Indian components industry to be on upswing in 2012

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According to a report brought out by the India Semiconductor Association (ISA) in association with Frost and Sullivan, the components industry in India was estimated to be about US$ 8 billion in 2011, of which 60 per cent was made up of imports. Next to oil, electronics is the single largest domain in which imports are growing by double digits every year.

Wednesday, March 20, 2012: In the absence of any significant manufacturing of electronics components in India, electronics component distributors are doing good business, and here, year on year, growth is expected to be 25-30 per cent.

Due to highly skilled talent available at relatively low costs, India has always been looked to by global companies for software and related services. However, the trend is now changing. Due to the government’s increased focus on developing indigenous manufacturing and on building an ecosystem to support the electronics industry, global companies have started looking at India for electronics manufacturing as well. This, in turn, will surely drive foreign direct investment and business opportunities in the electronics industry.

The first half of 2011 started on a very promising note. Electronics customers had orders to fulfill, and suppliers estimated a robust demand seeing the early trend. Components markets all over Asia were booming. India was no different and had a healthy growth in components imports. Sales teams of all key suppliers were busy, in taking orders from clients–both current and prospective. Then came the European crisis, Japan’s tsunami and the Thai floods. Fortunately, contrary to expectations, the Indian components industry was not badly affected. Although the European crisis brought about a slowdown in EMS exports, while the Japanese tsunami and the Thai floods saw delays in component supplies, many Indian manufacturers, component importers and sourcing companies still managed to do well.

The market was also hit by the adverse foreign currency conversion ratio. Additionally, the cost of finance also went up. Everything, from the cost of supplies and parts to the cost of freight, went up. This resulted in burgeoning costs and the depletion of margins. Eventually, this cost was passed on to the consumers (for products sold in India; though EMS exports to Europe are still facing challenges). However, the industry stabilised to a certain extent and what could have been a major crisis was thwarted.

According to estimates, the electronic components industry will touch nearly US$ 10 billion this year. This will primarily be due to growth in sectors like IT/OA (30 per cent); consumer electronics, including mobile devices (39 per cent); telecom (19 per cent); industrial electronics (4 per cent); automotive (3 per cent); and others including medical, defence, etc (5 per cent).

Despite the global crisis, we estimate that the Indian components industry will be on an upswing in 2012 because of the gap in the demand-supply equation that persists in the country, though both the buyers and suppliers should be a bit cautious. The future appears encouraging despite difficult global market conditions, and we continue to see an increase in the demand of high-mix low-volume needs. RS Components is at the forefront of the high service level distribution model and we aim to grow substantially given the current opportunities. We look forward to a stronger industry ecosystem where the demand for components could be met with a supply within the country, thus insulating us from external destabilising factors.

By RS Components and Controls (I) Ltd

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine