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SWOT analysis of Indian electronics industry

Growing annually around 10 percent, the Indian electronics industry is projected to touch $94 billion over the next three years, quoting a report by global consultancy firm Frost & Sullivan.

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Saturday, 25 May 2013: The Indian electronic system design and manufacturing (ESDM) and semiconductor industry is on a growth trajectory of 9.9 percent CAGR (cumulative average growth rate) to register a turnover of $94 billion (Rs.5,061 billion/Rs.5.1 trillion) in 2015 from $65 billion in 2011. Of the total, product segment will account for $79 billion and services $ $15 billion in 2015 as against $56 billion and $9 billion in 2011.

Driven by growing consumer demand, increasing disposable incomes and higher aspirations, the industry is bracing up to leverage on world class talent and favourable policies for innovative product development and value added manufacturing in a tough global environment.

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Like India, the larger Japanese companies appear to have responded positively to the new policy, legislative, and business framework. Unlike India, there has been substantial investment in clean technology and in developing infrastructure for recycling home appliances and office equipment.

The initiatives by the top Japanese Original Equipment Manufacturers (OEMs) like Toshiba, Sony, Matsushita, NEC and others towards greening supply chain by working closely with vendors, are an important lesson for Indian industry. The move by Japanese companies to place greater focus on green product development with highly challenging goals for the next 5–10 years offers useful lessons for Indian companies.

India companies should adopt the Japanese system of broader product-related environmental information systems incorporating data on materials, chemical, energy.

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Within the electronics industry, only the electronic components and personal computer segments have posted strong growth. Electronic goods manufacturers in India have found it difficult to compete with imported goods, due to high interest rates and a strengthening rupee. Indian goods are usually priced higher due to increasing cost of credit, power, transportation, labor, and other taxes levied at the state levels. The Indian Government’s Free Trade Agreements with ASEAN countries, such as Thailand, caused another upsurge in the import of cheaper electronics. In addition to the regulatory burden and taxation problems that the electronics industry is facing, there are a host of other issues – lack of an efficient infrastructure, slow clearance of goods at customs, bottlenecks at ports of call, and cumbersome procedures – that stifle industry growth. The Indian Government has recognized the need to focus investments in IT hardware industry to enable it to support the growth of the software industry. The Ministry of IT projects a Rs.6.4 trillion demand for hardware equipment and an additional Rs.2.4 trillion for components by 2008. This hardware base is seen as necessary to support the software sector, which is projected to reach a size of Rs.3.5 trillion (including software products, e-business, IT services and IT-enabled services). Sustainable long-term growth will critically depend on large-scale investment in hardware manufacturing and establishing strong linkages with the domestic ancillary industry. 

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