ESDM Industry in India
India is one of the largest growing electronics market in the world with a CAGR (Compound Annual Growth Rate) of around 66.1%. In 2015, this industry has a market size of USD31.6 billion and is expected to grow to USD 400 billion by 2020. In India, the electronics market is divided into 6 segments viz. Consumer electronics, Industrial Electronics, Computers, Communication and broadcasting equipment, Strategic electronics and Electronic components; as shown in below graphics:
Prior to 1980s, the market of electronics in India was very small confined to some transistors, black and white TVs, Calculators etc. The advent of colour TVs, computers and digital telephone exchanges in 1980s; the liberalization, WTO agreements that led to sharp decline in custom tariff on IT products; increased foreign investment, increasing demand and penetration of high end electronic products and government policies led the industry to grow by leaps and bounds. Two sub-sectors viz. IT-ITES (Information Technology – Information Technology Enabled Services) and ESDM (Electronics Systems Design and Manufacturing) have driven growth of the Indian economy in terms of employment, revenue generation, foreign exchange earnings, standards of living etc.
Government Policy Framework
The National Policy on Electronics (NPE) 2012 was approved in 2012 with the vision to create a globally competitive Electronics Design and Manufacturing (ESDM) industry, which can foster the manufacturing of indigenously designed and manufactured chips.
ESDM is of strategic importance, not only in internal security and defence but also in the pervasive deployment of electronics in civilian domains such as telecom, power, railways, civil aviation, etc.
This policy included the below policy objectives and initiatives:
- Set up two semiconductor wafer fabrication units in the country. This would give boost to large scale manufacturing of electronics in the country, including that of mobile phones. This would help to achieve global leadership in Very Large Scale Integration (VLSI), chip design and other frontier technical areas and to achieve a turnover of USD 55 billion by 2020.
- The policy outlined that domestically manufactured electronic products will be given preference in the Government procurement and share of domestic procurement would be raised from 20-25% to 60%.
- Other policy measures included:
- To build up strong supply chain of raw materials, parts and electronic components;
- to boost R&D in ESDM sector;
- develop standards and certification systems
- develop long term partnership between India’s ESDM and strategic and core infrastructure sectors – Defence, Atomic Energy, Space, Railways, Power, Telecommunications, etc.
- To expedite adoption of best practices in e-waste management.
Electronics Manufacturing Clusters Scheme
This scheme was notified in 2012 to provide support to both Greenfield and Brownfield Electronics Manufacturing Clusters (EMCs) to aid growth of ESDM sector. The idea was to make components available locally; which were hitherto imported from China and Taiwan. Under this scheme, government provides 50% project cost (max Rs. 50 Crore) for Greenfield projects while 75% (max Rs. 50 Crore) for brownfield projects.
Modified Special Incentive Package Scheme
Modified Special Incentive Proposal Scheme (M-SIPS) was launched to encourage the ESDM units by providing them 20% subsidy for investments in capital (plant & machinery) expenditure within SEZs and 25% in non-SEZs. The basic objective of the scheme to attract investment into the ESDM sector. The government proposed to provide Rs. 10,000 Crore support under this scheme in 12th five year plan period.
Current Status of M-SIPs
This scheme has been successful and has attracted investments worth over Rs. 1 Lakh crore in the ESDM sector. The NDA government has given special thrust to ESDM sector under “Make in India” programme.
Electronics Development Fund (EDF)
The Electronics Development Fund (EDF) was proposed in the National Policy on Electronics-2012 as a fund to promote innovation, Indian IP, R&D, product development, commercialization of products, etc. So far, this fund has not been operationlized.
Current Status of semiconductor wafer fabrication units
The NDA government is pushing for local manufacturing of chips and electronics, given the high level of imports. The previous UPA government had pushed for two semiconductor wafer fabrication units led by Jaiprakash Associates and HSMC Technologies India.
The consortium led by Jaiprakash Associates included American giant IBM and Tower Semiconductor of Israel and was supposed to come up at Yamuna Expressway in Uttar Pradesh at a cost of over Rs 34,000 crore. Another consortium led by HSMC Technologies included ST Microelectronics and Silterra Malaysia for the Rs 29,000 crore project, which was to come up in Gujarat.
However, both of these have hit a roadblock. These two projects collectively involved an investment of Rs 63,000 crore. The government says that these two consortia have not fulfilled satisfactory conditions and their proposals are still under consideration.