The electronics industry in India has undergone a rapid transformation over the past couple of years. These have primarily been in the product domain, the evolution of the retail channel, and an evolving regulatory landscape. The requirements of both the consumers and businesses have evolved, leading to a demand for innovative products. The supply chains are now far more complex, diverse, and optimized to meet the new industry structure. The government has also unleashed various subsidy and incentive schemes to boost the industry. Production Linked Incentive (PLI) under the aegis of Nation Policy on Electronics (NPE) has turned out to be a game-changer for the industry. The schemes have helped the nation to achieve a target of total electronics production of $300 billion and export is expected to reach $120 Bn by 2026. Amid these optimistic scenarios, the country is also grappling with numerous challenges such as growing the component ecosystem. In this regard, Shri S Krishnan, Secretary, Ministry of Electronics and Information Technology, Government of India and Ramachandran Natarajan, Managing Director, Mel Systems and Services Ltd has informed how the country is undertaking important strategies to grow the manufacturing landscape, the challenges the country witnessed in the past, and the country’s potential to become a global powerhouse in electronics manufacturing.
The Past Challenges and The Current Scenario in Electronics Manufacturing
S Krishnan- We now really need to look forward to developing the component manufacturing ecosystem so that we can fully grow the ESDM sector. When the ITA-1 agreement was signed in 1997, it was the death nail of various brands in the country. Previously, the department was not looking to develop the core electronics and the focus was mostly centered upon developing software, e-governance and other aspects. But, in the past 5-6 years, the core electronics mojo is back again on the right track. We now have a very successful PLI on IT hardware and 27 companies have signed MoUs and many of them have already started operating. This PLI offers benefits even to the existing companies and provides subsidies as well. We are now dealing with an industry where India has traditional strength, and we must use it in such a way that it benefits the country. Currently, 70 percent of PCBs approximately used in India are still imported. Therefore, I urge all the stakeholders to come together and work closely to grow the industry.
The Strategies and Investments Required to Boost the Industry
Ramachandran- We need real support for infrastructure and existing industries. No small-scale unit can start an operation by purchasing land especially in cities like Chennai and this is because the price of land is more than their ability of investment. They cannot move to other smaller locations because their customer base, infrastructure, and manpower is located within the city. I urge the government of India and the state government of Tamil Nadu to help in building multi-storied factories for lease or sale to the MSMEs. The level of subsidies is still inadequate in terms of components manufacturing. This is because they have higher investments, and the margin is very low. There is a requirement of additional PLI in areas such as PCBs and other components where the margins are very low.
MSMEs and Knowledge Economy to Play an Important Role in Boosting India’s Electronics Industry
Ramachandran- As we now compete in the global electronics market, we have to have sustainability as our core business strategy. All the major manufacturers including both the giant companies and MSMEs must look into sustainability deeply and start transforming the major source of their unit’s energy into green energy. Most importantly, these sectors need to create more employment, which can fulfill the dreams of the youth and make them more passionate to do something for their own country. The industry has to come forward and form partnerships with all the stakeholders. For instance, Tamil Nadu’s niche area is knowledge economy, and it needs more partnership. The state has an excellent scheme known as Naan Mudhalvan, where both the academy and the industry work together. Tata has also invested Rs 2000 crores in the ITIs, which can be used for upskilling and reskilling. We are now looking for more such investments.
India’s Initiatives to Grow Semiconductor Design Ecosystem
Krishnan- There are a couple of crucial parts within the semiconductor industry of which design is an important one. There are several global companies who do not own a fab but only focus on design. For instance, MediaTek, AMD, Qualcomm etc. are pure design/fabless companies. India is furnished with a lot of skilled workforces in this ecosystem. The design of chipsets is mostly done in our country and the global firms provide employment to thousands of people in India. Additionally, there are a lot of startups in India that concentrate on design, but they are mostly done for the global multinational firms. This is a key area where the nation needs to grow and the bigger companies in India must completely focus on developing products for its own consumption as well. I am very optimistic that in the coming few years, India will definitely have more fabs in operation.
