EMS industry will witness 20 per cent growth in 2012

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The year 2011 was a difficult year for the world economy. The slow recovery in the US and the fear of recession in Europe had its impact on India as well. However, the Indian electronics industry could maintain its growth trajectory by virtue of large domestic demand and increasing export potential. Presently, India contributes only 1.5 per cent to the global electronics industry, but this contribution is expected to grow to 15 per cent by 2020. This adds up to a whopping US$ 360 billion. The government’s recent policy initiative will definitely act as the catalyst for the growth of the electronics industry in the country.

By Subhash Goyal, managing director, Digital Circuits Pvt Ltd


Tuesday, March 20, 2012: EMS industry in 2011

Electronics manufacturing services (EMS) is fast emerging as the backbone of the electronics industry, next only to the components industry. Presently, the penetration of EMS in the Indian electronics industry is around 10 per cent compared to 25-30 per cent, globally. Hence, there is a huge potential for the Indian EMS industry to grow in the near future to reach at least 20-25 per cent of the overall Indian electronics industry, which itself is growing at a CAGR of 20-22 per cent.

The Indian EMS industry has faired very well in 2011, even against severe odds. A safe estimate will put this growth rate in the double digit category. The industry has pumped in fresh investments to enhance capacities and upgrade facilities to face the challenges presented by emerging technologies in electronics.

As the electronics industry is facing more and more competition, there is a need to outsource manufacturing to EMS providers so that big firms can derive the advantage of their core competence, while benefiting from the economies of scale at the EMS side. The growing competence of EMS providers in offering value-added services like complete solutions, including design and box build, is an opportunity for the Indian electronics industry to concentrate on its core competence and bring out new products into the market in a short span of time, without too much investment. All these factors have contributed to the reasonably good performance of the EMS industry in 2011.

Though there was a slump in the global demand for the products of some existing customers, this was well compensated for by the emergence of the new export opportunities. Design houses and R&D centres in India have developed many new products, specially in the field of LED lighting, automobiles, solar products and related applications, which have created a new market in India as well as abroad.

Thrust towards mobile handsets and accessories, apart from innovative devices like locally developed tablets and simple computers, are other products that have fuelled the growth of the EMS industry in the country. However, this growth was moderated by the high cost of the dollar, the high rate of interest and the scarcity of finance in 2011.

Trends in 2012

The growth trends that began in 2011 will gain momentum in 2012 with a higher dependence of the electronics industry on EMS. The introduction of new products like LED based equipment, mobile handsets and their accessories, tablets and simple computers will also mature, adding to the top line of EMS companies.

The interest rates and dollar prices are expected to ease in 2012 and the availability of funds is also likely to increase. The implementation of the National Manufacturing Policy and the National Policy on Electronics will create the desired ecosystem to attract investments in EMS. The measures stipulated in these policies will help the EMS industry to become globally competitive.

The rising cost of manufacturing in China is sure to prompt a shift in the investment decisions of global players and make India an attractive destination for manufacturing. All these factors will contribute positively in furthering the growth of the EMS industry in 2012, which I expect to be more than 20 per cent.

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

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