Challenges Facing Indian Electronics Industry
While there is huge scope for growth, sadly things have not been too great for local electronics manufacturers in the country. "It is an irony that IT and services have powered India to be one of the world's fastest-growing as well as respected economies, but manufacturing accounts for well under 20 percent of the output. This amounts to roughly half of the share in China and well behind India's targeted 25 percent over the next decade. Further, share of electronics in India's GDP is still 2 per cent. Looking at the brighter side, we have a huge potential for growth," says Sunil Dhar, GM, Renesas Electronics Singapore.Real challenges
There are some integral challenges that the Indian electronics industry is facing today. If not controlled in time, it can pose some serious challenges. PVG Menon, president, India Semiconductor Association (ISA) says: "A significant challenge is the cost of finance, especially working capital. Capital is scarce to come by in India, and the cost of borrowing is very high, as compared to some other countries where electronics is flourishing. Another challenge is hard infrastructure, such as power, water, roads, etc. India will need to make significant and fast investments into infrastructure if domestic manufacturing has to get an impetus, and grow to global scale."
The serious obstacles observed in the path of growth are the lack of friendly ecosystem for growth, inconsistent government initiatives, unstable exchange rate, poor infrastructure, and so on. It gets even harder to for India to catch up with the major global electronics manufacturing centers as the gap widens.
Dhar elaborates: "Looking at the rate at which electronics import is projected to grow, electronics hardware has potential to surpass oil import bill. Herein lies the challenge and also an opportunity for the industry. The demand for electronics is growing significantly, but so is the competition from globally competitive manufacturing centres. Industry and government must jointly put their act together, turn a new leaf, and invigorate this lacklustre sector of our economy."
Breaking down the challenges, the severe price pressure on India-made products and the inverted duty structure play spoilt sport too. Menon adds: "There is severe price pressure on India-made products from imported products, some of which seem to be suspiciously low priced with respect to BOM-to-manufacturing cost ratios. Moreover, the inverted duty structure on some of the components actually makes it cheaper to import them, than to design and make them indigenously in India."
The existent supply-chain issues are also prevalent but it is expected to ease out with the policy for development of clusters, which will hopefully lead to gradual reduction of these bottlenecks.
The right path
Given the significant demand pool for domestic consumption of electronics in India, the opportunity is at our doorsteps. Dhar feels that in order to create an ecosystem for growth, we need to create our own world class products, substituting imports from China and other countries.
We would also need wafer fabs to support indigenisation. We need to create more skilled workforce in electronics manufacturing sector apart from design force. India also needs to learn to improve the scale and vision, and create economy through volumes.
The government can play an important role in the overall scenario by creating more technical parks, free trade zones, minimise bureaucratic hurdles, support industry by tax holidays, etc. Giving significant incentives for export and promoting local content in end products manufactured for domestic demand along with National Electronics Mission and allocation of funds to drive the initiatives through this mission would also be refreshing moves.
The industry, on its part, has the target to deliver quality and volumes at globally competitive prices. For instance, train the workforce with techniques, skillsets and mindsets that are seen in eastern economies today. Expose key managers and workforce to opportunities and challenges and finally learn to find synergies among collaborations and create a joint pull effect on opportunities for a mutual win-win.
Next big thing
The coming big waves will be tablet PCs, set-top boxes, automotive electronics as well as medical electronics. "If the industry can demonstrate an integrated approach where turnkey solutions can be offered from design to finish and competitive end products, there will opportunities in abundance. Competitive sourcing and quality manufacturing would be key challenges," Dhar adds.
Moreover, with the government showing keen interest in encouraging local manufacturing of electronics, the emergence of locally made electronics products, what we like to believe as 'Made in India for the World' products, could be one of the next big waves.
Re-instating the fact, Menon says: "There is a tremendous amount of talent and innovation brimming in India, and these ideas and energies need to be channelised and found expression in new and innovative products. We see examples around us everywhere, though not in as high a number as we would like. These early successes need to be highlighted and showcased, so that they can become role-models for young innovators and entrepreneurs. This is where we see a big role being played by media."
Learning from global market
Moreover, with the government showing keen interest in encouraging local manufacturing of electronics, the emergence of locally made electronics products, what we like to believe as 'Made in India for the World' products, could be one of the next big waves.
Re-instating the fact, Menon says: "There is a tremendous amount of talent and innovation brimming in India, and these ideas and energies need to be channelised and found expression in new and innovative products. We see examples around us everywhere, though not in as high a number as we would like. These early successes need to be highlighted and showcased, so that they can become role-models for young innovators and entrepreneurs. This is where we see a big role being played by media."Learning from global market
First and foremost, we need to be able to somehow attract the large Indian diaspora, most of whom are highly qualified and experienced - to come and set up companies in India.
Countries like China, Taiwan and Korea have been hugely successful with this approach. "The NRI community constitute a very rich source of ideas, talent, cutting-edge technological capability and of course investment potential. As a nation we should make it very easy and attractive for them to come in and set up companies here to develop 'Made in India for the world' products. Second, capital must be available at a significantly lower rate than what it is presently. Multiple routes are available for this, and all of them should be explored. Third, domestic manufacturing should be encouraged and incentivised, as only scale can bring about efficiency and economy in the supply chain. Many countries have adopted different policies to stimulate domestic manufacturing, and India too should learn and emulate this," Menon elaborates.
The key learning is that opportunity does not knock the doorstep twice. India needs to learn to catch the wave and ride it! We missed the wave a few times in past, from semiconductor fabs to mobile phones. It is time to grab the next wave in time!
Countries like China, Taiwan and Korea have been hugely successful with this approach. "The NRI community constitute a very rich source of ideas, talent, cutting-edge technological capability and of course investment potential. As a nation we should make it very easy and attractive for them to come in and set up companies here to develop 'Made in India for the world' products. Second, capital must be available at a significantly lower rate than what it is presently. Multiple routes are available for this, and all of them should be explored. Third, domestic manufacturing should be encouraged and incentivised, as only scale can bring about efficiency and economy in the supply chain. Many countries have adopted different policies to stimulate domestic manufacturing, and India too should learn and emulate this," Menon elaborates.
The key learning is that opportunity does not knock the doorstep twice. India needs to learn to catch the wave and ride it! We missed the wave a few times in past, from semiconductor fabs to mobile phones. It is time to grab the next wave in time!
