Page 32 - CII Artha Magazine 1

the sector has gone up from Rs.
Expert Speak
B. Deepening the supported CAS (conditional
Component Value Chain access system) for set top
across the entire boxes.
ecosystem
Similarly, a global innovation
The domestic electronics challenge for designing of
industry is characterised by
lack of a component for educational tablets for the
ecosystem which leads to its
MANUFACTURING
dependence on imports. High
dependency on imported Besides, the next focus should
inputs raises cost and impedes
competitiveness. A right mix
of policy realignment coupled
with new targets is required.
know-how available with past. There were a large
Ministry of Finance,
number of SMEs in
The government has, no doubt
announced the PLI scheme for
components. However, the 5-6
per cent incentive on outsourced R&D needs to be
incremental sales, envisaged
unicorn boom. The
under the scheme, is not In-house R&D, Technology
enough to achieve scale in this
growth. The government
companies. We have become
example, we have VLSI design
here. We are trying to push
sector and accordingly would
the pricing offered by China.
Manufacturing Clusters (EMC
discourage manufacturers patents and a Guarantee Fund
from indigenizing production.
Hence, the government should
review the scheme by capital. digital shop of the world,
thanks to its software
semi-conductor shortage.
electronics manufacturing) by
expanding the incentive from
the present 5-6 per cent and
(CSCs) in villages is helping in
invest in design in India.
import bill is second only to
labour reforms, power sector
widen the eligibility criteria. A
be available in India, though
government push, we are still
revamped PLI would facilitate
scale economies from should also look at other
domestic production and also
encourage SMEs to strengthen
services sourcing business in
providing an enabling
semiconductors.
the supply chain and reduce
our dependence on imports. exports, incentivizing
needed to proceed.
billion) in 2020-21 (a slight
manufacture of products not
and discovery, like EVs and
country. And when we define
C. Encouraging Design-led currently produced in India,
Manufacturing facilitating EoDB, among
others. Google first launched its
For ensuring that the industry
Pay in India—before taking it
serious cyber-attacks of
remains competitive (by To conclude, a robust policy
facilitating domestic IP environment would help the
that can be used for skilling
creation), even after the PLI &
semi-conductors, we need to
it is Apple or Samsung, or
other benefits expire, a push
to R&D is most essential. For
this, the government should
explore innovative solutions
act fast to develop Indigenous
for the sector such as a model
based on the Government led
domestic manufacturers
31 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2021
semiconductors and chip sets
GET INTO
masses could be encouraged. SEMI-CONDUCTOR
TO OVERCOME IT
SHORTAGE
be on maximizing domestic trends, seizing the
value addition and promoting
Design in India, besides Make
which is technologically competent to deliver on the third-generation reforms.
in India. For this, the learn from mistakes of the
with assembly, testing,
Government owned R&D electronics before the
laboratories should be made Information Technology
freely accessible to industry,
pandemic, India generated
incentivized on the lines of
unprecedented performance
Acquisition Fund be created
for liberal assistance in filing
talent for new tech and an
be created to help R&D entrepreneurial mindset.
houses to raise working India’s contribution as the
engineering talent, is well 2025-26 (from about US$70
D. Other Suggestions known. We have been the
leading IT sourcing opportune moment when
Similarly, the government destination across the world,
accounting for 55 per cent
options such as leveraging market share of the
upcoming FTAs (UK & the US$200-250 billion global
EU) towards enhancing 2019-20.
in India
Global captive centres in India
are transforming into test
beds for global innovations.
conclusion that the
devices, wireless ear buds,
payment product—Google neckbands, speakers, pocket
to the world. Global MNCs
such as Oppo, OnePlus,
country to realise the huge
opportunity awaiting India to
emerge as a global hub for India in recent years. Parag
electronics and meet the Agrawal, CEO of Twitter, now
targets envisioned in the NPE
2019. components from those
countries. here. For now, the country’s
Dr Rakesh Mohan
INDIA NEEDS TO Member (Part-Time) Economic Advisory
Council to the Prime Minister of India and
President & Distinguished Fellow,
Centre for Social and Economic Progress
There is a need for a third-generation reforms aimed at leapfrogging its growth trajectory
opportunity of Designing in Dr Krishnamurthy to the next level of around 8-9 per cent which would ensure a doubling of per capita
India and Making in India, and journey in the semiconductor Subramanian income in coming decades. There is also a need for a regulatory standards-setting authority
sector is more likely to start
Chief Economic Advisor,
marking, and packaging Government of India
(ATMP) and specialty fabs.
