India’s Electronics Manufacturing Growth Hinges on Component Ecosystem Investment

A Motilal Oswal report emphasizes the need for substantial investment in India's electronic component ecosystem for industry growth, despite progress with OEMs and assemblers. Government initiatives and Niti Aayog's recommendations are pivotal in bolstering component manufacturing and enhancing India's global electronics manufacturing position.

India's electronics manufacturing sector requires substantial investment in its component ecosystem to ensure overall industry growth, a report by financial services firm Motilal Oswal has revealed. The report highlights India's strong presence in assemblers and Original Equipment Manufacturers (OEMs) but underscored the nation's heavy reliance on imported components.

'Currently, the country has significant presence and capabilities of assemblers and OEMs in the electronics value chain but is heavily reliant on imports for components and design capabilities across all sectors. Progress on component manufacturing is being initiated by a few companies, which will evolve more in the coming years,' stated the report. It also emphasized the need for government initiatives to stimulate this segment.

'Component manufacturing has not shown the same growth as it requires an upfront initial capex and has lower asset turnover ratios with a gestation period of 1-2 years from investment to production. Hence, the industry is seeking more initiatives from the government to boost component manufacturing in India,' the report added. India's policy think tank, Niti Aayog, has proposed measures including fiscal incentives, R&D investments, and infrastructure development to enhance the component manufacturing sector.

India has made considerable advancements in manufacturing sectors such as mobile phones and consumer electronics. The next objective is to increase value addition within these industries. Government initiatives like the Production Linked Incentive (PLI) schemes and the Semicon India program have been crucial in supporting electronic manufacturing growth in India, with expectations for the domestic Electronics Manufacturing Services (EMS) industry to grow significantly by FY27.

The report states, 'Backed by these measures, the domestic EMS industry is likely to grow to Rs 6.0 trillion in FY27 from Rs 1.46 trillion in FY22.' Despite the Government reopening the PLI Scheme for White Goods, the report stressed that additional efforts are needed.

'To further enhance localization and value addition in India, more initiatives will be necessary to stimulate component manufacturing, an area where the government is already developing various schemes,' the report stated. Experts predict India's electronic manufacturing capacity could reach USD 500 billion by FY2030, with significant growth in both finished goods and components.

(With inputs from agencies.)