By Deepa Doraiswamy, industry manager, electronics and security, Frost & Sullivan
2012 will transform the Indian electronics industry from a purely consumption-led economy to a manufacturing economy
The Indian electronics market, estimated to be worth about US$ 80 billion in 2011, has been growing consistently at 23-25 per cent, year on year, in the recent past. Though comparatively small when viewed against the global electronics market, which is worth US$ 1.8 trillion, a burgeoning domestic market as well as the increasing export opportunities have placed the Indian electronics industry in an enviable position on the global map. 2011 was quite a landmark year for the Indian electronics industry that witnessed mobile handset sales in excess of 180 million units, rapid penetration of flat panel display (FPD) TVs, the uptake of safety and comfort enabling electronics in mid-segment automobiles, and the rollout of 3G services in the country, to name just a few major developments. Figure 1 shows the demand-supply projections for the Indian electronics industry.
2012: A defining year
2012 commenced amidst turbulent global economic conditions. The deepening euro zone debt crisis and apprehensions of a double dip recession in the US, coupled with fluctuating economic conditions in the Middle East, have ensured a marginal decline in projected growth trends for India as well. The Indian electronics industry is, however, well poised to continue its growth ascent bolstered by the strong demands from all end user segments. The anticipated formalisation of the National Policy on Electronics (NPE), 2011 is expected to make 2012 the most crucial year for the country’s electronics industry. NPE aims at bridging the US$ 200 billion gap, which would arise by 2020 between the supply of and demand for electronics in India. The policy envisages the overall development of the electronics systems design and manufacturing (ESDM) ecosystem, thus ensuring unbridled growth in the electronics sector.
With the government taking the lead to promote the growth of the indigenous electronics industry, which has the potential to be a significant contributor to GDP growth and create employment for many, there are certain sunshine sectors that hold the key to the growth of the electronics industry in 2012. Figure 2 depicts these high growth sectors.
LED lighting: According to Frost & Sullivan’s latest research, the Indian LED lighting market was estimated to be US$ 73.32 million in
2010, growing from US$ 52.34 million in 2009. The market is expected to grow at a compound annual growth rate (CAGR) of 47.76 per cent till 2018 and reach revenues of US$ 1.67 billion in 2018. As India grapples with the challenges of energy deficiency, electrification of remote rural regions, and energy sustainability, the need to develop alternate technologies that overcome these challenges has become more urgent. Lighting being an application that accounts for 20 per cent of the entire energy consumption in the country, LEDs have emerged as the solution to India’s lighting energy woes. LEDs are poised to replace conventional general lighting service (GLS) lamps and high intensity discharge (HID) lamps in many key applications like street lighting, indoor and outdoor lighting, apart from industrial, automotive, and niche applications like the railways.
Solar power: An ambitious solar mission aims at 20 GW of solar power generated by 2020 and has attracted companies to enter photovoltaic module production in the country. The natural progression towards more upstream value-addition in the solar industry holds significant potential for companies to focus on.
Medical electronics: About 75 per cent of India’s US$ 3.3 billion medical devices market is currently catered to by imports. A growing population, apart from the
increasing propensity of lifestyle related diseases such as cancer and diabetes warrant the need for more healthcare infrastructure and have also created a huge demand for medical equipment. All major device manufacturers are turning towards India to service this enormous demand. From the need for everything from PCBs, to controllers, processors, displays, and medical equipment, all of which are rich in electronics components, the opportunities for indigenous manufacturing are expected to be significant in the ensuing years.
Automotive electronics: India is evolving into a global hub for the automotive industry. Increasing labour, raw material and logistics costs have resulted in numerous automotive OEMs to shift manufacturing to India. Electronics accounts for anything between 20 to 40 per cent of the cost of an automobile and is continually increasing each day as more safety and comfort features get included in automobiles.
The electronics industry is also driven by regulations. These trends make the automotive sector a highly propitious one for local electronics companies.
Set top boxes and TVs: The digitisation drive is expected to propel the demand for set top boxes, whose penetration is currently minimal. Of the 140 million households in India that have a TV, less than 25 million have a set top box enabled DTH connection. Growth trends in both rural and urban India indicate huge prospects in this market. In the TV market, with the phasing out of CRT TVs almost touching its zenith in urban markets (unlike in rural and semi-urban pockets), the penetration of flat panel TVs (LCD and LED) is expected to be on the rise. These consumer markets have significant potential and offer great opportunities.
In 2012, supply chain fluctuations, the rising dollar and yen, and the turbulent global economic climate are likely to impact the local electronics industry by way of increased prices, lower margins, and higher operating expenses. On the other hand, policy initiatives would provide a major thrust to localisation. Demand and the proliferation of indigenous devices such as the Aakash tablet would be rampant and take the local electronics industry to a whole new level. 2012 will, therefore, be a defining year in transforming the Indian electronics industry from a purely consumption-led economy to a manufacturing economy.