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Charting the Course towards India’s Dominance in the Electronic Manufacturing Services Industry
Challenges for the Indian Electronic Manufacturing Services Sector
In recent years, with rapid digital transformation sweeping the globe, the urgency for nations to establish a self-sustaining and robust electronics manufacturing sector has never been more pronounced. India has emerged as a formidable player in the global manufacturing landscape, particularly in the electronics sector. The Indian manufacturing sector has undergone a significant transformation, with the country now being touted as the future hub of the global electronic manufacturing services industry.
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Charting the Course towards India’s Dominance in the Electronic Manufacturing Services Industry
Know the top reasons behind India’s rising prominence and the key factors that position it for success in the competitive world of electronic manufacturing services.
1. Government Initiatives and Policies
The Indian government has implemented several initiatives and policies aimed at fostering a conducive manufacturing environment for every electronics company. The “Make in India” campaign, launched in 2014, has played a pivotal role in attracting foreign investment and promoting domestic manufacturing. Recent government approvals for collective 30-billion INR investments by 27 top electronics manufacturing companies signify a promising start.
BMI Country Risk & Industry Research forecasts that India’s consumer electronics market will outperform regional peers, driven by a large consumer base and tech companies rerouting their supply chains due to geopolitical risks.
Rajeev Chandrasekhar, Union Minister of State for Electronics and IT, asserts that India is on track to achieve the $300 billion electronic manufacturing services target, showcasing a massive 20-25 times growth in just over a decade. Led by mobile phones manufactured locally, the electronics industry of India witnessed a record 58% increase in exports in FY22-23.
The introduction of production-linked incentive (PLI) schemes for various sectors, including electronics, has incentivized companies to set up manufacturing units in India, driving growth and employment opportunities. The PLI scheme for large-scale electronics manufacturing has already attracted investments exceeding the ministry’s initial target, showcasing India’s appeal as a manufacturing hub.
Read on: Indian Economic Growth Story: The Contribution of the Smart Watch Market.
2. Skilled Workforce
Presently, India’s electronic manufacturing services industry stands at nearly $100 billion, employing approximately 2.5 million individuals. India boasts a vast pool of skilled and technically proficient professionals. The country’s emphasis on education in science, technology, engineering, and mathematics (STEM) fields has resulted in a workforce capable of satisfying the demands of the electronics industry.
Fueled by rising electronics consumption, the Indian Government aims to achieve $300 billion in domestic electronic manufacturing services by 2025-26. With a burgeoning young population, India has the potential to provide a continuous stream of skilled labor, a crucial factor for sustained growth in the manufacturing sector.
3. Cost Competitiveness
One of India’s major advantages is its cost competitiveness. The overall cost of manufacturing in India, including labor costs, land, and utilities, is significantly lower compared to many other countries. This cost advantage positions India as an attractive destination for companies looking to optimize their manufacturing expenses without compromising on quality.
With a median age of 28, India’s demographic landscape mirrors China in 2008 before its rapid industrial and economic growth, highlighting India’s potential to become a powerhouse in electronic manufacturing services. Continuing on the import substitution path, the domestic electronics market of India is anticipated to be worth $150-180 billion, contributing significantly to the $300 billion target. As a leading contender for alternate solutions for global electronics companies, India’s electronics sector has the potential to become one of the top exports, driving foreign exchange earnings and employment generation.
4. Infrastructure Development
Over the years, India has invested heavily in upgrading its infrastructure, including transportation, logistics, and energy supply. The development of industrial corridors and dedicated manufacturing zones has created a robust ecosystem for electronic manufacturing services.
Improved connectivity and logistics infrastructure reduce lead times and make it easier for companies to establish and operate EMS manufacturing facilities in the country. India’s conducive policy framework, collaborative efforts between central and state governments and comprehensive operational policies have accelerated the migration of manufacturing activities. India has emerged as the world’s second-fastest-growing market for laptops, tablets, servers, and data centers, positioning itself as a prime hub for electronic manufacturing services on the global stage.
5. Rising Consumer Demand
The increasing purchasing power and evolving consumer preferences within India have created a substantial domestic market for electronics products. This burgeoning demand not only attracts global manufacturers but also provides a platform for local manufacturers to scale up their operations. Meeting domestic demand can serve as a springboard for Indian companies to expand their global footprint.
BMI anticipates India’s IT market value to reach USD 104 billion by 2027, with the hardware market remaining dominant. The recent surge in mobile phone exports and strong market fundamentals, coupled with geopolitical risks impacting global supply chains, position India as an attractive market for technology firms seeking secure supply chains.
With a concentrated 53% market share among 10 firms in Taiwan, China, and the US, there is a global push to explore new avenues. India, with its talent base, vibrant market, and facilitative policies, is strategically positioning itself to capture a significant share of investments in electronics production and global value chains.
6. Focus on Innovation and R&D
To compete in the global electronic manufacturing services arena, India is placing a growing emphasis on innovation and research and development (R&D). The country is witnessing a surge in collaborations between academia, industry, and research institutions, fostering an environment conducive to technological advancements and product innovation.
Intel’s collaboration with eight Electronic Manufacturing Services (EMS) companies and Original Design Manufacturers (ODMs) signals a strategic move to accelerate laptop manufacturing in India. This partnership aims to equip Indian companies to meet both domestic and global demand for laptops, aligning with the Make in India initiative. Intel’s expertise, shared through the collaboration, facilitates the production of full entry-level laptops in India, contributing to the nation’s technological progress. This collaboration further strengthens India’s position in the global electronic manufacturing services landscape.
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Challenges for the Indian Electronic Manufacturing Services Sector
Electronic manufacturing companies are overjoyed at the promise of progress, vis-à-vis economic development in India. However, in order to evolve beyond assembly and truly embrace comprehensive electronics manufacturing, a holistic approach is crucial. India is making strides in this direction, propelled by the government’s Production-Linked Incentive (PLI) scheme, which aims to incentivize domestic production across all production tiers.
A catalyst for this journey is the surging local demand for IT hardware. India’s IT hardware market, presently valued at $9 billion, is projected to reach $25 billion by 2025-26. Despite generating 20% of the world’s data, India possesses only 2% of the world’s data centers. Recognizing this opportunity, the government is committed to keeping data within the country’s borders, accelerating demand and driving manufacturing growth.
The digital era is advancing at an unprecedented pace. India’s journey towards being self-reliant in manufacturing semiconductor and electronics manufacturing is not merely an economic pursuit but a strategic move to safeguard autonomy, foster domestic innovation, and build supply chain resilience for the world. Upskilling the workforce, addressing production bottlenecks for electronic company, and injecting capital to nurture the burgeoning ecosystem are essential steps in advancing electronics manufacturing companies.
Read on – Indian Economic Growth Vs Chinese Economic Growth: 2024 and Beyond, Who Will Emerge Taller?
Conclusion
India’s ascent in the global electronic manufacturing services industry is not just a result of chance; it is a consequence of strategic government policies, a skilled workforce, cost competitiveness, improved infrastructure, rising consumer demand, and a commitment to innovation. As the world continues to rely on electronic devices, India is poised to play a pivotal role in shaping the future of the global electronic manufacturing services landscape. With sustained efforts and continued investment, India is well on its way to becoming a manufacturing powerhouse and a key player in the fourth industrial revolution.
