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Market Reports

Electronics Industry in India

UJA Market Reports : Electronics Industry in India
1Quick facts: Indian Electronics Industry
2Overview: Indian Electronics Industry
3Overview: The Electronics System Design & Manufacturing (ESDM)
4Indian Electronics Industry – Product Segmentation
5Production Linked Incentive Scheme for White Goods
6India’s Electronics Exports: Key Commodity Group Breakdown
7Government Programs and Policies for the Electronics Industry
8Key Investments and Partnerships in India
9Our Team

Quick Facts: Indian Electronics Industry

  • From April 2000 to December 2023, cumulative FDI equity inflow into the electronics industry amounted to INR 386 billion.
  • The Union Budget 2023-24 allocated INR 169 billion to the Ministry of Electronics and Information Technology.
  • In FY24, electronic goods exports totaled INR 2,464 billion, compared to INR 1,995 billion in FY23, marking a growth of 23%.
  • India has set a target to achieve INR 25,401 billion in electronics manufacturing and INR 10,160 billion in exports by 2025-26.
  • The demand for electronic products is projected to grow from INR 2,794 billion in FY20 to INR 33,868 billion by 2025.
  • India has surpassed China to become the second-largest manufacturer of mobile devices globally and is expected to become the fifth-largest consumer of electronics by 2025.

Strengths

  • High consumption and rising demand: Huge product consumption and rising demand in the consumer electronics sector, with substantial growth in the sales of smartphones, appliances, and televisions during the first half of 2024.
  • Increasing Government’s support for the electronics sector: The Indian government has introduced multiple strategic initiatives to support the growth of electronic product startups, focusing on enhancing domestic manufacturing, attracting investment, and fostering innovation.

Weaknesses

  • Higher manufacturing costs: Compared to countries like China, Vietnam, and Mexico, it is difficult to compete in the global market.
  • Supply chain and logistics constraints: India must secure a steady supply of critical minerals to support its electronics industry. With limited reserves and reliance on other countries, it’s important to use advanced mining technology and build strong regional opportunities.

Opportunities

  • A strong investment destination: The government has allowed up to 100% foreign investment in electronics manufacturing, helping India reach over INR 84.9 trillion in foreign investments from April 2000 to September 2024, making it a safe and important place for global investors.
  • Wide scope for R&D activities: Promoting a sustainable and inclusive R&D ecosystem, the government, industry, and academia are working together on shared solutions. The R&D in Electronics Group is leading multiple research projects to boost technological progress in electronics.

Threats

  • Skills Gap: Despite government efforts, the industry is facing a workforce shortage as demand rises in areas such as semiconductors, electronic components, and electronic system design.
  • Tough Competition from Global Players: Fierce competition from established players like China, which benefits from lower production costs.

Overview: Indian Electronics Industry

  • India’s electronics sector has seen rapid growth, with production reaching INR 8,550 billion in FY23. However, the country still holds a small share of the global market, focusing primarily on assembly rather than design and component manufacturing. To boost competitiveness, India needs to localize high-tech components, invest in R&D, and build strategic partnerships with global tech leaders. By 2030, India’s electronics industry could grow to INR 23,535 billion, with a more ambitious target of INR 42,329 billion to position the country as a global leader.
  • This would create millions of jobs and strengthen its role in emerging areas like IoT and automotive electronics. Strategic interventions in infrastructure, R&D, and technology are essential for achieving these goals.

