Indian ESDM market trends(2011-2015)

The ESDM industry in India has continued to grow in recent years. The industry may not have achieved the exponential growth forecast by experts, its performance in the last few years can be termed an achievement in view of the overall slowdown of the Indian economy. The ESDM industry is expected to grow at a Compound Annual Growth Rate (CAGR) of 9.9 percent between 2011 and 2015 resulting in an industry size of $94.2 billion by 2015.

The growth of the product markets is one of the key drivers where mobile devices, consumer electronics and IT/OA products continue to script some of the high growth rates globally. Financial inclusion programs and rising standards of living have generated demand for new products besides increasing customer-base of existing ones. India is also recognized globally as a key source of high technology skills which are leveraged by global corporations for generating value.

Key Highlights

  • Indian ESDM Industry on growth trajectory of 9.9% CAGR from $64.6 Billion in 2011 to $ 94.2 Billion in 2015
  • 65% of electronic products’ demand met by imports. Imports likely to grow from $28 billion in 2011 to $42 billion in 2015 in the absence of intervention.
  • High value -added manufacturing to decline to 6.7% in 2015.
  • Cumulative opportunity loss of $200 billion during 2011-2015.
  • Total semiconductor market $6.03 Billion in 2011 and growing to $9.66 Billion by 2015.
  • Although local demand and sourcing grows from $2.9 Billion in 2011 to $3.6 Billion in 2015 due to heavy reliance on imported electronics products.
  • Achieving 50% Total Domestic Manufacturing by 2015 will create additional direct employment of 2 Lakhs

The ESDM industry in India comprises of the following four key segments:

1. Electronic Products
2. Electronic Components
3. Semiconductor Design Services
4. Electronics Manufacturing Services (EMS)

Electronic Products

This market is expected to grow from $52.4 billion in 2011 to $74.6 billion in 2015 that includes exports of $10.5 billion in 2011 decreasing to $9.7 billion in 2015. Declining prices and increasing affordability are anticipated to propel domestic demand.The total market is expected to grow from $41.91 billion to $64.85 billion in 2015. Total domestic manufacturing contributes only 35% of this demand and the remaining 65% is met through imported products. The anticipated decline on the share of high value added manufacturing to 6.6% of total market is a matter of serious concern. Timely policy intervention and incentives must be implemented urgently to increase the scope for local value addition.

Electronic Components Including Semiconductors

The electronic components industry comprise of semiconductors and passive components. As most electronic products are
enabled by semiconductor components, it is important to analyse the overall consumption of semiconductors, which is expected to grow from $6.1 billion in 2011 to $9.66 billion in 2015. Although, local demand and sourcing of semiconductors is limited to $ 2.94 billion in 2011 and increasing to $ 3.69 billion in 2015 due to import of electronic products and low domestic manufacturing. Since currently there is no semiconductor manufacturing in country, the entire consumption is met through imports.

Semiconductor Design

Semiconductor design has traditionally been the strength for Indian ESDM industry generating revenues of $8.8 billion in 2011. There are more than 120 companies in India focused on semiconductor design for global products. This industry has witnessed a robust growth of 17.3 percent since 2009 and today boasts of a 5.1 percent share of the global pie. Considering the continued growth momentum, the Indian semiconductor design market is expected to grow to $14.5 billion in 2015. The chart below gives break down and growth trend of Semiconductor Design which is expected to grow at healthy rate in coming years.

Electronic Manufacturing Services

Manufacturing policies such as the Electronics Manufacturing Clusters policy are deemed favorable to the prospects of the EMS industry in India. The burgeoning market for local consumer electronics and select telecom products is also attracting investors into the segment. Emerging segments like medical and aerospace/defense are also expected to the leverage the existing capabilities of the EMS industry.

The EMS industry services contribution is expected to grow at a CAGR of 27.8 percent from $ 0.4 billion to $ 1 billion in 2015. The overall turnover in the EMS industry is estimated to be $ 3 billion in 2011. Both the conventional and emerging industry segments are anticipated to maximize the benefits from this industry.

Strategic Recommendations:

It is very encouraging to see increased focus on the ESDM sector in last couple of years and a significant amount of work was done to bring out National Electronics Policy and National Telecom Policy by the government in consultation with industry. Some of the initiatives outlined in these policies are already in process of implementation such as Preferential Market Access (PMS), Electronics Manufacturing Clusters (EMC) and Modified SIPS. To strengthen current initiatives going further the following strategic recommendation are suggested for immediate action:

• Goal to achieve 50% of demand for high impact products met by local high value added manufacturing,
from current 9%.

• Expediting implementation of National Electronics Mission to facilitate co-ordination of National Electronics
Policy implementation.

• Declaration of Electronics as a ‘Priority Sector’ and Provision of deemed export status to domestic products as
they are substituting imports.

• Address >20% disability cost in developing domestic ESDM products through normalizing duty structure and
cost of working capital.

• Expedite EDF setup with initial focus on fabless and ESDM start up’s. Encourage participation of GOI in focused
funds to develop eco-system.

• Mandate preference to domestically manufactured electronic goods in all Central, State Government and public
sector units (PSU’s) procurements with immediate effect.

• Establishment of 10 ESDM innovation centers across the country where electronic product ideas can be taken to
prototype and end product.

• India specific standards for the key products catering to domestic need.

You can read the executive summary of the original report by Frost & Sullivan from which this article was derived here.

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