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View from India: A $1bn electronics innovation fund

Image credit: DT

Electronics production has the potential to reach up to $260bn and generate ten million jobs, thereby providing an alternative source of employment to the IT sector.

Industry body India Electronics and Semiconductor Association (IESA) works toward the development of a vibrant Indian Electronics System Design & Manufacturing (ESDM) ecosystem, evangelising the dream of ‘Make in India’ a reality.

In its latest report, the IESA aims to provide a strategic direction to the ESDM ecosystem. Current trends are being assessed. Subsequently, strategic advice will be provided to accelerate growth and local value addition.

The goal is to promote the domestic value chain. India’s dependency on imports for its electronic product needs - from smartphones to super- computers - has seen an exponential rise.

The current Covid-19 crisis has highlighted the need to have a strong and robust electronics research and manufacturing ecosystem in the country. More so, because intelligent electronics forms the backbone of strategic sectors such as healthcare, security, defence, transportation, financial inclusion and agriculture.

The IESA report proposes the creation of a $1bn ESDM Innovation fund. The key sectors covered in the report include electronics product market; electronics component market; electronics design market; electronic systems market, and electronics manufacturing services market. The product segments looked at were mobile phones; notebooks; CCTVs; FPD TVs; LED lighting; engine control unit; gigabit passive optical networks (GPON) and energy meters/smart meters. 

A sunshine market, the electronics market has grown at a compounded annual growth rate (CAGR) of 14 per cent from 2016-2019. It is expected to accelerate at a CAGR of 16.6 per cent between 2020 and 2025. The electronics production currently contributes 3.3 per cent to the economy. It will grow to $320bn by 2025. With additional measures, it has the potential to reach $410bn. This will be 8.2 per cent of India’s GDP (gross domestic product) target of $5tn by 2025. As India is forecast to be among the world’s top three countries in ESDM consumption, it’s only natural that the electronics ecosystem is strengthened so that the country will rank among the world’s top five countries when it comes to electronics production.

Given a boost, ESDM can generate 1Cr (10 million) jobs and provide an alternative source of employment to the IT sector. Currently 50 per cent of $134bn of the total demand of electronics products is imported. By 2025, the total product demand will reach $368bn. However, import can reduce to 29 per cent, thus saving $76bn of foreign exchange.

“With the goal of making India a hub for electronics design and manufacturing, IESA has been working with the government, academia and industry players to suggest, influence and execute multiple strategies for the electronics and semiconductor industry,” said Jitendra Chaddah, chairman, IESA, and senior director, Intel India.

Coming to design, it has grown from $13bn to $20bn between 2016-2019, at 15.4 per cent CAGR. It is expected to grow to $60bn at 20.1 per cent CAGR. Design is hailed as a great source of foreign exchange. The way ahead is to support design companies to grow. This can happen by subsidising training and internship, besides incentivising research, IP development and product engineering.

The IESA ESDM 2020 report is an attempt to project the needs of the electronics market and the steps to be taken to meet the demand and growth of the industry. “The demand for electronics products is fast growing in the country and this sector will contribute significantly to the country’s GDP and the digital economy,” added Chaddah.

For its part, IESA plans to incubate 1,000 electronics product and fabless start-ups. This is expected to create 1,000 IPRs (intellectual property rights), generate business worth INR 1,000 crore and create 10 lakh jobs over next five years.

“A strong partnership between industry and government is vital in creating an ecosystem for the fabless start-ups and electronics products companies. This should not just focus on the indigenous market and substitute imports, but focus on driving exports by the next five years,” explained Dr Satya Gupta, vice chairman, IESA, and CEO, Seedeyas Innovation.

Some of the key strategic recommendations include the creation of electronics products for new use cases such as medical, agriculture, defense, 5G or 6G, artificial intelligence (AI) and machine learning (ML), automation and electric vehicles (EV).

There’s a felt need for the geographic inclusion of all states and union territories for innovation in electronics. Incentive measures should extend to set the assembly, testing, marking and packaging (ATMP) display, LED and power electronics fab.

All this was documented in the 'Electronics System Design & Manufacturing (ESDM) Report 2020', published by IESA in collaboration with Frost & Sullivan.

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