Overview: The Electronics System Design & Manufacturing

  • The Indian electronics system design and manufacturing (ESDM) sector is witnessing rapid growth, driven by strong consumer demand and increasing adoption across various industries. Covering a diverse range of electronic hardware products and components including IT, office automation, telecom, consumer electronics, aviation, aerospace, defense, solar energy, nanoelectronics, and medical devices, the ESDM industry also encompasses design activities such as product and chip design, VLSI, board design, and embedded systems. With the surge in demand for electronic products, the ESDM sector is projected to reach approximately INR 18,662 billion by 2025, growing at a CAGR of 16.1% from 2019 to 2025.
  • Growth in the ESDM sector is driven by factors such as OEMs increasingly outsourcing manufacturing to specialized providers, rising demand for electronics, a vast and expanding domestic market, and supportive government programs like the production-linked incentive (PLI) scheme and semiconductor development investments.
  • Launched in 2016 by MEITY and IESA, the Electropreneur Park (EP) is a pioneering initiative in India that has contributed to the development of 51 hardware products, secured 51 patents, and supported 23 startups. With plans to evolve into a central hub with 20 satellite centers, EP aims to foster innovation and promote the growth of unicorns in the ESDM sector. Furthermore, the AIC STPINEXT Initiatives (STPINEXT) under STPI, in partnership with HDFC Bank and Excelpoint Systems India Pvt. Ltd., offer startups technical support, mentoring, funding, and market access.

Indian Electronics Industry - Product Mix

Market Reports: Electronic Products Mix - FY23

  • The above graph provides a detailed breakdown of electronic product production across different categories. Mobile phones stand out as the largest segment, accounting for 43% of total production. This is followed by consumer electronics and industrial electronics, which comprise 12% each. Other categories together account for 33%, suggesting that the market remains diverse and has room for expansion across all segments.

Production Linked Incentive Scheme for White goods

  • In April 2021, the Indian government approved the Production Linked Incentive (PLI) Scheme for White Goods focused on air conditioners (AC) and LED lights, to boost local production capacity, particularly in export-dependent segments. Implemented over seven years from FY 2021-22 to FY 2028-29, the scheme will involve a total government expenditure of INR 62.3 billion. The target segments for AC production include high-value intermediates such as copper tubes, aluminium foil, and compressors, as well as low-value intermediates like PCB assembly for controllers, BLDC motors, and service valves. For LED lighting, the focus will be on core components such as LED chip packaging, registers, ICs, and other critical parts. The first application round identified 42 beneficiaries with a committed investment of INR 46.1 billion. Additionally, the government announced 15 beneficiaries under the PLI 2.0 scheme, including companies like Adani Copper Tubes, LG Electronics, and Wipro Enterprises. Nine companies will focus on LED light components with a committed investment of INR 4.6 billion, while six companies will manufacture AC components with a committed investment of INR 9.0 billion.

India’s Electronics Exports: Key Commodity Group

Electronics Items

Amount (INR Mn), (Apr-Oct 2024)

Computer Hardware, Peripherals

81,593

Consumer Electronics

31,127

Electronics Components

250,008

Electronics Instruments

214,181

Telecom Instruments

1,009,572

Total

1,586,483

  • Between April and October 2024, the United States emerged as the top export destination for India’s electronics components, with exports valued at INR 1,009,572 million. The United Arab Emirates followed with INR 11,094 million, while European countries such as the Netherlands (INR 2,609 million), the United Kingdom (INR 5,156 million), and Germany (INR 10,625 million) also saw significant export volumes. Other notable destinations include Singapore (INR 7,541 million), China (INR 8,205 million), and Saudi Arabia (INR 9,107 million). Exports to countries like Bangladesh (INR 3,194 million), Brazil (INR 1,927 million), and South Africa (INR 753 million) further contribute to the diverse market reach of Indian electronics components, showcasing strong international demand across various regions.

Government Programs and Policies for Electronics

Mrket Reports: Government Programs and Policies for Electronics
  • Semicon India Program: The government has approved the Semicon India program with a total budget of INR 760,000 million to strengthen the semiconductor and display manufacturing ecosystem in the country. This initiative is designed to offer financial support to businesses investing in semiconductor production, display manufacturing, and the related design ecosystem.

