TVs have evolved extensively during the last decade. Not just in terms of sizes, but the evolution of genres of content being consumed through this vertical of entertainment and knowledge, is revolutionary.
All in all, the TVs of today have become a bigger business opportunity than ever before. If a report by Research and Markets is to be believed, then the Indian television market would be worth approximately Rs 1,238 billion by 2024n and if Indian players can manage to start exporting these to its neighbouring nations and continents then the opportunity becomes bigger by billions. But can India be transformed into a manufacturing hub of TVs, a hub that supplies to the world or atleast to its neighbours?
TV Market in India: Present Conditions
“The revenue for the TV industry in 2020 so far has been around $13.32 billion dollars. The expected revenue for the TV industry for 2021 is around $13.64 billion dollars. Despite the pandemic the growth, in comparison to 2019, has been good. The major factors driving the TV market at the moment include replacement market and space for second TV in Indian homes,” explained Avneet Singh Marwah, CEO, SPPL about the present market conditions.
Pointing towards the space for a second TV and pent up demand, he added, “Watching TV is now more about personalised content. People in India are spending on smart TVs as they allow different streams of content to be played on the screen. However things have slowed down in the market for various reasons at the moment.”
In fact the Indian smart TV and OTT market, as per a mordor intelligence report, is expected to register a CAGR of five percent during the 2020 – 2025 period. The report highlights that as high-speed internet has become easily affordable, viewers/audiences that prefer good quality content are preferring smart TVs over other television systems. Also, the increasing admiration for OTT streaming in audiovisual content is impacting the overall smart TV market in a positive manner in India.
“The purchasing of TVs increased immediately after the lockdowns were done away with. A lot of people, during the pandemic, realized that watching their favorite content on small screens of mobiles was not good at all and these are people who are among the primary drivers of the TV market in India. The shift towards bigger screens, be it mobile to TV, or smaller TVs to bigger TVs is here to stay,” noted Arjun Bajaj, Director, Videotex International.
Bajaj added, “There is not just an increase in the purchasing of TVs in the country, but also in the production of them!”
The evolution of content and OTT platforms, as per Marwah and Bajaj, has transformed TV buying into experience buying. Consumers looking to purchase TVs have now started giving emphasis on the kinds of content apps it supports. Moreover, additional support like that for professional apps like the ones from Microsoft also play a major role in TV buying decisions.
The same, on the other hand, makes the competition hard for the players as TVs with such features not only require improved software approach but better hardware integration too. The other trend that the duo highlighted is increasing sales of TVs through the online channel. Marwah pointed out that the TV sales share of 28 percent via the online channel in 2019, has increased to about 34 percent in 2020 already.
What’s made in India?
In terms of TVs being made in India (assembled may be the right word here), the real value addition takes place in terms of the cardboard boxes , accessories or the polypropylene bags these TVs are packed in. Bajaj explains that India has always missed value addition when it comes to components used in manufacturing a TV.
“Looking towards the manufacturing of TVs perspective, 65 percent of the addition happens through an open cell. The same is not manufactured in India. The value addition that happens in India includes packing boxes, the cabinets, the bezels and may be the accessory bags,” said Bajaj.
He added, “Apart from that, India is missing out on the major components as well as the open cell. There is no setup for these in the country,”
The major chunk of components used in TVs, as Bajaj explained continues to be sourced from outside India especially China. While there are no exact figures available for exact amount of TV components that India exported in 2019-20, the total figure for electronics components sourced by India during the same period stood at a mammoth Rs 1.15 trillion. Majority of these (37 percent were sourced from China).
Sanjay Dhotre, MoS, Ministry of Electronics and Information Technology (MeitY), in a recent Rajya Sabha proceeding had said, “The government has not proposed to ban the import of electronic equipment and parts thereof from China,” said Dhotre.
He had also pointed towards the steps that the government is taking to reduce India’s dependence on a single source for obtaining electronics and components. Dhotre noted that right steps are being taken to encourage local electronics manufacturing in India. The country’s administration has recently introduced electronics schemes worth Rs 50,000 crore.
The finance ministry of India, through a notification, had also prescribed 5 per cent customs duty on open cells used in manufacturing LED/LCD TV. panels. As a matter of fact the government of India has earmarked Rs 5,000 crore as approved financial outlay for implementing the PLI scheme in the Electronic/Technology Products vertical. Product lines included in the PLI scheme include semiconductor fab, display fab, laptop/notebooks, servers, IoT devices and specified computer hardware.
Value additions that can be done in India
The honourable Prime Minister of India has just called for Atma Nirbhar Bharat, and the same would not be possible unless we can add a lot of local value to products consumed in India, and exported from India.
Marwah, revisiting history, pointed towards the 1970s and 80s said, “There was a lot happening in terms of making components for TVs and Radios in India in the 1970s and 1980s. We must start to figure out why manufacturing of such components went back to China if we had the capability to do so four decades back.”
“During the last two decades almost every kind of manufacturing has been shut down in India. People do not talk about that but I would like to know what kind of lobbying has been done in the past three-four decades,” he added.