n the middle of the global origin tech captains steering Agreement (ITA) of WTO
global tech companies. National Policy on Electronics
considerable interest with its So, we have the ability, and (2019), Production Linked
government policies too are Incentive (PLI) Scheme for
has been a showcase of sorts moving us towards the electronics sector, the
for its appetite for adventure, atmanirbharta (self-reliance). SPECS Scheme, Electronics
Since electronics is a meta 2.0) Scheme, and several
resource for all verticals, the other interventions designed
government’s aim to hit to promote indigenous onto the mainstage. tool design. So people are
US$250 billion (domestic manufacturing. being trained in all these scale which will make
When we start designing in areas. AR/VR across four lakh
CII and Chairman &
billion in 2021) comes at an It’s also a fact that despite our
huge talent advantage and depth, more components will
there is fresh zeal to get out lagging on the depth of
of the Covid storm. manufacturing through design Some components like
and domestic value addition. passives etc are already
The government is keen on When we talk of new and
environment, with the Make emerging technologies, we start making in India, we will
talk of a new era in mobility, be defining the components We need to think locally.
program, communications, connectivity which would be used in the Designing for India means
drones, space tech, backhaul the components we need, we
in telecom, interesting will create a market for our Indian conditions. So, we need
global footprint.
structure and funding,
future semiconductor plants. to design products that are In the past, Indian design did
repairable locally. What has so not work because of the
projectors, digital and far happened is that a lot of
immersive tech, metaverse manufacturing has come from
Mondelez, Intel etc have and education, and so on. global companies. So, whether
opened new R&D centres in Chinese companies, they are VALUE ADDED think locally. India may have to
So, the US$250 billion aim all designing in China or
must embrace these South Korea or the US, and
joins the growing list of Indian new mega therefore they buy INDIA’S ELECTRONIC
IMPORTS Samsung are manufactured electronics products.
ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 32
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2021
also evident from the annual
depends entirely on imports
1,90,366 crore (US$27.20
import bill which has
for its semiconductor needs.
escalated from Rs. 2,29,615
Already, electronics attracts
billion) in 2014-15 to about Rs.
5,33,550 crore (US$76.0
the second highest import
crore 2014-15 to Rs. 3,85,081
crore in 2019-20 marking a
bill and semiconductors
billion) in 2019-20, exhibiting an
account for a significant
impressive CAGR of 23 per
CAGR of 10.89 per cent.
portion.
cent.
What is notable is that India has
There is need to incentivize
emerged as a leading
production of the high-tech
sectors such as
manufacturer of mobile phones
in recent years. In FY20, mobile
semiconductors in the
phone manufacturing
country. As per CII study, the
development of these
accounted for 41 per cent of
industries entails huge
total production of the sector,
investments and hence need
In view of its pivotal role in
followed by industrial
significant Government
realising the US$5 trillion
electronics (18 per cent),
support, both monetary (may
economy dream in near
consumer electronics (16 per
account for more than half of
future, the government has
cent), electronic components
(15 per cent), strategic
identified electronics
the total project’s cost) and
electronics (6 per cent) and
manufacture as a thrust
non-monetary (including
growth of the sector. Some
again a logical step to augment
Components and
computer hardware (4 per
sector in policy formulation
semiconductor-grade
the electronics manufacturing
of the challenges include
Semiconductors (SPECS) and
cent).
to boost electronics
infrastructure requirements,
capabilities in the country
infrastructure deficiency
Modified Electronics
manufacturing in India, reduce
land and preferential market
Manufacturing Clusters
while the Modified Electronics
such as shortage of
import dependence and
Similarly, major strides have
access); as has been the case
Manufacturing Clusters
high-quality power, deficien-
Scheme (EMC 2.0). A fourth
been made towards
increase exports.
in countries which are global
cies in transportation/logis-
Scheme (EMC 2.0) is specially
scheme, namely the
increasing exports of
leaders like Taiwan, South
tailored to provide the
Production Linked Incentive
tics, high cost of finance,
electronics items. As per
Korea, Israel and China.
