Electronics System Design & Manufacturing Industry in India – Business Opportunities & Advantages

The Electronics System Design & Manufacturing (ESDM) industry in India is experiencing robust growth, driven by increasing demand, supportive government policies, and the rapid pace of digitalization. With significant contributions to the country's digital economy targets, exports of electronic goods have surged, reaching USD 23.57 billion in 2023. Projections indicate further growth, with the aim to manufacture 1 billion mobile handsets valued at USD 190 billion by 2025, alongside substantial advancements in 5G networks and IoT adoption. India's conducive policy framework and improved digital infrastructure position the country as a favourable destination for foreign investment, with the potential for significant expansion in electronics exports by 2026.

Market Overview

The electronics market in India has exhibited robust growth, with a notable CAGR of 14% from 2016 to 2019, projected to accelerate to 16.6% by 2025, reaching a demand of USD 540 billion. Government initiatives such as the PLI schemes, SPECS, and EMC 2.0, alongside strategic partnerships and investments, are pivotal in fostering growth and enhancing India's competitiveness. With ambitious targets to position electronics among top exports and significant investments in semiconductor ecosystems, India is poised to emerge as a global hub for ESDM, bolstering economic value and technological leadership.

Growth Drivers

• Policies: The NPE 2019 aims to position India as a global hub for ESDM by fostering chipsets development and creating a competitive industry environment, aligning with "Make in India" and "Digital India" initiatives.
• High Demand: Emerging markets like North Africa and Latin America, along with Middle Eastern countries, offer significant export opportunities for Indian electronic goods. Rapid adoption of electronics is driven by advancements like 5G networks and IoT expansion.
• Investment: India's electronics industry has received USD 4.42 billion in FDI equity inflow from April 2000 to September 2023. With the third-largest start-up ecosystem globally and robust R&D framework, the sector received a notable budget allocation of INR 16,549 crore (USD 2 billion) in 2023-24, up by almost 40% from the previous year.

Start-Up Ecosystem

The Electropreneur Park (EP), established in 2016 by MEITY and IESA, is a pioneering initiative in India that has facilitated the development of 51 hardware products, generated 51 patents, and supported 23 startups. With plans to expand into a central hub with 20 satellite centres, it aims to foster innovation and nurture potential unicorns in the ESDM sector. To further support start-ups, AIC STPINEXT Initiatives (STPINEXT) under STPI has partnered with HDFC Bank and Excelpoint Systems India Pvt. Ltd. to offer comprehensive support including technical guidance, mentoring, funding assistance, and market access.

Large Consumer Base

India's electronic goods exports surged to USD 23.57 billion in 2023, marking a remarkable 50.52% growth from 2022's USD 15.66 billion. Imports during April-October 2023 totaled USD 51.33 billion, with exports reaching USD 15.48 billion. Notably, exports escalated nearly 88% from USD 6.6 billion in 2013-14 to USD 12.4 billion in 2021-22, covering key categories like mobile phones, IT hardware, consumer electronics, industrial electronics, and auto electronics. Forecasts predict India's electronic goods exports to reach USD 120 billion by 2026, with the Consumer Electronics and Appliances Industry expected to secure its position as the fifth-largest globally by 2025. With high internet penetration and its status as the second-largest global smartphone manufacturer, India's ESDM market is poised for significant growth.

Why Invest in India?

• Policy Support: The Indian Government's policies, including the production-linked incentive (PLI) schemes and 100% FDI under the automatic route, provide a favorable environment for electronics manufacturing. The National Policy on Electronics (NPE) 2019 aims to achieve a domestic turnover of USD 400 billion by 2025.
• Investments: The government targets a significant boost in electronics sector contribution post-COVID-19, aiming for a value of USD 400 billion, including USD 120 billion in exports. Intel's investment exceeding USD 7 billion in India highlights the country's appeal for technological innovation.
• Robust Demand: Electronic goods exports surged to USD 23.57 billion in 2023, demonstrating a remarkable growth rate of 50.52%. India is the world's second-largest manufacturer of mobile phones and poised to become the fifth-largest consumer of electronic products by 2025.
• Attractive Opportunities: India aims for USD 300 billion in domestic manufacturing and USD 120 billion in exports by 2025-2026. The integration of AI could add USD 967 billion to the economy by 2035, with EMCs and FABs playing a vital role in infrastructure development and employment generation.

FDI Inflows

Between April 2000 and September 2023, the Electronics industry has attracted US$ 4.42 billion in cumulative Foreign Direct Investment (FDI) equity inflows, with defence electronics permitting up to 49% FDI through the automatic route. The government's liberal approach allows for 100% FDI in the Electronics System Design and Manufacturing (ESDM) sector to attract investments from OEMs and IDMs. Investment opportunities span mobile phone manufacturing, LED and LCD technologies, wearable devices, solar cells, AR/VR, drones, robotics, and additive manufacturing, along with semiconductor fabrication, medical electronic devices, and automotive electronics R&D.

Skill Development in ESDM Sector

The Electronics Sector Skills Council of India (ESSCI), India Electronics and Semiconductor Association (IESA), and National Institute of Electronics & Information Technology (NIELIT) are pivotal entities driving growth in the Electronics System Design & Manufacturing (ESDM) sector. ESSCI focuses on skill development across the product lifecycle, IESA works to establish India as a hub for ESDM activities through policy advocacy and innovation promotion, while NIELIT Ajmer spearheads skill development initiatives to meet industry demands, thus collectively contributing to the sector's advancement.

