What are the key trends and opportunities that may impact the Indian electronics industry and influence business strategies in the coming year? Here are some perspectives and insights shared by key industry experts.
By the ComConnect Consulting research team
The Indian electronics system design and manufacturing (ESDM) industry seems to be on track to achieving its full potential of manufacturing and designing capabilities. A significant milestone on the path towards becoming a manufacturing hub was achieved in 2016-17, when India’s domestic electronics production exceeded imports of electronic goods into the country.
However, to unlock the full potential of the Indian electronics industry, it is imperative to create a supportive ecosystem to facilitate manufacturing competitiveness, and this should be backed by strong domestic R&D.
A growing customer base and increased penetration of consumer durables have provided enough scope for the growth of the Indian electronics sector. Consumer electronics is expected to be the major driver for the Indian electronics industry in the coming financial year.
In addition, increased broadband penetration in the country will open up further avenues of growth for the electronics industry. Considering the huge demand for communication and broadband equipment, including mobile handsets and their accessories, this segment is also likely to drive the demand for electronic components and products.
1. Consumer electronics
2. Communication and broadband equipment (including mobile handsets)
3. Automotive (including electric vehicles and connected mobility)
The Indian electronics industry is going through an exciting phase due to revolutionary changes in technology, the launch of innovative products and the challenge of global competition. This means electronic product and component manufacturers must focus on continuously improving their products. Survey participants shared some insights about the trends that will shape the market in India. Here is a collation of their views along with our analysis.
- Constant miniaturisation and the addition of multiple functions are the trends of the day. Miniaturisation of products has led to the creation of smaller devices or components, while convergence has led manufacturers to integrate multiple devices. The demand from consumers to reduce the size of the products to make them easy to manage has resulted in these products increasingly becoming smaller in size, leading to a greater density of components, made possible through VLSI designs. This also enables lower cost of production, resulting in a fall in product prices. Miniaturisation is expected to continue and will impact the traditional component market, as most of the traditional components will be replaced by chip components and integrated circuits.
- Consumers are becoming increasingly technology-conscious and are demanding products with built-in artificial intelligence. This has led to the development of electronics and consumer durable products that come with intelligent functions. For example, washing machines can now sense the load and decide the appropriate washing cycle. Artificial intelligence will move beyond consumer products, and will be available in several medical electronics and industrial electronic products with CNC controlled functions.
- Integrated circuits and modules for high frequencies will be in demand considering the large data that needs to be transmitted in a very short time– be it in communication, sensors or astronautics. Advances in integrated circuit technology are driving packaging and interconnect designers to accommodate more input/output connections and larger sized dies, which dissipate more power and operate at faster speeds. This, in turn, will generate a demand for components and products suitable for high frequency applications.
- Consumer demand for smart and connected devices is going to shape the market. Such devices will require at least a microcontroller to add intelligence to the device, one or more sensors to allow for data collection, one or more chips for connectivity and data transmission, and a memory component. The connected devices that transmit information across the relevant networks will rely on innovations from semiconductor players—highly integrated microchip designs, for instance, and very low power functions in certain applications.
- A new class of System on Chip (SoC) based devices, with provision for optimal power and connectivity features as well as with sensor integration, will be in demand to make the products smarter to support the wide adoption of ÍoT. The first generation of such chips are already on the way, although it will probably be a few generations before chips can deliver all the functionality required.
- New sensors based on micro electromechanical systems (MEMS) technology will rapidly be developed for IoT products, and will have applications beyond motion and image sensing. These include products that measure humidity, altitude, food calorie composition, and human health indicators.
Electric vehicles and connected mobility related applications have already opened up huge opportunities for power electronics devices and components, including power management semiconductors, etc. However, the desire for a longer driving range between charges, faster battery charging times, increasing electronics integration for infotainment, safety and security, and other applications will further tech advances, increasing the total electronics content of EVs.
A key challenge for the domestic manufacturing ecosystem is the low cumulative value
addition in the production cycle, which according to a PwC study is less than 40 per cent for most new age consumer electronics appliances and 7 per cent for smartphones, far lower than the global average. This can be attributed to a limited domestic components manufacturing ecosystem, the high cost of finance and power, and inefficient infrastructure. For domestic manufacturing to flourish in the electronics industry, India needs to focus on critical enablers such as large scale demand creation, cost competitive domestic manufacturing and ease of manufacturing.
Large scale demand can be generated by easing the tax structure and encouraging financial institutions to provide easy finance for electronics manufacturing companies. In addition, it is important to facilitate exports by reducing the cumbersome paper work, increasing the Merchandise Exports from India Scheme (MEIS) incentives for high domestic value added products, and expanding the free trade coverage to enable exports to regions such as Africa.
Domestic manufacturing can be made cost effective by reducing the cost of capital, creating a phased manufacturing plan for all electronic products (similar to that for mobile phones) in which incentives are linked to value addition in India, and by ensuring low sourcing costs through the development of a good supplier ecosystem.
Ease of manufacturing can be achieved by providing easy access to skilled manpower, providing better connectivity through roads and railways to reduce transit time and logistics costs on key industrial corridors, and by creating a strong intellectual property rights framework for IoT, among others.