The National Policy on
inadequacy of domestic
requisite infrastructure to
Scheme (PLI) for IT Hardware
DGCI&S data, India’s exports
Electronics (NPE) 2019 seeks
supply chain, complex
was notified in March 2021.
promote the establishment of
computer hardware and
In this context, the recent
have grown from Rs. 38,263
to change the electronics
greenfield and brownfield
regulatory system, limited
strategic electronics
crore in 2014-15 to Rs.
landscape of the country by
incentive package worth
R&D, among others. In
electronic manufacturing units
The production linked
(aerospace and defence). Of
he electronics industry,
82,929 crore in 2019-20,
positioning India as a global
Rs.76,000 crore announced
addition, the absence of an
within the cluster to promote
incentive (PLI) scheme for
these, three segments namely
considered to be the
notching an impressive CAGR
hub for domestic
by the government for the
innovation and steer growth in
large scale electronics
adequate manufacturing base
communication and broadcast
bedrock of every other
development of
of 16.73 per cent. Indian
manufacturing and export in
manufacturing, mobile phone
the sector.
for different components viz,
equipment, industrial
manufacturing activity in the
semiconductors and display
exporters are also gradually
the entire value-chain of
manufacturing and specified
semiconductors, passive and
electronics and consumer
country, has the potential to
getting integrated in the
Electronics System Design
manufacturing ecosystem, is
electronic components as well
The wide array of calibrated
electromechanical compo-
electronics comprise around
hasten our quest of emerging
global value chain.
and Manufacturing (ESDM).
laudable. The scheme , which
and well-crafted measures
nents etc is a deterrent to
as the PLI for IT hardware,
75 per cent of the overall
as a hub of global
would cover companies
The aim is to achieve a
medical devices including
introduced by the government
investors as it increases the
share of the market for
manufacturing, technology
turnover of US$300 billion by
Besides, the sector is showing
engaged in silicon
dependence on imports.
electronics has been described
together with growing
electronics industry.
and innovation. A flourishing
remarkable growth in
2025-26. It estimates that
semiconductor fabs, display
demand, rising disposable
as a game changing initiative
electronics industry, through
about 10 million jobs will be
fabs, compound
demand. In fact, demand for
for promoting local
Some of the constraints and
incomes, the digital India vision,
its ability to create value and
created from the
electronics hardware in India
semiconductors, silicon
the remedial measures to
among others would
electronics manufacturing in
jobs, can also contribute
is anticipated to perk up from
implementation of NPE.
photonics, sensors fabs,
encourage domestic players to
help the industry are
the country. The scheme is
significantly to bringing
semiconductor packaging
US$127 billion in 2019 to
make forays into the sector.
also expected to attract global
elucidated below.
dynamism to our
reach US$300 billion by
Similarly, in consonance with
and semiconductor design,
investments, facilitate
development journey. What is
the credo of Make in India,
would not only help to
2025-26. This surge in demand
A. Encouraging High Value,
investments in innovation,
Despite the above, the
also significant is that its
is huge which brings a big
Digital India and Atmanirbhar
address the global shortage
electronics industry is beset
technological upgradation and
High volume
applications are being
Bharat Abhiyan, and to realise
opportunity for the industry.
of semiconductors but
with numerous disabilities
Manufacturing such as
research and make India an
increasingly utilized by almost
would also go a long way
the vision of the National
However, unless there is a
integral part of the global
Semiconductors
Responding to the impetus
all segments of the economy.
huge ramp up in domestic
toward making India an
Policy on Electronics 2019,
supply chain.
provided by the government’s
electronics hub.
the government launched
capacity, it is likely that the
The country does not have
‘Make in India’, Atmanirbhar
The electronics industry is
three major incentive
incremental demand would be
enough presence in the
The Scheme for Promotion of
Bharat, Digital India and Smart
classified into six broad
Further, MeitY’s recent EOI
met through a rise in imports.
