India's electronics sector needs investment in component manufacturing to drive growth: Motilal Oswal Report

New Delhi [India], August 20 : India's electronic manufacturing sector requires significant investment in the component ecosystem to ensure overall industry growth, according to a report by Motilal Oswal, a financial services company.
The report pointed out that while India has established a strong presence in assemblers and Original Equipment Manufacturers (OEMs) within the electronics value chain, the country remains heavily dependent on imported components.
"Currently, the country has significant presence and capabilities of assemblers and OEMs in the electronics value chain but is heavily reliant on imports for components and design capabilities across all sectors. Progress on component manufacturing is being initiated by a few companies, which will evolve more in the coming years," the report stated.
The report also emphasized that India is lagging in component manufacturing, urging the government to introduce more initiatives to stimulate this area of the industry.
"Component manufacturing has not shown the same growth as it requires an upfront initial capex and has lower asset turnover ratios with a gestation period of 1-2 years from investment to production. Hence, the industry is seeking more initiatives from the government to boost component manufacturing in India," the report added.
Niti Aayog, India's policy think tank, has also recommended several measures to enhance component manufacturing and improve India's positioning in the global electronics manufacturing landscape. These recommendations include fiscal incentives for component manufacturing, incentives for investing in R&D, tariff simplification, soft infrastructure initiatives, technology transfer enablement, and the establishment of industrial infrastructure zones.
India has made significant strides in establishing a manufacturing presence in sectors like mobile phones and consumer electronics. The report added that the next key objective for the country is to boost value addition within these industries.
It stated that various government initiatives, including the Production Linked Incentive (PLI) schemes and the Semicon India program, have been pivotal in promoting electronic manufacturing in India and these measures are expected to propel the domestic Electronics Manufacturing Services (EMS) industry to grow from Rs 1.46 trillion in FY22 to Rs 6 trillion by FY27.
"Backed by these measures, the domestic EMS industry is likely to grow to Rs 6.0t in FY27 from Rs 1.46t in FY22" the report said.
The report also noted that the government has reopened the PLI Scheme for White Goods, aiming to attract further investments. However, it emphasized that these efforts alone are insufficient.
"To further enhance localization and value addition in India, additional initiatives will be necessary to stimulate component manufacturing, an area where the government is already engaged in developing various schemes," the report stated.
Looking ahead, experts project that India's electronic manufacturing capacity could reach USD 500 billion by FY2030, with USD 350 billion from finished goods and USD 150 billion from components. This growth will require significant investments in enhancing the component ecosystem as well.