Transforming India's Electronics Sector: From Assembly to Component-Level Manufacturing

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Transforming India's Electronics Sector: From Assembly to Component-Level Manufacturing

Team Finance Saathi

24/Jun/2024

Key Points:

India's electronics sector plans to shift from assembly-centric to component-level manufacturing, aiming to reduce import dependency significantly.
The demand for key components like PCBAs is projected to grow rapidly, creating substantial economic opportunities and job prospects.
Policy interventions such as SPECS 2.0 and import tariffs aim to catalyze domestic production, aiming for India to become a global hub for electronics manufacturing.

India's electronics industry is at a pivotal moment, poised for a significant transformation from its current state of import-dependent assembly to a robust ecosystem of component-level manufacturing. The Confederation of Indian Industry (CII) has outlined a comprehensive roadmap in its recent report, emphasizing the urgent need for strategic actions to propel this shift forward.

In 2022-23, India's electronics sector witnessed a demand of US$ 45.5 billion for components and sub-assemblies, supporting a production worth US$ 102 billion. Looking ahead, this demand is projected to escalate sharply, reaching US$ 240 billion by 2030, correlating with a US$ 500 billion electronics production target. Central to this growth are critical components such as Printed Circuit Board Assemblies (PCBAs), expected to expand at a robust Compound Annual Growth Rate (CAGR) of 30%, potentially reaching US$ 139 billion by the end of the decade.

Key challenges currently facing India include a heavy reliance on imported components, particularly those crucial to electronic devices like camera modules, which are projected to constitute a substantial portion of the demand, growing to US$ 51.6 billion by 2030. Recognizing the economic risks associated with such import dependency, the report underscores the necessity of implementing supportive policies.

The proposed Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS 2.0) stands out as a pivotal initiative aimed at providing fiscal incentives to boost local production. Additionally, the recommendation to impose import tariffs on critical components seeks to encourage domestic manufacturing by leveling the playing field and reducing the cost advantage of imports.

One of the most promising segments for India is PCB assembly, where current demand is predominantly met through imports. This segment alone is expected to grow by 30%, translating to a demand of approximately US$ 87.46 billion by 2030. By harnessing its skilled workforce and fostering emerging capabilities, India has a substantial opportunity to capture a larger share of this lucrative market.

The benefits of these proposed policy interventions extend beyond economic gains. The report estimates that by 2026, the initiatives could generate around 2.8 lakh jobs, significantly increase domestic value addition, reduce import reliance, and boost the GDP. These outcomes are crucial not only for strengthening India's position in the global electronics manufacturing landscape but also for fostering innovation and technological self-reliance.

In conclusion, as India navigates its path towards becoming a global hub for electronics manufacturing, the strategic implementation of policies like SPECS 2.0 and targeted import tariffs will play a pivotal role in reshaping the sector. By fostering an environment conducive to component-level manufacturing, India can realize its potential as a leader in electronics production, ensuring sustainable growth and economic resilience in the years to come.

Also Read : Rural India Surges: FMCG Sales Set to Outpace Urban Markets in 2024 Q2

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Transforming India's Electronics Sector: From Assembly to Component-Level Manufacturing

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