CII’s Report on “Developing India as the Manufacturing Hub for Electronics Components and Sub- Assemblies”
CII has come out with a Report on “Developing India as the Manufacturing Hub for Electronics Components and Sub-Assemblies”. The Report encapsulates critical actions required to transition India’s Electronics sector ecosystem from an ‘import dependent assembly led manufacturing’ to ‘component level value-added manufacturing’.
As per the Report, in 2023, the demand for components and sub-assemblies stood at USD 45.5 billion to support USD 102 billion worth of electronics production. This demand is expected to scale to USD 240 Billion to support the USD 500 Billion worth electronics production by 2030. Priority components and sub-assemblies including PCBAs, are projected to grow at a robust CAGR of 30%, reaching USD 139 billion by 2030.
The Report identifies 5 priority components/sub-assemblies of batteries (lithium-ion), camera modules, mechanicals (enclosures etc.), displays and PCBs which are categorized as high priority for India. They cumulatively accounted for 43% of the components demand in 2022 and is expected to grow to USD 51.6 billon by 2030. These components have either a nominal production in India or are heavily import dependent. India can hardly afford to sustain this trend of importing the priority components. Similarly, PCBA is a high potential category for India since most of the demand is met by imports. This segment is expected to grow by 30%, leading to a demand creation of ~USD87.46 billion by 2030.
However, manufacturing related cost disabilities vis-à-vis other competing economies like China, Vietnam, Mexico (10-20%), lack of big domestic manufacturing corporations, lack of domestic design ecosystem for Indian companies and lack of raw materials ecosystem add to the challenges that disable the domestic manufacturing of components and sub-assemblies in India.
Some of the key recommendations suggested in the Report are:
• To craft a scheme aimed at providing fiscal support for select components and sub-assemblies in the range of 6-8%. The fiscal support to be extended for a period of 6 to 8 years to ensure adequate time for scaling up and enhancement in value addition.
Additionally, SPECS 2.0 to be introduced with a subsidy support ranging from 25% to 40% to support potential investors across brownfield and greenfield categories. The new policy should adopt a gradient approach with support towards the higher end of subsidy.
The import tariffs on priority sub-assemblies and components like camera modules, displays modules, mechanicals, need to be urgently rationalized in line with key competing economies. Majority of tariff lines need to be brought under the level of 5% or lower to ensure that product manufacturers become competitive.
Needs to aggressively pursue FTAs with EU, UK, GCC countries and emerging economies in Africa. The creation of export demand for India made products have the twin advantages of increasing export volumes and helping boost domestic manufacturing of components and sub-assemblies.
The policy support will help in various economic benefits arising from the development of the components and sub-assemblies’ ecosystem in India. Job creation to the tune of ~2.8 lakhs by 2026, increase in the domestic value addition from the current levels, reduction in import dependency, increase in GDP, all leading to firmly positioning India as a global hub for electronics manufacturing.
An enabling ecosystem for the components and sub-assemblies will strengthen India’s electronics manufacturing capabilities, enabling it to be self-sufficient and deeply integrated into GVCs.
22 June 2023
New Delhi