India?s electronics market is projected to reach $400 billion by 2020 from the current $84 billion, with over 60% of the demand being met through imports. The Indian electronics system design and manufacturing (ESDM) industry has the potential to reduce import dependency by focusing on creating and manufacturing value-added products, said Sanjeev Keskar, chairman, India Electronics & Semiconductor Association (IESA), in an interview with FE?s PP Thimmaya. Edited excerpts:
How do you see India?s electronics market?
India?s electronics market is projected to reach $400 billion in 2020. But the question is where we are today? At IESA we have prepared a detailed report on the ESDM sector. In manufacturing, we should focus on high value-added products as the three building blocks of electronic goods are: Intellectual property (IP) and technology, which contribute 40-50% of product revenue, component ecosystem, which is about 30-35%, and the rest comes from systems integration and contract manufacturing. Unless we focus on all these three, we will not get the larger picture. We found that the top 20 products account for 80% of electronics consumption.
How can we make manufacturing attractive?
There are four key components in each of the 25 products, contributing more than 50% of the product. If there is a local original equipment manufacturer (OEM) with 10-15% market share, we can support it to grow beyond 50-60% market share. Our strength is in consumption of electronics, and we have to leverage this buying power. In India, we do not have local IP, so we have to do focused marketing to attract global players, use policies in creating high value addition manufacturing.
Large ESDM industrial houses should focus on manufacturing in India. We should address issues that come as hurdles. Scaling up of the operations is not a big issue because of India?s consumption pattern and talent availability.
What are the major challenges associated with the sector?
The electronics manufacturing sector faces various challenges like the inverted duty, whereby it is cheaper to import a product than a component, high cost of finance, the lack of a component eco-system and tax structures. If these are addressed, then we can talk about creating a high value-added manufacturing framework.
We do not have a local product innovation or design system. For example, Apple does not manufacture anything in the US but 50% of the value is captured in their headquarters because of IP rights. What we should work on is to create product innovation in India.
How has the government responded to proposals?
The government is very serious. The government has presented a modified special incentive package and also sought our feedback. The Centre has received R13,000 crore of investment proposals. Various states are interested in setting up electronic manufacturing clusters. If we create a common facility and provide entrepreneurs seed funding, I think they can develop next-generation technologies in India.
What about semiconductor manufacturing?
This year, we expect approval to two proposals for setting up of wafer fab manufacturing in India. This will be a strategic decision, and the size could be around $60 billion.
