Electronics in India
Electronics in India
Electronics in India
49 • 13156 Berlin
Tel.: 030 48163-470 • Fax: 030 48163-404 • E-Mail: [email protected]
Foreign Trade
Imports 78,15 bn. USD (59,95 bn. 106 bn. USD (81,30 bn.
EUR) EUR)
Exports 63,84 bn. USD (48,97 bn. 80 bn. USD (61,40 bn.
EUR) EUR)
Bilateral Relations
After the reforms of 1991, India is on its way to a social market economy, though the public sector
is still dominating core economic sectors with a share of more than 70 %. The new government
elected in May 2004 will continue the reforms with a “human face” and concentrates on improving
the infrastructure especially in rural areas, as well as on investments in health and education.
Privatization efforts are of minor priority.
The industrial and services sector, with growth rates of 8.1 % respectively 8.9 % in 2004/2005 are
the drivers of the Indian economy. It is noteworthy that the Indian economic structure is more and
more shifting towards those sectors while it is moving away from the primary sector. As a result
agriculture only accounts for 21 % of the GDP whereas industry amounts to 26 % and the services
sector contributes to 53 %.
One of the most important growth drivers is biotechnology, which increased by about 40 % in 2004
/ 2005 and will reach a turnover of 1 billion USD this year. A continuous growth motor is and
remains the software-IT branch with a turnover of 28,2 billion USD, which corresponds to an
increase of 31 % in 2004 / 2005. Another promising sector is the food processing industry.The
Indian GDP increased by 8.5 % in 2003 / 2004 (the fiscal year starts on 1st April and ends on 31
March). It is estimated to have grown by 6.9 % for the recent fiscal year. Similar prognostics also
exist for the year 2005 / 2006. Gross capital expenditures accounted for 26,3 % of the GDP.
Also in future, India will remain one of the most interesting emerging markets in Asia and therefore
worldwide. A study of the Deutsche Bank, presented in May 2005, forecasts India to be the fastest
growing economic nation (even before China) by the year 2020. Already today it ranks on the 4th
place as to measured purchasing power parity. Favorable parameters for India's growth are the
demographic development, increased investment in education and infrastructure and further
integration into the world economy. Industrial sectors boosting growth above average are
information and communication technology, textiles, automobile and parts production and the
pharmaceutical sector.
India understands itself as one of the winners of globalization. Foreign trade amounts to one third
of the GDP and has grown by 30 % in the past fiscal year. In the year 2004 / 2005 exports reached
80 billion USD, which corresponds to a growth record of 25.3 % compared to the previous year.
However, India’s imports increased even more. They grew by 35.6 % and represented a value of
106 billion USD. The reasons for this are not only an increase in volume of imports, but also a price
increase of crude oil and steel. Therefore the trade balance deficit has increased and amounts to
26 billion USD (compared to 14 billion USD in 2003 / 2004).
2) The Electronics Industry
a) Development
The beginnings of the Indian electronics industry reach back to the early 1960s. At that time the
electronics industry concentrated on developing and maintaining fundamental communication
systems, such as radio-broadcasting, telephonic and telegraphic communication, and aimed at
enhancing defence capabilities. Later, at the end of the 1980s, the electronics industry experienced
rapid growth, as a result of outstanding economic changes. The latter were due to the liberalization
and globalization efforts of the Indian government in order to trigger off economic growth and to
promote the creation of an export-oriented electronics industry. By 1991, foreign and domestic
private investments were encouraged. Foreign investment norms were eased, 100 % foreign
equity was allowed, custom tariffs were reduced and many consumer electronic products
delicensed. These initiatives attracted a large amount of foreign investment and collaborations.
The latest step for supporting the opening of the electronics sector for global players was the
signature of the information technology agreement (ITA-1) of the WTO, which came into force in
April 2005. Since then the “Zero Customs Duty” principle applies for all electronic components.
