by Rajoo Goel, Elcina

Electronics Manufacturing has been declared as one of the focus sectors for development in India and we have been one of the world’s fastest growing electronics manufacturing hubs. With supportive policies and favourable eco-system the sector has grown rapidly over the past 4-5 years at a CAGR of approximately 25% from USD 29 Bn in 2014-15 reaching USD 70 Billion in 2018-19, against total demand of US$ 127 Bn. 

An overall scenario of the Indian electronics market

India’s share in global electronics manufacturing has grown almost 2.5 times in 6 years i.e. from 1.3% in 2012 to 3.0% in 2018 while Exports of electronic goods have also increased substantially from USD 6.4 Bn in 2017-18 to USD 8.8 Bn in 2018-19.

While all segments have grown, the bright spot has been that India emerged as the second largest manufacturer of mobile phones in the world in 2018. The production of mobile phones in the country has gone up 8 times in last 4 years i.e. from USD 3 Bn in 2014-15 to USD 24 Bn in 2018-19 and majority of the domestic demand is being met through domestic production. Other segments  which have shown remarkable double digit growth are Automotive/Industrial Electronics, LED Lighting, Defence Electronics and Consumer Electronics which includes a wide variety of products.

The National Policy on Electronics 2019 (NPE 2019) was announced last year, as a successor to the NPE 2012, to accelerate the growth of Electronics System Design and Manufacturing (ESDM) sector and position India as one of the global hubs. This policy seeks to provide incentives to investments in the electronics sector to expand and diversify electronics manufacturing into sectors like medical, automobile, EVs, defense, components and in emerging domains such as 5G, IoT, Artificial Intelligence and more. The underlying objective is to enhance domestic value addition, R&D, Innovation and encourage exports. Accordingly, the Government announced 3 key Schemes under NPE 2019 on 20th March 2020 which are aimed at incentivizing large-scale manufacturing, developing a robust supply chain ecosystem and building new manufacturing clusters in the country.

Three Schemes – PLI (Production Linked Incentive), SPECS (Scheme for Promotion of manufacturing of Electronic Components and Semiconductors) and EMC 2.0 (Electronics Manufacturing Clusters Scheme) – together constitute the foundation of NPE 2019 and are expected to enable large scale electronics manufacturing, a domestic supply chain ecosystem of components and state-of-the-art infrastructure and common facilities for large anchor units and their supply chain partners.
It will contribute significantly to achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025. These Schemes will also leapfrog India towards a US$ 400 Bn ESDM Industry, higher value addition moving us from assembly to real manufacturing and overcome the 8-10% disability faced by manufacturers.

PLI – The Production Linked Incentive Scheme

• The scheme is proposes to offer a production linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units.
• Provides for a 4% to 6% incentive on incremental sales (over base year) of goods manufactured in India which are covered under the target segments, for a period of 5 years
• Target Segments: Mobile Phones and Specified Electronic Components
• Government has budgeted an amount upto INR 40,951 Cr which can be be disbursed over a period of 5 years
• The Scheme aims to increase domestic value addition for mobile phones from the current 20% to an impressive 35% – 40% by 2025 which requires huge investments in the mobile manufacturing value chain. The PLI Scheme also has an ambitious target of creation of total employment (direct and indirect) of approximately 8,00,000 jobs.

Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS)

• SPECS will strengthen the domestic manufacturing ecosystem for electronic components and semiconductors by incentivizing investments in these segments
• The Scheme will provide an incentive of 25% on capital expenditure pertaining to plant, machinery, equipment, associated utilities and technology, including R&D for the identified list of components, semiconductors, ATMP Units, specialized sub-assemblies and Capital Goods.
• Government has earmarked an outlay of INR 3,285 Cr which can be awarded over a period of 8 years
• The scheme focuses on high value added manufacturing, the lack of which hampers the design, development and assembly of the downstream value chain of electronic products 
• The scheme will be applicable to investments in new units and expansion of capacity/ modernization and diversification of existing units. 
• Duration of the Scheme for receiving applications is 3 years from the date of its notification. The incentives will be available for investment made within 5 years from the date of acknowledgement of application.
• It is envisaged that SPECS will create around 600,000 (direct and indirect) jobs.

Modified Electronics Manufacturing Clusters Scheme (EMC 2.0)

• The EMC 2.0  Scheme is a successor to the EMC Scheme of 2012 with the objective to support setting up of world class infrastructure for electronics manufacturing (with minimum area of 200 acre Clusters) along with industry specific facilities like Common Facility Centers, Ready Built Factory Sheds / Plug and Play facilities, Social Infrastructure etc.
• Will provide 50% of project cost as grant subject to a ceiling of INR 70 crore for every 100 acres of land for common infrastructure development
• EMC 2.0 also provides for Common Facility Centre (CFC) with financial assistance of upto 75% of the project cost subject to a ceiling of Rs.75 crore.
• Electronics Manufacturing Clusters (EMCs) will require confirmed participation and investment from Anchor Units which must occupy atleast 20% of the allocable area with supporting/ancillary units for encouraging development of supply chain and ecosystem for the electronics industry.
• Government has earmarked a budgetary outlay of Rs. 3,762.25 crore for this scheme over a period of 8 years. The scheme is expected to create around 10 Lakh (direct and indirect) jobs.

Mobile phones and consumer electronics are key segments of the market

The Indian EMS Industry

Estimate of the current size of EMS industry in India is approx USD 9-10 billion. This is about 20% of the total ESDM manufacturing in the country. For India, EMS has a special role to play as a driver of demand for components, support design of equipment, increase value addition and generate employment as we move up from the SKD to CKD model of equipment manufacturing. It has potential to grow at 20-25% per annum.