An overview of the Indian Electronics Design Market

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In spite of an increase in domestic production, the import of electronics into India continues unabated. EMS providers, therefore, must grab the opportunity to manufacture for the local market by nurturing long-term relationships with OEMs.

By the ComConnect Consulting research team

New and advanced technologies such as IoT, artificial intelligence and virtual reality, coupled with smart and connected devices, are driving the electronics design market.

According to Technavio, a UK based multinational market research company, the global electronic design automation (EDA) market will grow by more than US$ 3.67 billion over the period 2019-2023 (Figure 1), and 57 per cent of that growth will come from the APAC region.  This also indicates the growth potential of the global electronics design services market.

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In India, the design services segment plays a significant role in the electronics system design and manufacturing (ESDM) sector. According to a study by the India Electronics and Semiconductor Association (IESA), the contribution of design services to the ESDM sector grew steadily over the past few years. The same study forecasts that revenue from design services will reach between US$ 23.5 and US$ 29.2 billion by 2020 at a CAGR of 13-18 per cent (Figure 2). The segment has shown a strong growth in the last ten years, with the entry of a number of domestic and global companies. Leveraging the abundance of local talent and the presence of mature ITeS firms that have achieved significant scale, India has already emerged as an attractive destination for offshore ER&D (engineering and R&D) services.

While the Indian ESDM industry is import-dependent due to the huge demand gap caused by insufficient local manufacturing, domestic design services are its key strength. Design services revenue is also heavily reliant on the demand for exports. Though the domestic market has grown in the last few years, it is at a nascent stage. There are limited cases of indigenous product companies generating domestic demand for offshore R&D services (except for verticals such as aerospace and defence). Embedded systems is the largest segment (85 per cent revenue share) in the design services market. Connectivity, portability and IoT are the key themes that are driving demand for embedded systems services across verticals such as automotive, consumer electronics, mobile handsets and healthcare.

Market overview
As opposed to the earlier trend wherein Indian design companies worked on bits and parts of the overall design, they are now being asked to provide end-to-end product development, right from concept design to development to prototype testing. This augurs well for companies that can provide complete product design services from start to finish.

The growing customer base and the increased penetration in the consumer electronics segment offer great potential for the growth of the Indian electronics design house. Recent government policies such as Make in India and Digital India have inspired confidence and provided the necessary momentum for this growth.

Advanced product development focusing on miniaturisation, IoT, automation, LED lighting, AI and defence applications is likely to be one of the biggest drivers of growth in the electronics design market. A few emerging technologies, which are still in their nascent stages, could be key areas of focus in the near future. These include next-generation wireless and silicon photonics.

Figure 1: A forecast of how the global electronic design automation (EDA) market will grow (Source: Technavio)

India has become a global hub for electronics design with nearly 2,000 chips being designed here every year and around 500,000 engineers working in various aspects of this field, starting from chip design and verification to the different stages of product design. Though India still lags behind its chief competitors in the Far East (i.e., China and Taiwan), it has significant potential as it seeks to continually raise the bar and increase the breadth and depth of its offerings.

Within semiconductor design, there is very large scale integration (VLSI) design, embedded software and electronic design automation (EDA). In India, VLSI and EDA make up the biggest chunk of the Indian semiconductor design industry. While VLSI is big in Bengaluru, Noida has the biggest chunk of Indian EDA operations.

Greater digitisation across verticals has led to the increased penetration of Indian electronics design houses in the LED illumination, communications and broadband equipment as well as automotive electronics. The domestic design teams’ capabilities in localising the technological changes, while maintaining global competitiveness, encourages companies to consider India as the design hub for the global electronics industry.

India’s strength in design systems is based on three main factors:

  • Strong capabilities in embedded systems design
  • Large number of electronics engineering graduates (even though only 10 per cent are employable, without training)
  • Increased demand due to a sizeable number of Indian SMEs and startups focusing on IoT

Challenges at a glance
While conditions are indeed favourable for the growth of the industry, there are a few impediments that need to be removed for it to live up to expectations.

There are very few Indian companies that are capable of doing complete product design, the reason being the lack of skills at various levels. Designers need the expertise to understand and define the overall architecture, translate it into the hardware and software requirements and, in the end, do the actual implementation. There aren’t too many Indian companies that have in-depth expertise in ASIC/FPGA design, high-speed board development and firmware development.

Figure 2: The Indian electronics design services market forecast (Source: IESA- EY)

The Indian electronics industry is still more focused on assembly rather than on manufacturing. Therefore, semi-finished items are imported from China and only the final assembly is done in India. For example, mobile phones and smart TVs are designed in China or elsewhere, and assembled here. Thus, only a small percentage of the design for local brands happens in India. One of the prime reasons for this is the need for significant R&D investments in a sector where margins are already slim. This is why firms prefer to shop for products that are suitable for the Indian market and arrange to import the SKD (semi knocked down) kit for assembly in India. This has had a huge negative impact on the design industry.

Some other factors that are impeding the growth of the Indian electronics design industry are:

  • Small and medium enterprises (SMEs) and startups lack experience in complex systems design and are completely unaware about outsourcing opportunities (both for design and manufacturing).
  • Design (CAD) tools are expensive and open source tools are not of acceptable quality. As engineering design is capital intensive, educational institutes that have the relevant tools (CAD as well as T&M equipment) should work out a scheme to offer ‘labs on hire’, which would help startups and SMEs to develop products at low cost.
  • There is a dearth of hardware accelerators that support board design and FPGA/electronic programmable logic devices (EPLDs).
  • There are also government policy related challenges.
  • The prototype ecosystem is yet to mature, leading to lots of wasted time in customs and other processes; also, duty-free components are still being taxed at 28 per cent.
  • While there is a steady supply of graduates in the job market, there is still a significant gap between the skillsets required by the industry and what has been acquired by graduates through higher education institutes. Effective collaboration programmes between industry and institutes can go a long way in developing more employable candidates for the industry.
The Indian electronics design market
Major types of services

  • Embedded software design
  • End-to-end product design services
  • Electronic design automation (EDA)
  • Very large scale integration (VLSI) design
  • Product certification and compliance

Major types of companies

  • Independent design houses (IDH) offering design services for the world market, more in the services business model (driven by IoT, automation, analytics, etc) as well as designing India-specific products (especially with IoT and automation driving efficiencies for the manufacturing, healthcare and hospitality segments)
  • Captive design houses (CDH) of global electronics firms
  • Electronic design automation (EDA) tools providers
  • Original design manufacturers (ODM)


What’s next?

New technologies are getting adopted faster, worldwide, and in India too. However, the Indian market is unique with respect to application areas as well as costs, which will lead to a demand for products that cater to its specific needs across application areas like telecom, automotive, medical and industrial products.

The key trends that are going to transform the electronics design space for new age applications are mobility, the cloud and analytics. The emerging application areas include industrial and automotive microcontrollers, wireless infrastructure, digital TVs, handheld devices and compute/storage infrastructure.

Moreover, special design services will be required for smart energy management, medical telemetry applications and high-end application processor development.

All these emerging trends in electronics design services indicate that there needs to be some handholding done by manufacturing for the design industry, so that ‘Design in India’ can lead to ‘Make in India’.

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