This represents a great opportunity as well as a challenge to domestic and foreign manufacturers.
b) Present Situation
Today the electronics industry as a whole, with the exception of aerospace and defence
electronics, has been fully delicensed. Fiscal, investment and trade policies for the electronics
sector have also been liberalized. All components, raw materials and capital goods are freely
importable. Sector specific schemes have been introduced to attract foreign investment and
provide a duty free environment for export of electronic hardware and software under the export-
oriented schemes.
As India has become more open to foreign trade and investment, it has also emerged as a mass
market for consumer electronics and telecom. For the time being the consumer electronics
segment also shows higher growth than the industrial electronics field. Reasons for this are the
slow growth rates in core sector industries like steel, cement, petro-chemicals / refineries, textiles
or paper mills to which the industrial electronics production is closely linked as it forms part of their
supply chain. The existing demand for industrial electronics products derives from process
improvements of user industries, such as energy conservation and replacement markets. Whereby
value added services, such as application engineering and software, system integration etc. are
the key competence areas of the industry.
In 2003-04 the total electronic components production amounted to Rs. 76 billion, of which 60%
was accounted for by the television industry and 10% by the audio industry. The balance of 30%
corresponded to the requirement of the professional electronic sector, namely, the
telecommunication and industrial sector. This trend has remained stable during the last few years.
Moreover, the demand of surface mount components, display devices, micro-electronic, opto-
electronic, semiconductor devices, etc. continued to be met by imports due to the limited or non-
existent manufacturing base in the country.
Consumer electronics is the largest sector of Electronics Hardware industry and accounts for
almost 35 per cent of the total electronics hardware production. The Colour TV segment
contributes over 60 per cent of the turnover of the Consumer electronics industry with other
products being audio products, DVD units and microwave ovens. During the year 2003-04,
production of computers was worth Rs. 68 billion. The total PC population in India in April 2004
was estimated to be over 8.0 million. The penetration of computers in commercial and domestic
segments in the country is approximately in the ratio of 80:20 respectively. With 3.7 million
connections, the Internet penetration is currently at a mere 0.37% of the population.In control
instrumentation and industrial electronics, ultrasound equipment and uninterrupted power supply
are major export items. In industrial electronic products group, mixed performance was observed.
The domestic production in this sector is estimated to be around Rs. 61 billion for the year 2003-
2004.
Consumer
138,000 152,000 168,000 10
Electronics
Industrial
55,500 61,000 77,000 18
Electronics
Computer
42,500 68,000 88,000 45
Hardware
Communication &
48,000 53,500 46,000 14
Broadcasting
Strategic
25,000 27,500 30,500 10.45
Electronics
Though domestic demand for electronic products is increasing in India, it is necessary to mention
that the electronic equipment sector owes its augmenting production output to a robust export
performance, according to IEEMA, the Indian Electrical & Electronics Manufacturers Association.
Electronics Production (Calendar Year)
Consume r
18,000 Ele c tronic s
16,000
14,000
2000
12,000
Rs. Crore
2001
10,000 Industria l Compone nts
Ele c tronic s Compute rs 2002
8,000
Comm. & 2003
6,000 Broa dc a sting
S tra te gic 2004
4,000 Ele c tronic s
2,000
0
Item
The export performance of electronics and IT industry was Rs. 615 billion in 2003-04. Exports have
increased not only in financial terms but also in terms of variety of items exported. To take
advantage of growing world trade, 100% Export Oriented Zones, Software Technology Parks and
Electronics Hardware Technology Parks have been set-up in the country.
Consumer
3.00 6.48 7.00 7.50 8.25
Electronics
Industrial
2.00 5.00 9.50 14.00 15.15
Electronics
Communication
& Broadcasting 0.50 5.50 1.50 5.00 1.65
Equipment
Strategic
0.10 - - - -
Electronics
*estimated
Source: Elcina, Directory of Indian Electronics Industry, 2005-06, p. 12
c) Growth Parameters
In the following drivers of growth in the Indian electronic segment and bottlenecks will be outlined.
Ports
- Frequent delays at ports
- Turnaround times average 72
hours compared to 16 hours in
Singapore and 20 hours in Bangkok
- Waiting times for ships to get a
berth at Indian ports can be three to five
days.
