etc.

In addition, with “Make in India” initiative, multiple Chinese manufacturers are also investing in India and setting up their manufacturing plants, which is making products in the market more affordable.

Focus on energy efficiency: Many companies are also seeking to make products that are more environmentally friendly. They are willing to reduce e-waste and promote product recycling. Thus, each passing year, companies are launching highly energy efficient electronic products.

Market Size and Forecast

As of 2019 end, the market size of electronics industry in India is valued at $220 billion.

Top three biggest sub-segment markets within the industry are as follows:

• Electronics Products: The market value of the segment is expected to be around $186 billion as of 2019
  • Consumer Electronics: As of 2019, the market accounts approximately 18% of the electronics product segment. Thus, the market value is expected to be around $33.4 billion.
  • Industrial Electronics: The segment accounts 15% of the electronic products segment share, which makes its market, value around $27.9 billion.
  • Mobile Devices: The segment accounts highest share among all sub-segments at 27% i.e. market size of around $50.2 billion as of 2019 respectively.
• Electronics Components: The market value of the segment is expected to be around $34 billion as of 2019.

Market Outlook

Overall, electronics industry market in India is growing at 24.4% CAGR between 2020-2025. By 2025, the market size is expected to be around $488 billion

Growth of sub-segments

• The electronic products segment is increasing at 26% between 2020-2025. By 2025, the market size of the sub-segment is expected to reach $427.8 billion.
  • Among the segment markets, mobile devices manufacturing is growing fastest at 185% annually. By 2025, the market size of the sub-segment is expected to reach $169.2 billion
• The electronic components sub-market is increasing at 8.6% annually. As of 2025, the market size of electronics sub-segment is expected to reach $48.6 billion.

Also, the domestic manufacturing of electronics products in India is rising at 17% annually. However at present, foreign players mostly dominate the market.

Distribution Chain Analysis

Some of the major electronics industry clusters in India are follows:

• Jharkhand: Adityapur Industrial Area Development Authority
• Odisha: Odisha Industrial Development Cooperation
• Rajasthan: ELCINA Electronics Manufacturing Centre
• Gujarat: Mundra Solar Techno Park
• West Bengal: West Bengal Industrial development Cooperation
• Madhya Pradesh: Madhya Pradesh State Electronics Development
• Telangana: Telangana State Industrial Infrastructure Cooperation
• Chhattisgarh: Chhattisgarh State Industrial development Cooperation
• Goa: Department of Information Technology
• Andhra Pradesh: ELCINA RAAGA MAYURI Electronics Park
• Kerala: Kerala Industrial Infrastructure Development

Development projects in Electronics

As of 2020, there are approximately 12 projects being conducted in development of electronic technology and systems spread across 13 districts in India.

The total value of these projects is around $635.3 million. Out of 12, private companies and 5 fund 7 projects by government authorities. Some of the biggest projects are follows:

• Mobile Phones Project- Uttar Pradesh ($278.03 million)
• Electronics Manufacturing E-city Project- Telangana ($94.2 million)
• Electronics System Design & Manufacturing Project-Odisha ($70.5 million)
• Electronics Manufacturing Cluster Project- Telangana ($61.6 million)

Competitive Landscape

The electronics market in India is comprised of two major segments namely electronic products and electronic components segment.

• Electronics Products: As of 2020, 82% of the market is comprised of electronics products. The segment is further sub-segmented into follows:
  • Mobile devices (27%)
  • Consumer Electronics (18%)
  • Industrial Electronics (15%)
  • IT Automation (10%)
  • Automotive Electronics (8%)
  • Telecom (8%)
  • Others (14%)
• Electronics Components Segment: The sub-segment comprises 18% of the total electronics market in India. Nearly 70-80% market of electric components market is import driven in India.
  • Electro-mechanical segment (30%)
  • Passive & Active Segments (27% and 22%)
  • Others (20%)

Key Market Players

Some of the top 5 electronics companies in India are as follows:

• Bosch India: It is leading multinational supplier of technology and services. The company has expanded its presence in India through Bosch India. They mainly specialize in electronics services to automotive sector & entertainment sector such as carbide cutting tools etc. They also have competence in air-conditioners. As of 2019, the company had highest market value in the entire industry at $1.4 billion.
• Bharat Electronics Ltd.: It is leading provider of radars, night vision devices, integrated warfare systems, whether satellite systems, surveillance systems etc. As of 2019, the company had market value of around 1 billion.
• Excide Industries Ltd.: The Company is provider of range of batteries such as, automotive batteries, industrial batteries, inverter & solar batteries and home UPS systems. It caters to large net worth clients and thus is able to earn higher margins than other similar companies. As of 2019, the company had around 1 billion net worth.
• ABB India: The Company mainly manufactures lighting and ventilation systems. They have also provided smart solutions to variety of projects such as Karnataka rail. The company also provided electronic systems to first green energy project in India (longest road tunnel in India). As of 2019, the company was worth around $1.1 billion.
• Surya Roshni Ltd.: They are manufacturers of high quality LED bulbs and tubes. As of 2019, the company was worth around $426 million.

Other notable players include:

Electronic Products

• Industrial electronics companies
  • Dixon Technologies
  • Jabil Circuits
  • SFO Technologies
  • ELIN Electronics
• Consumer electronics companies
  • Havells India Ltd.
  • Aar em Electronics
  • Bajaj Electronics
• Mobile devices companies
  • Micromax
  • Lava
  • I-Ball Mobile
  • Intex

Electronic Components

• Electro Mechanical companies
  • Bharat Heavy Electrics Ltd.
  • Mahindra & Mahindra
  • Coal India
• Electronic Hardware companies
  • Essar
  • Siemens
  • Godrej & Boyce
  • BSNL
  • Nvidia
  • Bharati Airtel

Strategic Conclusion

The domestic electronics manufacturing ecosystem doesn’t require government subsidies, instead the industry stakeholders expect government to be catalyst for growth.

For instance, in the Indian automotive industry, the government discourages automotive imports with its high duty structures and complicated registration process, compelling automotive companies to manufacture in India resulting in proper manufacturing ecosystem with high domestic value addition.

The government should fouls on introducing similar environment for electronics industry to aid its long term sustainable growth.

References

• https://indiainvestmentgrid.gov.in/sectors/electronics
• https://www.investindia.gov.in/sector/electronic-systems
• https://www.trendrr.net/1782/best-electronics-companies-india-core-communication-biggest-famous/
• https://www.electronicsb2b.com/eb-specials/leading-organisations/top-10-ems-companies-india-2/
• http://www.circuitstoday.com/top-20-electronics-companies-india-every-fresher-know
• http://www.walkthroughindia.com/hot-trends/top-5-best-indian-brand-mobile-companies/
• https://www.electronicsb2b.com/industry-buzz/outlook-indian-electronics-industry-2018-19/
• https://www.ibef.org/download/consumer-durables-eb-2019.pdf
• https://www.pwc.in/assets/pdfs/publications/2018/future-of-consumer-durables-and-electronics-in-india.pdf