India: The next electronics manufacturing hub

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In the last couple of months, the government has been working hard with stakeholders in the electronics manufacturing ecosystem to come up with investor-friendly policies to attract capital as well as manufacturers, to make in India

By Atanu Kumar Das

In what could be a major boost to the electronics manufacturing segment, the Department of Electronics and Information Technology (DeitY) is in the process of finalising guidelines on production-linked subsidies for companies willing to manufacture electronic items like microprocessors, semiconductors and others, within India. This has been stated in a statement issued by the IT and communications ministry.

According to Ajay Kumar, additional secretary in DeitY, “We have introduced an element of the production subsidy; now we are in the process of finalising the guidelines and since there are different kinds of projects, we are looking for specific technical inputs.” He added that the production subsidy the government is initiating is substantial, amounting to 10 per cent of the turnover for 10 years. It is meant for projects that are capital intensive and, hence, do not look attractive in the short term.

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In the last couple of months the government has been working hard with stakeholders from the electronics manufacturing ecosystem to come up with investor-friendly policies that would attract capital as well as manufacturers, to make in India.
It should be noted that the government has been taking increasing interest in venture capital funding in recent months. Recently, it said that investors had committed at least ₹ 4 billion to a government-backed fund, which will provide capital to new ventures that serve the needs of India’s low-income communities. The fund’s eventual size is envisaged at more than ₹ 50 billion.

Ajay Kumar, additional secretary in DeitY

The government has also come up with a special report on the National Policy on Electronics, which highlights the necessity of building a semiconductor fabricator, or fab, which can then churn out a large number of wafers that house electronic chips. There is also the Modified Special Incentive Package Scheme (MSIPS), which primarily aims to bridge the infrastructure gaps in the country.
Talking to journalists, Satya Gupta, chairman of the India Semiconductor Association (ISA) said, “Today, the semiconductor industry has become a strategic weapon, much like our space or nuclear programme, and not just a commercial opportunity.”

Industry sources have been very vocal about the fact that India needs to manufacture semiconductors. India has always been a design destination, and it is high time that the country became a manufacturing hub. However, since semiconductor manufacturing is very capital intensive, this industry cannot flourish without the help of the government.
Over recent months, more than 100 mobile companies from China have shown an interest in making India their manufacturing base. But when it comes to semiconductor manufacturing, the number of players interested in investing is less. Yet, even if there are two to three players who start manufacturing wafers, it will be a big boost for the domestic industry.
As many as 50 new mobile phone factories were set up in the country during the past 10 months, creating employment for 20,000 people. The installed capacity for mobile phone manufacturing in India is now 9 million units per month, with growth predominantly coming from the increasing demand for smartphones.

While attending the IESA Vision summit in Bengaluru, Ajay Kumar of DeitY said, “The technology sector is going to be a US$1 trillion opportunity in the next five to seven years. Of this, US$400 billion would be from hardware, around US$ 350 billion from IT, ITeS and e-commerce, and another US$ 250 billion from telecommunications and IoT.”
So one can imagine India’s growth potential over the next decade. Experts are of the opinion that India could even overtake China in the next 10 years when it comes to manufacturing. If we look at the last 20 years, the primary focus of the country was on services, but a country can never grow beyond a point doing only services. It needs to have a manufacturing base, and after a long time, we seem to be moving in the right direction.
According to the National Policy on Electronics 2012, India will be a US$ 400 billion electronics market by 2020. The government has plans for 25 per cent of India’s GDP to come from the technology, electronics and telecom sectors. To achieve this, the government has already allowed 100 per cent foreign direct investment (FDI) in medical electronics and 49 per cent FDI in defence (which could be higher, with permissions granted on a case-to-case basis) to bring some momentum into indigenous electronics manufacturing.
The journey has just started and we have a long way to go, but if everything goes well, India is well set to become the most favoured electronics manufacturing hub in the world.

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