Introduction
The electronics sector has long been the engine of economic growth. It is one of the pillars of the ‘Make in India’ program and a key driver for realizing the vision of ‘Digital India’ programs of the government. The advanced level of digitization in the last few years has touched every corner of the country and every single person.
Global Electronics Market Growth
As per research data available from JEITA (Japan Electronics & IT Association), a reliable and consistent source of information, total global electronics production rose 11% year-on-year in 2021 to reach $3,360.2 billion. The spread of telework and work-from-home culture has driven up demand for electronic equipment sharply. Higher investment in digitalization has promoted more sophisticated data use and the need for solution services, further pushing demand for IT and communication equipment.
The forecast indicates that growth continued through 2022 at approximately 5%, with the global electronics industry valued at $3,536.6 billion, or US$ 3.5 trillion, in that year. Components, comprising Semiconductors (16%) and all other electronic components (8%), add up to 24% of this value, amounting to US$ 848 billion. If we include Display devices (5%) valued at US$ 177 billion, the total reaches US$ 1027 billion, or 1 trillion dollars. This highlights the potential of electronic components—a US$ 848 billion industry driving a US$ 3.5 trillion industry with a 1:4 multiplier effect!
Growth of Electronics Production in India
There has been consistent growth in the demand for electronics. This, coupled with various government schemes, has driven growth in electronics production from US$ 29 billion in 2014 to approximately US$ 84 billion in 2022. The growth of the electronic products industry has resulted in an expansion of the electronic components market size in India.
Domestic demand has increased from USD 11 billion in FY 2009-10 to USD 29.9 billion in FY 2021-22 (excluding imported PCB-Assemblies), with a year-on-year growth rate of around 8.7%. If we include imported PCB-Assemblies, the component demand figure jumps to around USD 39.2 billion. Unfortunately, the overall growth of the Electronic Components industry for FY 2021-22 has not changed significantly since 2018-19, though imports have risen due to rapid growth in the production and assembly of electronic equipment, including mobiles, consumer electronics, industrial electronics, lighting products, automotive electronics, among others.
Key Areas to Focus on for Unlocking the Potential
To unlock the potential of electronic components and derive the 1:4 multiplier benefits to strengthen our ESDM industry, we need to focus on some key areas that are not only critical but also low-hanging fruit.
1. PCB Manufacturing
Nearly 85% of Bare PCBs are imported, and our industry lacks an ecosystem to compete with China and other Southeast Asian countries. Bare PCBs are the heart of electronics manufacturing and crucial for sustainability, security, and integrity of any electronics ecosystem. This calls for crucial and bold policy decisions.
India needs to ramp up its PCB sector over tenfold in the next few years to achieve a scalable and robust Bare PCB component ecosystem. At a minimum, PCB manufacturing must expand from US$ 0.36 billion to US$ 2.0 billion by 2026 and further to US$ 5.0 billion by 2030. A smaller ambition will not deliver the desired outcomes.
2. Boosting Manufacturing Capacities for Other Components
At the next level, we need to boost manufacturing capacities and technical capabilities for:
- Electro Mechanical Components – currently estimated at US$ 4.5 billion
- Wire Wound Components – currently at US$ 0.58 billion
- Passives – currently at US$ 0.80 billion
- LED Lighting Components – currently at US$ 0.90 billion
- Other Components (which do not qualify for inclusion above) – currently valued at US$ 2.06 billion
These component categories already have an existing ecosystem in India, making it possible to accelerate investments, achieve scale, and service both domestic and export markets. Established players, combined with a strong favorable policy push, will surely attract small, medium, and large investments. In addition to incentivizing investments in manufacturing, we also need to disincentivize rampant imports and the dumping of components at irrationally low prices.
Achieving the Government’s Vision
The government has set a target of US$ 300 billion in electronics production by 2026. This requires US$ 120 billion worth of components, and ELCINA envisions meeting 50% of this requirement, amounting to US$ 60 billion by 2026.
As per standard BOM, Active Components (Semiconductors) comprise 60% (US$ 36 billion) of component value, while the remaining 40% (US$ 24 billion) consists of all other components (PCBs, electromechanical, wound, passives, LED components, etc.). Our current estimates show that these four component categories, together with ‘Others,’ contribute to US$ 8.84 billion, while PCBs contribute to US$ 0.36 billion. Our target for these components, including Others and PCBs, is to reach US$ 24 billion by 2026, which equates to a growth of 2.6 times from US$ 9.2 billion to US$ 24 billion in four years.
The much bigger challenge is to fulfill the demand for Active Components (Semiconductors), targeted at US$ 36 billion, while current production stands at only US$ 1.5 billion.
Conclusion: A Path to Self-Sufficiency
The importance, criticality, and benefits of a strong electronic components industry are well known. A robust components ecosystem will drive self-sustainability, technology development, employment, and value addition. External factors such as the China Plus One strategy, learnings from the pandemic, the Digital India drive, and emerging technologies present the biggest opportunity for India.
The key question to ponder is: What is a realistic vision for ‘Atmanirbharta’ in electronic components? What needs to be done to realize our vision, and what is the key component or way forward?
Rajoo Goel
Secretary-General
Electronic Industries Association of India (ELCINA)