Interestingly, Philips had manufactured the millionth Philips radio in India in 1965. The same company had started a new consumer electronics factory in the country in 1970 and in 1982 it had bought colour television transmission to the country.
Bajaj, cementing the thoughts of Marwah noted that while technology that was used to manufacture components four decades back has changed drastically, the companies manufacturing these technologies have chosen not to stay in India because of the policies.
He said, “Has anyone wondered why the companies that were very active once in India decided to leave the country and shift base somewhere else? I think there are a lot of factors for that!”
“These factors include government policy changes. The fact that government policy changes are sudden, fails them to meet the needs of the companies. Not just that when such companies move out of India, they get support from the government of the country they are relocating to,” Bajaj added.
A TV, as per Patel, can be broadly categorised into four categories – Open Cell; Accessories, Motherboard and Semiconductors; and Software. Patel explains that the government, and TV manufacturers, should be clear on the roadmap for all these four parts. The roadmap should include all the information and action plan for each of these categories.
“Just speaking about other countries will not do anything. The government needs to take strategic actions to bring or create a TV manufacturing ecosystem in India. At the same time I will also like to appreciate the government for taking some bold steps about the industry in the last few years,” noted Patel.
It is to be noted here that the TV market in India is now dominated by players of Chinese origin. The likes of Xiaomi and BBK Group have been able to capture bigger chunks of the market in a few years. One of the prime reasons behind the same, as per Bajaj, is the deep pockets of Chinese brands. Bajaj is of the view that Chinese brands spend a lot in India.
“Since there are no strict barriers to entry in India, anybody can come and set up an assembly plant in the country. But at the end of the day a Chinese company will always prefer a Chinese company. Now if it is easy for foreign companies to set up assembly plants in India, what are the Indian companies going to do in the near future? If Chinese companies keep establishing assembly plants in India, how are we going to develop a local ecosystem of manufacturing TVs in India?”
Bajaj, without mentioning names of two big companies, who are into open cell manufacturing, explained that both the companies have sold their manufacturing units to Chinese players. This, topped with the fact that the Koreans have also stopped manufacturing open cells, might mean that the Chinese will now dominate the open cells market too.
“Sourcing a complete TV from China has become cheaper than sourcing open cells. Until we solve such problems, we cannot step in the direction of making India a hub of TVs manufacturing,” Bajaj explained.
Policy changes that can help
The 28 per cent tax structure, as Marwah explained, is the highest for any developing country in the world. He also mentioned making requests to the finance ministry about not levying five per cent additional duty of importing open cells.
“It is a serious joke that the margins on televisions in India are higher than taxes. No where in economics. something like the current scenario has happened. Currently the demand is not there, but there continues to be a shortage and still a price increase! So, buying and selling are both affected. I think this is the first time that demand and supply have both been affected at the same time,” said Marwah.
The 28 per cent GST on TVs that are 32-inch or more than that, clubbed with 5.5 per cent on importing open cells, in addition to complete ban on importing CBUs has created a big problem for TV manufacturers in India. To add to the worries, as Marwah explained, the pane prices have gone up by almost 170 per cent during the last eight months.
Marwah added,”Nobody is talking about logistics. The cost of logistics for a 40-feet container from Shenzhen to Nawashiva used to be around $350. The same is more than $3500 dollars today. Everybody is suffering in terms of shortage in the supply chain.”
“If you go to the government, they are not even interested in listening. They seem to be more interested in collecting GST. I personally wrote to the government that at least make the GST to 18 per cent on 43-inch TVs as they are no longer luxury goods. But nothing happened” he noted.
A 10-kg front load washing machine, which as Marwah explained, is an ultra-premium luxury product, attracts only 18 per cent GST. However, a 40-inch TV attracts 28 per cent GST as it is termed as a luxury product.
Coming to the infrastructure part needed for enabling an ecosystem for manufacturing TVs in India, Marwah explained that the country ranks 92nd when it comes to infrastructure requirements. Lack of parallel roads running between metros like Mumbai to Delhi or Delhi to Calcutta are discouragements for companies in terms of making investments in India.
Marwah, Patel and Bajaj are of strong opinion that TVs should be made a part of PLI schemes that were announced. If, not a seperate PLI scheme should be introduced for TV categr
Marwah explained, “In terms of railroads running in India, we still are relying on what was built by the British. Similarly the only parallel road that runs between Delhi and Calcutta, is the one that was built was Sher Shah Suri. If we need to make India a hub of electronics manufacturing, special emphasis will have to be laid upon creating modern infrastructure!”
Next, as per Bajaj, should be the constantness in policies formulated. The policies, as per him, should not change with a change in governments as the same sends a wrong message to the investors as well as companies into TV manufacturing.
Patel, also shared his concern about lack of strong anti-dumping laws. Whether it is a TV brand, or an after sales service company, no foreign companies should be allowed to dump their products in India.
Note – This story is based on a panel discussion held at the December Edition of India Technology Week. The panel discussion was chaired by Arpit Chhabra
Author – Mukul Yudhveer Singh