The Indian government has recently unveiled three comprehensive schemes that aim at boosting the electronics manufacturing sector in the country, with a total projected expenditure of Rs. 48,000 crore. These include the Production Linked Incentive (PLI) Scheme, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.
The Growth of the Electronics Sector In India
A remarkable growth pattern can be observed in the Indian electronics sector. The current projection suggests that the demand would cross the mark of USD 400 billion by 2023-24. A significant boost in domestic production has been noticed over the years, with an increase from USD 29 billion in 2014-15 to nearly USD 70 billion in 2019-20, exhibiting an admirable Compound Annual Growth Rate of 25%.
Role of Assembly Units in Electronic Production
Most electronic production in India takes place in final assembly units, which are often referred to as last-mile industries. By prioritizing these units, it’s possible to develop deep backward linkages, thus triggering industrialization. The government’s recently launched PLI Scheme supports this idea by providing a 4-6% incentive for domestic production.
Challenges in the Electronics Sector
Despite the impressive growth in electronic production, there are several hurdles that need to be addressed. For instance, despite substantial output, the net value added by electronic manufacturers in India usually falls between 5% and 15% as most components are imported. Furthermore, there is limited indigenous capability in upstream industries like the production of processors, display panels, memory chips, cameras, etc., leading to high reliance on imports.
Lack of Foundries and Its Impact
India lacks semiconductor fabrication plants or foundries, forcing manufacturers to rely on foreign countries for microchip production. This absence of foundries can be attributed to high initial investments, rapid changes in technology, and a lack of research and development. It has further resulted in low interest from domestic players due to their inability to compete with tech giants.
National Security Considerations
The dependence on imported chips and components exposes India to potential cybersecurity risks. There is a possibility of programming backdoors into the chips during manufacturing, which could undermine networks and compromise national security.
Increasing Imports
The escalating demand for electronics and continuous reliance on imports are threatening to make electronics overtake crude oil as India’s largest import commodity. This scenario puts Indian assembly units at a disadvantage, turning them into mere packaging units.
Suggestions to Boost Electronic Manufacturing
To enhance electronic manufacturing, the government may need to increase the outlay for SPECS, thereby attracting global microchip giants. Capitalizing on current anti-Chinese sentiments, particularly by countries like the USA and the UK, may also provide an opportunity for India to attract multinational companies looking for alternate production bases. Furthermore, promoting semiconductor manufacturing alongside assembly units under the ‘Make in India’ initiative can drive greater local production and foster overall industry growth.
Conclusion
With hundreds of start-ups making strides in microchip designing and the launch of new schemes to boost electronic manufacturing under the banner of ‘Atmanirbhar Bharat’, hopes have been rejuvenated for an upsurge of the indigenous electronics industry. Only through such actions, India can aspire to establish a truly indigenous electronic ecosystem that encompasses all aspects of the electronics industry.