Industry Trends

• Growing Export Market: India's electronic goods exports have surged, nearly doubling from USD 6.6 billion in 2013-14 to USD 12.4 billion in 2021-22. Notably, in 2023, exports reached USD 25.3 billion, marking a 49% increase since the previous year.
• Local Manufacturing: The manufacturing of laptops and tablets within India has gained momentum, as indicated by the significant growth in the Index of Industrial Production for computer, electronic, and optical products, reaching a value of 137 in 2023. These efforts are expected to boost production to USD 100 billion by 2025, generating around five lakh additional job opportunities.
• Quantum Computing Application Labs: The Ministry of Electronics and Information Technology (MeitY), in collaboration with Amazon Web Services (AWS), is establishing a quantum computing applications lab in India. This lab aims to provide quantum computing services to various stakeholders, fostering innovation in sectors like manufacturing, healthcare, agriculture, and aerospace engineering.

Policies and Support

The Union Budget 2023-24 allocates INR 16,549 crore (USD 2 billion) for the Ministry of Electronics and Information Technology, reflecting a significant 40% increase from the previous fiscal year. This underscores the government's emphasis on electronics hardware manufacturing as a key driver of initiatives like "Make in India" and "Digital India." Aligned with the National Policy on Electronics (NPE) 2019, efforts are focused on positioning India as a global hub for Electronics System Design and Manufacturing (ESDM). Initiatives such as the MeitY Start-up Hub's accelerator program and the ADIF's vision to elevate India's start-up ecosystem globally by 2030 demonstrate a commitment to fostering innovation and collaboration. Schemes like the PLI scheme for IT Hardware Products and proposals such as the RoDTEP scheme further underscore the government's efforts to incentivize innovation and promote exports in the electronics sector.

New Government Schemes

• Production Linked Incentive Scheme (PLI) - Incentivizes domestic manufacturing and investment in mobile phones and electronic components. Offers 4-6% incentives on incremental sales over base year, up to USD 5 billion over five years. Eligibility based on meeting investment and sales thresholds.
• Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) - Provides a 25% financial incentive on capital expenditure for specified electronic goods. Aims to position India as a hub for electronic design and manufacturing, aligning with Atmanirbhar Bharat policies.
• National Policy on Electronics 2019  - Aims to establish India as a global hub for Electronics System Design and Manufacturing (ESDM), focusing on core components development like chipsets.
• Electronics Development Fund (EDF) - Operates as a "Fund of Funds," investing in startups and companies developing new technologies in electronics and IT, fostering R&D and innovation.
• Design Linked Incentive (DLI) Scheme - Offers financial incentives and design infrastructure support for semiconductor design development, covering ICs, Chipsets, SoCs, Systems & IP Cores.
• Modified Special Incentive Package Scheme (M-SIPS) - Provides capital subsidy to electronic industries in and outside Special Economic Zones (SEZs). Over 400 applications totaling billions under consideration, with approved and pending investments.

Business Clusters

• Bengaluru, Karnataka: Known as the "Silicon Valley of India," Bengaluru is a leading hub for the ESDM industry, hosting numerous electronics companies, research institutions, and start-ups.
• Noida-Greater Noida, Uttar Pradesh: Emerging as a prominent electronics manufacturing cluster in North India, this region houses manufacturing units for mobile phones, consumer electronics, and IT hardware.
• Hyderabad, Telangana: Hyderabad has a growing ESDM industry cluster, focusing on semiconductor design and manufacturing, with semiconductor fabs, research labs, and technology parks attracting investments.
• Pune, Maharashtra: Pune is a key hub for electronics manufacturing, particularly in automotive electronics, with several manufacturers, R&D centres, and testing facilities.
• Chennai, Tamil Nadu: Chennai is a significant electronics manufacturing cluster in South India, with a strong presence across segments like consumer electronics, automotive electronics, and IT hardware.
• Gandhinagar, Gujarat: Gandhinagar's electronics manufacturing ecosystem is supported by government initiatives and infrastructure, hosting manufacturing units, research institutes, and industrial parks.
• Sri City, Andhra Pradesh: Sri City, known for its industrial parks and manufacturing facilities, has attracted investments from electronics companies, especially in mobile phone manufacturing and assembly.
• Jaipur, Rajasthan: Jaipur is a promising destination for electronics manufacturing, especially in LED lighting and solar energy sectors, offering favourable policies, infrastructure, and skilled labour.
• Kochi, Kerala: Kochi is evolving as an ESDM cluster, focusing on embedded systems, IoT, and semiconductor design, benefiting from academic institutions and research organizations fostering innovation.
• Mohali, Punjab: Mohali has seen the emergence of an electronics manufacturing ecosystem, particularly in IT hardware and consumer electronics, offering incentives and infrastructure support.

In conclusion, India's Electronics System Design and Manufacturing (ESDM) industry has experienced significant growth and transformation, driven by proactive government policies, robust infrastructure, and collaborative efforts across stakeholders. Initiatives like the NPE 2019 and PLI scheme have spurred investment, indigenous manufacturing, and innovation, fostering the development of a thriving ecosystem. With dedicated business clusters and rising indigenous champions, India is poised to compete globally in emerging technologies like AI and IoT. Continued investment in infrastructure, skill development, and collaboration will be crucial for sustaining growth and driving innovation in the ESDM sector, positioning India as a key player in the global market.

To know more about the ESDM Industry in India, request a Free Detailed Report by submitting a query below.