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Addressable Market For OEMs Expected To Be Over Rs 10 Lakh Crore By 2025: KPMG-HSBC Report

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  • Multinational companies seek to relocate their global supply chains, emerging economies such as India are increasingly seen as attractive sourcing destinations
  • Since FY17, domestic electronic production has exceeded electronic imports, which could be perceived as an indicator of the effectiveness of these supportive policies
Image for representation( Pic credit-MBO partners)

The growing domestic handset manufacturing market and supportive policies by government have ensured that India steadily builds on its device manufacturing capabilities, and the addressable market for OEMs (original equipment manufacturers) is expected to be about Rs 10 lakh crore to Rs 11 lakh crore by 2025 as per a report. The report KPMG in India and HSBC India titled ‘Powering up – Electronics manufacturing in India’ looked at the advantages that India offers global electronics components manufacturers, specifically in mobile handsets

The report said that the addressable market for components manufacturers after deducting the conversions cost, handling charges, margins, etc is estimated at around Rs 6.5 to 7.5 lakh crore ($85.79-98.99 billion). It added that by any stretch, this is a large and attractive market and India offers an enviable opportunity for handset and components manufacturers to establish the manufacturing units in India.

Global supply chains are undergoing a radical reconfiguration

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As per the report, India can leverage this “opportune moment” and capitalise on several existing strengths as well the shifting, post COVID-19 geo-political sentiment to become a global leader in the handset, components and electronics manufacturing industry. The report said that the global supply chains are undergoing a radical reconfiguration against the backdrop of the COVID-19 pandemic, rising economic nationalism across the world and significant geopolitical shifts. The pandemic has highlighted the risks a single-source supply chain carries, as companies across the world have faced disruptions to the flow of materials from China – the initial epicenter of the pandemic added the report.

It further said that as multinational companies seek to relocate their global supply chains, emerging economies such as India are increasingly seen as attractive sourcing destinations. It added that with India continuously improving its ease of doing business and the launch of several attractive government initiatives such as the Production Linked Incentives (PLI), export incentives, Phased Manufacturing Program (PMP), M-SIPS, Make in India, Digital India, etc. alongside the visionary National Digital Communications Policy (NDCP), FDI in to the country – and especially into electronics manufacturing is sure to rise.

Compounded annual growth rate (CAGR) of around 24 per cent during FY15-20

As per the report, India’s electronics production posted a compounded annual growth rate (CAGR) of around 24 per cent during FY15-20. Since FY17, domestic electronic production has exceeded electronic imports, which could be perceived as an indicator of the effectiveness of these supportive policies.

Arun M Kumar, chairman and CEO of KPMG in India, said that while the pandemic has caused economic damage it has also yielded vital lessons and opportunities to forge new paths of growth. A significant example is that the diversification of global supply chains has generated new opportunities. He added that the Electronics Systems and Design Manufacturing (ESDM) segment, of which electronics components and mobile handsets are a part is one such area.

Second largest mobile phone manufacturing hub in the world

He said that India has the second largest smartphone market globally, with the number of users expected to increase to 829 million by 2022. As of this year, India has become the second largest mobile phone manufacturing hub in the world. The report said while top global handset manufacturers such as Samsung, Xiaomi, Vivo, etc have established their presence in India with assembly operations, the components manufacturing ecosystem is still comparatively nascent.These units continue to import a significant number of components and other raw materials as their availability in India is limited.

As per the report, of late, imports into this sector are increasingly Semi Knocked Down (SKD) or smaller components rather than as completely built units (CBU). This signals a healthy shift from a consumption economy to a manufacturing focused one. The annual production of mobile phones in India has increased from 60 million units valued at Rs 18,900 crore in FY15 to an estimated 320 million units valued at Rs 2,25,000 crore in FY20.

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