schemes in 2020 to support
indigenous manufacturing of
Manufacturing of Electronics
City initiatives, the electronics
segments viz. communication
local manufacturing. These
It also needs to be noted that
for inviting companies to set
Components and
high value components such
industry has made noteworthy
and broadcast equipment
include the Production Linked
the country specializes in low
up semiconductor and display
as semiconductors which are
Semiconductors (SPECS),
progress in terms of production
(including mobile phones),
fabs is a welcome step and
Incentive Scheme (PLI),
tech content and most
extensively used by the
which targets the
and growth in the last five years.
consumer electronics,
should be pursued further.
Scheme for Promotion of
high-tech components are
electronics industry. For
development of the
This is borne out from the fact
industrial electronics,
Introduction electronic components, that the value of production in presently imported. This is Manufacturing of Electronic components’ ecosystem, is which restrict the potential example, the country
We should stick to the large There is an impelling need to
came into effect resulting in volumes and produce improve the competitiveness of
the closure of many SMEs. something that is very huge. the manufacturing sector
With zero duty kicking in, We are skilling rapidly to There is no longer any need distribution of Chinese And today, the shortage is in which in turn would help in job
many local brands got killed, achieve self-reliance. For to just assemble products phones is done by Chinese the in the lower end, the creation and promote inclusive
as they couldn't compete with courses, courses for SMT into a higher gear with a sort of a colony of the higher end like 7 nm process recognizes that the high cost of
So, a lot of work needs to be (surface mount technology) manufacturing, getting into a Chinese in that matter. Now is difficult and extremely doing business – such as
done to bring SMEs back manufacturing, courses for deeper level of manufacturing. the opportunity has come for expensive to put up too. logistics, power, credit, etc - has
PLI has helped to get the a lot of companies, like Lava Geo-politics may have had a impacted manufacturing Mr Uday Kotak Mr Sanjiv Bajaj Mr Ajay S Shriram
and Micromax, to come back, hand in the present competitiveness and has Immediate Past President-Designate,
production economically because they are also getting Trump banned the export of likewise taken remedial President, CII and CII and Chairman & Past President,
India, we will see more of common services centres viable. Our electronics goods PLI benefits. But they must hardware and software for measures, by undertaking Managing Director & Managing Director, Senior Managing
education as well. Recently, the country’s oil import bill. semiconductor manufacturing. reforms, MSME policy etc CEO Kotak Mahindra Bajaj Finserv Limited Director,
some may still be imported. Foxconn set up an R&D According to the Meity and We need to get extensively Europe has taken a which would reduce operating Bank Limited DCM Shriram Limited
centre in Chennai, in IIT Invest India data figures, into making chips. The semiconductor chip decision. costs and encourage industry Very often I have been Capabilities and access India has a unique
Madras, and the company is import of electronics was reigning mega technologies AI The next wars are going to to build scale. asked what is the new to finance, research & opportunity to
available for use. When we planning to design products in recorded at Rs 3,85,081 crore and ML are be fought with world gonna be? I define development and position itself in the
India. (US$54.4 billion) in 2019-20, compute-intensive, and it as a world that is never manufacturing, are overarching dynamics
and Rs 3,99,374 crore (US$54 massive amounts of data are Moreover, design and normal, next normal, and spread across the of the world and
decrease in US$ terms albeit Specialised chips can do that manufacture in India helps to new normal. Choose any globe. Therefore, a become one of the key
that we need to look at an increase in Rupee terms). more efficiently, especially in ward off threat from sources of these Ns and maybe globally coordinated nodes of global value
areas like face and voice such as backdoor spyware we can come to the program, with a chains and enhance its
recognition--and all that is sitting inside electronic world normal itself does is required to prepare
central to the new economies hardware. These can result in not fit in. for future pandemics.
sheer pricing pressure from we build now. enormous implications, which
Chinese products. Even the impacts our government
From the point of view of offices, banks, our defence
set-ups, power and space.
MANUFACTURING KEY wait a while before bleeding Hardware leaks can be more
TO CUTTING DOWN edge chips from companies dangerous than software. We
such as Intel, TSMC, and need to fortify ourselves and