Components account for nearly 50% of the product value, yet most are imported due to a lack of domestic manufacturing capabilities. Despite having exceptional design talent, much of it supports global companies or operates as design services, explains Sanjeev Keskar, Chief Executive Officer, Arvind Consultancy in dialogue with Rakesh Rao. 

India has made significant progress in electronics manufacturing. Five years ago, two-thirds of electronics products were imported as finished goods, while only one-third were manufactured domestically. In 2022-23, out of the $120 billion total electronics consumption, $80 billion was domestically manufactured, and $40 billion comprised finished goods imports, reversing the earlier trend. This growth is attributed to the PLI scheme. Mobile phones, which account for 45-50% of the total market, are now manufactured in India, thanks to the scheme's success.

India faces three key challenges. Local value addition is below 20%, with mobile phones, consumer electronics, and IT hardware relying heavily on CKD kits and limited to EMS activities, contributing only 10% value addition. This must improve to enhance local value recognition. Components account for nearly 50% of the product value, yet most are imported due to a lack of domestic manufacturing capabilities. Despite having exceptional design talent, much of it supports global companies or operates as design services. India must focus on creating IP, technology, chips, and products to capture higher value.                                                                                                                                                                                                                                                                                                                                                                 

Currently, out of the five approved semiconductor projects, only one is a wafer fab, while four are ATMP/OSAT projects, with no display fab project yet. The ISM should prioritise compound semiconductor fabs for areas like silicon photonics, discrete semiconductors, analog chips, and silicon carbide, coupled with a focused outreach program to attract these companies. The DLI scheme for Fabless semiconductor design requires significant improvement, as only 17 proposals have been approved against the goal of 100 companies in three years. Additionally, greater emphasis is needed on manufacturing passive components, connectors, and bare PCBs, which account for over 15% of any product's value.

India's strength lies in design, and with a robust EMS and OEM ecosystem now established, the focus should shift to two key objectives:

• Leverage India's competitive labour costs to increase electronics exports and capture a larger share of the global market.

• Encourage design services companies to evolve into Original Design Manufacturers (ODMs) by setting up their own manufacturing units or partnering with Indian EMS companies. This shift will enable India to create end-to-end value, moving beyond just design work for global projects.

Industry 4.0, AI / ML/ IOT / robotics will change the future of electronics industry. India has excellent start ups working in this domain but support available to these start-ups is limited and their success rate is low. To tap new opportunity, we need to have special support both financial and technical mentoring for these start-ups to make them successful and capture this product innovation from India.

My advice is:

• Link PLI schemes to local value addition beyond manufacturing.

• Expand focus to include passive component manufacturing alongside semiconductors.

• Support startups driving product innovation to capture IP and technology value, rather than just providing jobs through global companies.

• Prioritise fabless VLSI chip design for next-generation applications.