Hamish Patel, Chief Product Officer, World of Play, which makes Bluetooth headphones, neckbands, smartwatches, says that the electronics sector lacks a full-fledged component ecosystem, which results in higher import costs and increased lead time for the manufacturers.
This is “the biggest challenge and disadvantage for Indian electronics manufacturers”, says Sanjay Gupta, Vice-Chairman, India Electronics & Semiconductor Association (IESA). “A typical electronic manufacturing site needs thousands of components to be procured from around the world to make the end product. As many of the parts are imported, it results in heavy costs and time overrun.”
This is the primary reason the electronics manufacturing space in the country is not competitive enough, claim the stakeholders.
While Apple has been able to set up a phone manufacturing base in India and even exported $1 billion worth of handsets in December, industry players claim the situation is different for smaller players. The budget should take note of these issues and bring in the necessary policies to encourage manufacturing, they say.
Apart from the heavy dependence on imports, challenges such as limited infrastructure, high taxes and tariffs, inadequate logistics and supply chain management also add to the woes of the manufacturers, says Amit Khatri, co-founder, Noise. A combined effort from the ministries concerned, original equipment manufacturers and policymakers is needed to boost localisation of component manufacturing.
Patel of World of Play says that tax exemptions and schemes will boost the confidence of investors and entrepreneurs, leading to the creation of a component manufacturing ecosystem. “We expect the government to ensure better synchronisation between customs, tax and GST authorities. Apart from this, a reduction in duty on raw materials would also go a long way in boosting the confidence of local manufacturers and brands,” he says.Strategic planning is required to create an atmosphere for a centre of excellence-driven electronics manufacturing clusters. IESA’s Gupta says these clusters should target automotive, industrial, consumer networking and other miscellaneous consumer products, and then provide the peripheral components ecosystem right around those clusters so that the need for imports can be completely eliminated. “It will provide the Indian companies the right impetus for creating a competitive local market by having the right product at the just the right time, both from a cost perspective as well as from a logistics perspective. It will be a perfect recipe for making India a global giant in electronic manufacturing,” he says.
Electronics manufacturing will play an extremely vital role in India’s goal to become a $10-trillion economy.
Gupta says it is the only way to make the dream of an “atmanirbhar Bharat” or a self-reliant India come true. Through the budget, the government should give extremely competitive rates for electricity, land, water and taxes to attract more and more entrepreneurs. “This will create a self-sufficient ecosystem for different areas of electronic manufacturing,” says the IESA office-bearer.
He suggests the government replicate this system in different states so that it is uniformly distributed in special manufacturing or export processing zones.
There is also a need to develop the right talent. The industry, academia and government should collaborate to attract and train talents from the farthest corners of the country.
Semiconductor manufacturing needs more specific focus, says Gupta. The focus now is only on creating the supply side through heavy subsidies; demand creation is also required. “This is only possible if we have more and more Indian companies focusing on ‘make in India, make electronics for the world’ in huge volumes so that they can create local demand for semiconductors. This is a very natural evolution for any country to first start with electronic manufacturing and create indigenous companies that are global in nature. And these companies will finally drive the local electronic chips consumption,” he says.