Smart workforce Competition from China
- More software graduates than in - China and Taiwan are strong
any other country (326,000 engineers in market leaders on electronics
2004, i. e. 200,000 more than in the manufacturing market
U.S.)
- World-class technology and - Need to provide OEMs (Original
management institutes such as the Equipment Manufacturer) with incentives
Indian Institute for Technology and the to shift manufacturing facilities from
Indian Institute of Management China and Taiwan to India
- Outsourcing destination for
software services of global companies
- Hardware companies (e.g. Texas
Instruments and Cisco Systems) have
established design units in India to
leverage Indian R&D and design
expertise
The top exporting companies for electronic components and consumer electronics in India are:
7 Tyco 14.12
8 Vishay Components 12.48
9 International Rectifier 12.03
10 EPCOS Ferrites 9.6
1 LG Electronics 34.81
Many of the EMS (Electronic manufacturing Services) companies, which are present on the Indian
market, supply Indian OEMS with telecommunications and consumer electronic equipment
designed for satisfying local demand. About 30% of the EMS business in India refers to consumer
electronics equipment, including televisions and set top boxes, while 27% concerns
telecommunications equipment. By 2009 those percentages will reverse. This means
telecommunications manufacturing will amount for 37% of the EMS market and 27% will be
consumer electronics equipment.
As a result of the soaring popularity of mobile communications and a rising number of Internet
users requiring a broadband connection, EMS revenue from telecommunications has grown
considerably. Mobile phone subscribers have increased from 1.9 million in March of 2000 to 53
million in March of this year for a compound annual growth rate of 38%. The number of broadband
subscribers has more than doubled from 80,000 in 2003 to 190,000 in 2004, according to an
iSuppli report.
Other major opportunities for India lie in contract electronics manufacturing, analog, RF and MEMS
(micro-electro mechanical system), foundries, semiconductor packaging and test industry and in
becoming the design services hub for the world.
Semiconductor Industry
As regards the production of semiconductors, analysts doubt whether the Indian market will attract
investors in the near future. "I can't imagine it, really," says Brian Matas, an analyst for
semiconductor researcher IC Insights. Since the production process for chips is mainly automated,
cheap labour is not a decisive criterion when establishing a manufacturing base as it is for the EMS
industry and OEMs.
"India is a hard sell from a chip-manufacturing point of view," states Len Jelinek, director and
principal analyst of semiconductor manufacturing for iSuppli. "First and foremost is the
infrastructure. It is not up to global standards, especially the power grid. They also don't have
adequate water facilitization," he claims.
Furthermore India only wants to have transferred new equipment into the country instead of used
equipment. "If that strategy doesn't change, a semiconductor company would have to bring in
leading-edge equipment and processes," says Jelinek. Few companies would be ready to do so.
Most would prefer to bring in older equipment and make more mature trailing-edge chips.
Yet, some semiconductor makers have design centers in India and this trend is most obvious to
continue. According to a recent study conducted by the market research firm iSuppli, India’s
semiconductor design industry is expected to nearly triple by 2010, as overseas and domestic
suppliers rush to establish or expand their chip development efforts in the country. The El
Segundo, California-based market research firm assumes that the semiconductor design industry
in India will amount to $624 million in 2005. It is expected to exceed $1.7 billion by 2010.
At present, iSuppli estimates that approximately 125 companies are designing semiconductors in
India. This incited major EDA (Electronic Design Automation) tools suppliers like Cadence Design
Systems, Synopsys and Mentor to expand their Indian business. Last year, giant multinationals like
Texas Instruments, Intel, Cypress, Infineon and STMicroelectronics accounted for 70% of the total
semiconductor design industry in India. Indian companies, including MosChip and eInfochips Inc.,
are also planning to expand their design operations quickly.
The growth of the semiconductor design industry and the growing market in India for consumer
electronics, wireless communications and automotive products provide attractive opportunities to
the global semiconductor industry. Though significant challenges remain.
