India needs to manufacture electronic components and not just assemble them: CII

High production cost, lack of domestic players, lack of domestic design, & lack of materials keep India an assembler instead of a manufacturer of electronics.

India needs to take actions to transform its electronics sector from 'import dependent, assembly led manufacturing' to 'component level value-added manufacturing', highlights a report by the Confederation of Indian Industry (CII), ANI wrote.

Representational (Shutterstock)

The background

In 2023, the demand for components and sub-assemblies stood at $45.5 billion ( ₹3.8 lakh crore) to support $102 billion ( ₹8.52 lakh crore) worth of electronics production, as per the report.

This demand is expected to scale to $240 billion ( ₹20.05 lakh crore) to support the $500 billion ( ₹41.78 lakh crore) worth of electronics production by 2030, according to the report.

The priority components and sub-assemblies, including PCBAs (Printed Circuit Board Assembly), are projected to grow at a CAGR (Compounded Annual Growth Rate) of 30%, reaching $139 billion ( ₹11.61 lakh crore) by 2030, the report read.

What are some examples?

The report identifies 5 priority components including sub-assemblies of batteries (lithium-ion), camera modules, mechanicals, displays, and PCBs which are categorized as high priority for India.

They cumulatively accounted for 43% of the components demand in 2022 and are expected to grow to $51.6 billion ( ₹4.31 lakh crore) by 2030, the article read.

These components have either nominal production in India or are heavily import-dependent. India can hardly afford to sustain this trend of importing the priority components, according to ANI.

Similarly, PCBA (Printed circuit board assembly) is a high potential category for India since most of the demand is met by imports. This segment is expected to grow by 30%, leading to a demand creation of around $87.46 billion ( ₹7.3 lakh crore) by 2030.

What's holding India back?

Manufacturing cost-related disadvantages, compared to competing economies like China, Vietnam, and Mexico, lack of big domestic manufacturing corporations, lack of domestic design ecosystem for Indian companies, and lack of raw materials ecosystem add to the challenges that disable the domestic manufacturing of components and sub-assemblies in India, according to the ANI article.

What can policy do?

According to the report, policy-related support will help in various economic benefits from the development of the components and sub-assemblies ecosystem in India.

The report recommended the government to take actions including a scheme to provide fiscal support, SPECS 2.0 (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors) to be introduced, import tariffs on components like camera modules to be rationalized, and to sign FTAs with European and African countries, ANI wrote.

Approximately 2.8 lakh jobs can be created by 2026, domestic value addition will increase from the current levels, import dependency will be reduced, and GDP will increase, all to firmly position India as a global hub for electronics manufacturing, according to the report.