The program introduces four key schemes:

  • Modified Scheme for Setting Up Semiconductor Fabs in India: Offers 50% fiscal support (on a pari-passu basis) for the establishment of Silicon CMOS-based semiconductor fabs in India.
  • Modified Scheme for Setting Up Display Fabs in India: Provides 50% fiscal support (on a pari-passu basis) for building display fabs in India.
  • Modified Scheme for Compound Semiconductors, Silicon Photonics, Sensors, and Semiconductor Facilities: Grants 50% fiscal support for setting up compound semiconductors, Silicon Photonics, sensors (including MEMS), discrete semiconductor fabs, and semiconductor ATMP/OSAT facilities.
  • Design Linked Incentive (DLI) Scheme: Includes infrastructure support and financial incentives, offering Product Design Linked Incentives of up to 50% of eligible expenses (with an INR 150 million cap per application) and Deployment Linked Incentives ranging from 4% to 6% of net sales turnover for five years, capped at INR 300 million per application.
  • The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) offers a financial incentive of 25% on capital expenditure to produce electronic components, e-waste recycling, mechanics, and micro/nano-electronic components. As of June 30, 2024, the SPECS scheme has attracted an incremental investment of INR 88,030 million, which has resulted in a total production value of INR 1,80,830 million by the same date.
  • Production Linked Incentive (PLI) Scheme for Large-Scale Electronics: To strengthen domestic manufacturing and attract investment into the mobile phone value chain—covering electronic components and semiconductor packaging—the Production Linked Incentive (PLI) Scheme for Large-Scale Electronics Manufacturing was introduced in 2020. This scheme offers an incentive of 3% to 6% on incremental sales (over the base year) of eligible goods manufactured in India within the target segments of mobile phones and specified electronic components. The scheme is available to eligible companies for five years. As of June 30, 2024, the PLI scheme attracted an incremental investment of INR 70,581 million, which resulted in a total production value of INR 5,149,600 million by the same date.
  • The National Policy on Electronics, introduced in 2019, focuses on establishing value chain clusters, creating employment opportunities for over 10 million people (both directly and indirectly), and maintaining an ambitious growth rate of 32%.
  • In addition to these initiatives, the Indian government has supported the electronics sector through several other programs. These include the Electronics Development Fund (EDF), Modified Special Incentive Package Scheme (MSIPS), and Preferential Market Access (PMA), as well as reforms to rationalize the duty structure.

Key Investments and Partnerships in India

  • In February 2023, the India Cellular and Electronics Association (ICEA) signed a memorandum of understanding with the Uttar Pradesh government to promote investments and establish the state as an electronics manufacturing and skill development hub to meet both domestic demand and export needs. The government has set a goal of reaching INR 25,419 billion in electronics manufacturing by 2025-26, with ~INR 8,473 billion anticipated to come from Uttar Pradesh.
  • In July 2023, electronics company Elista announced plans to invest INR 1,025 million in Andhra Pradesh to establish a manufacturing facility for Smart LED TVs, smartwatches, audio speakers, and large appliances.
  • Mitsubishi Electric India plans to invest INR 18,910 million and INR 19,564 million to establish an air conditioner and compressor manufacturing plant in Tamil Nadu. The new facility is expected to create over 2,000 job opportunities.
  • Vedanta Group has signed memorandums of understanding (MoUs) with 20 Korean companies in the display glass industry to support the development of an electronics manufacturing hub in India.
  • In a strategic effort to grow its market footprint and diversify its supply chain, Alphabet Inc.’s Google has started manufacturing Pixel smartphones in India in 2024. The production began in the April-June quarter, with plans to produce more than 10 million Pixel units this year. By establishing local production in India, Google seeks to capitalize on the country’s large consumer market while benefiting from its favorable business climate.
  • Tata Consultancy Services (TCS) is collaborating with Tata Electronics Pvt Ltd to help India achieve its objective of producing its first domestically manufactured chips by 2026. TCS brings expertise in semiconductor design and engineering, while Tata Electronics focuses on advancing chip manufacturing. This partnership will also deliver software solutions and IP-based products to the semiconductor industry, representing a significant step forward in India’s semiconductor development efforts.

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