One challenge is the supply/demand gap for qualified professionals, despite a strong education
network in the country. iSuppli estimates that the industry had a deficit of about 3060 professionals
in 2004. The main reasons for this gap include a lack of design-related courses, a shortage of
qualified faculty, a lack of adequate infrastructure and selective hiring by companies. Within the
next few years this gap will close slowly due to government initiatives, better collaboration between
industry and academia, higher participation of experienced professionals in training activities and
greater flexibility in companies’ recruitment policies.
The absence of domestic semiconductor manufacturing will worsen the imbalance between design
and manufacturing. As India faces increasingly intense competition in semiconductor design from
other low-cost destinations, such as Eastern Europe and South-East Asia, the Indian
semiconductor design industry will evolve rapidly to provide many multinational companies with a
competitive edge in select areas of semiconductor design.
In order to attract foreign and domestic investors, the Indian government is encouraging Electronic
Hardware Technology Parks (EHTP) to foster electronics manufacturing in the country.
The government has also reduced taxes. For the fiscal years 2005-2006, the effective corporate
income tax rate for domestic companies has been cut from 35% to 30%. In the fiscal year 1994-
1995 the tax rate for domestic companies had still been 40% and 55% for foreign companies.
Today companies incorporated in India, even with 100% foreign ownership, are considered
domestic companies under India's laws.
3) Company Profiles ( illustrative list)
Some of the key players of the electronics industry will be outlined in the following.
AT & S India produces multilayer printed circuit boards for midrange and large-scale series.
Continuous investments are developing the technological equipment and capacity is constantly
expanding.
The Nanjangud printed circuit boards are used predominantly in the areas of industrial and medical
technology, and in the automotive industry as well.
Bharat Electronics Ltd. (BEL) was founded in 1954 to satisfy the growing needs of the Indian
Defence Services for electronic systems. Since then it has progressed manufacturing state-of-the-
art products in the field of Defence Electronics like Communications including Encryption, Radars
and Strategic Components. Over the years, BEL has diversified to meet the needs of civilian
customers as well and has provided products and network solutions on turnkey basis to customers
in India and abroad. BEL disposes of manufacturing units in various Indian states, among others in
Pune, Bangalore, Hyderabad and Chennai.
JCT Electronics Limited is a flagship company of the Thapar Group, one of India's largest Industrial
Conglomerates. Founded in the 1920's, the Thapar Group with 54 companies and 84
manufacturing plants is growing at the rate of more than 15% each year and has a Group turnover
of more than US $2.0 billion.
JCT Electronics Limited (JCTEL) was the first Colour Picture Tube (CPT) manufacturer in India.
Formerly known as Punjab Display Devices Limited (PDDL), JCTEL was set-up as a wholly owned
subsidiary of Punjab State Industrial Development Corporation (PSIDC) in 1976, to manufacture
Black & White Picture Tubes, Cathode Ray Tubes, Gas filled Discharge Tubes and Fluorescent
Display Tubes at Mohali, Punjab, India.
PDDL was taken over in 1986 by JCT Ltd, a flagship Thapar Group Company, as a diversification
project to manufacture CPTs and therefore renamed as JCTEL. JCTEL thereafter set up a modern
plant to manufacture CPTs in technical collaboration with Hitachi, Japan, one of the pioneers in the
Display Devices. Initially the plant had a capacity of 0.6 Million CPTs, which is now rated at 1.0 Mil
per year.
In 1996, JCTEL went in for an expansion and set-up a new greenfield plant near Vadodara, in
Western India. Engineered in-house with Hitachi's assistance, to manufacture 1 Million (presently
1.8 Million) 14”, 20” and 21 “ CPTs per. Plans exist to introduce a 21" Pure Flat very shortly.
Samsung India
B-1, Sector 81
Phase II
Noida
India
Phone: +91 (11) 865 82 51 55
Fax:+91 (11) 865 82 56
www.samsungindia.com
Samsung’s state of the art highly automated manufacturing facilities are located at the Company’s
sprawling Noida Complex. Enjoying the Number 1 position amongst all Samsung subsidiaries in
terms of productivity and having been ranked as the subsidiary with the ‘Best Quality System’,
Samsung India prides itself for its Manufacturing Value Innovation.
The manufacturing capacities of the Samsung products manufactured in India (as of Year 2004)
are:
Samsung India is working with and contributing to the development of the domestic component
industry in the country. The Company is working with its partners to improve their product quality
and processes. Thus, Samsung vendors are sent to different Samsung subsidiaries to meet the
Samsung overseas vendors in order to benchmark their own processes.
Samsung is also training its vendors on eco-partnership so that the components manufactured by
them are ‘eco friendly’ as per ROHS norms.
Samsung products manufactured in India currently enjoy an average localization level of over 50%.
Tata Infotech
Established in 1977, Tata Infotech is one of India's leading IT companies specialising in the areas
of systems integration, hardware manufacturing and IT education. With a focus on global systems
integration, the company provides customers with innovative offerings that bring together
hardware, software, solutions and services, worldwide.
The company offers seamless on-site as well as offshore software services through its SEI CMM
Level 5 assessed delivery centres. Tata Infotech has executed over 5,000 projects worldwide for
clients across 50 countries.
Tata Infotech researches emerging technologies and builds skills, which provide innovative
solutions in information security, optimisation and analytic, RF Tools, wireless network optimisation
and audit, and WiFi for enterprises. The company's radical use of technologies has resulted in the
creation of intellectual property rights.
TVS-E offers a variety of computer peripherals. Its product range includes Printers, Power
Conditioning Systems (UPS) and Keyboards. All TVS-E products are manufactured at its state-of-
the-art plants in Tumkur in Karnataka and in Guindy in Tamil Nadu. Both facilities are QS 9000
certified. Following the TVS corporate philosophy to offer high quality products at reasonable
prices, all items are designed with utmost care and quality. In this way TVS-E has become the
largest manufacturer of computer peripherals in India.
TVS Electronics is one of India’s leading Contract Manufacturing Service providers. In keeping with
the TVS tradition of working with Global OEMs, TVS-E contract manufacture Box Assemblies as
well as PCB Assemblies for some of the best names in the business. TVS-E’s world class
assembly line offers Cellular Manufacturing, Flow line, U-Shaped Assembly Line, PC Based
Testing of Products, Skilled Operators, Statistical Process Control, Zero Defect Manufacturing,
Just-in-Time Deliveries. Its PCB assembly line provides SMD PTH, COB assemblies undertaken,
Auto Insertion for Leaded Components, Assembly of Current Products in Self-Contained ‘Cells” to
ensure efficient assembly processing. Upgradations worth US $.4 million in 2003
Tyco Electronics Corporation (India) Pvt. Ltd.
Within five years Tyco Electronics has become the world's largest passive component
manufacturer. Based on the interconnect technology leadership of AMP products, Tyco Electronics
has added a full complement of leading component brands -- including Raychem, Elcon, P&B,
M/A-COM, CII and many more - to offer customers an unparalleled portfolio of connectors, relays
and circuit breakers, active and passive fiberoptic components, wireless products, power
components, resistors and inductors, motors and myriad others across 25 product segments.
Videocon International
Videocon is a household brand for consumer electronics and home appliances in India. It is multi-
faceted Rs. 3500 crore group, with the state of-the-art manufacturing facilities all over India. This
company was incorporated in 1984 with the avowed purpose of producing world-class Color
Television through a technical tie-up with Toshiba Corporation of Japan. It has emerged as India’s
leading brand of both color and black & white TV. The range of consumer electronic products and
home appliances include Neuro-Fuzzy logic washing machines, user friendly no-frost refrigerators,
music systems, color televisions & VCRs. Apart from making products for Toshiba and Sansui for
their markets, Videocon is also setting-up manufacturing and marketing facilities in the Middle
East, Europe, Indonesia and South Africa.
4) Useful Websites
1. Deutsche Bank Research, “Indien im Aufwind: Ein mittelfristiger Ausblick”, 03 June 2005
5. Reed Business Information, Carbone, James, “India takes first steps in electronics”, 15
Sep. 2005
6. RF Design, Bindra Ashok, “IC design industry flourishes in India”, 10 Nov. 2005