How India can attract big electronic manufacturing units moving out of China

By: | Published: October 10, 2018 12:45 AM

It is estimated by 2030, China’s private consumer market will reach $9.6 trillion and account for 47% of its GDP, up from $4.4 trillion and 39% of GDP today.

According to a report by Consumer Electronics and Appliances Manufacturers Association (CEAMA) and Frost & Sullivan, the consumer electronics industry in India is projected to grow at a CAGR of 9.5% from 2015 till 2021. (Reuters)

The global electronics industry is pegged at approximately $2 trillion. At present, China accounts for nearly 80% of the world’s total electronics production. It is estimated by 2030, China’s private consumer market will reach $9.6 trillion and account for 47% of its GDP, up from $4.4 trillion and 39% of GDP today.

As the Chinese economy grew impressively over the last 26 years, so did its manpower cost which was its biggest advantage at one point of time. Moreover, China is witnessing a shift of its workforce from factory environments to the services sector. Over the years, electricity cost in China has become 57% more expensive than India and natural gas 138% more expensive than India. Therefore, it seems likely that a big part of the electronics manufacturing in China will move out to countries, such as India, that are relatively more conducive to manufacturing now.

According to a report by Consumer Electronics and Appliances Manufacturers Association (CEAMA) and Frost & Sullivan, the consumer electronics industry in India is projected to grow at a CAGR of 9.5% from 2015 till 2021. India is poised at the threshold of a great opportunity—to take 30-40% share of the global production of electronics by leveraging its many strengths. We must set an audacious goal of manufacturing 40% of the world’s electronics with 40% value addition within India to be achieved in the next 10 years. Our current value share of global consumption is less than 3.5%. With the projected growth rates of the Indian economy, our contribution to global consumption of electronics in value terms is likely to double to 7% by 2026—amounting to a domestic consumption of about $200 billion, with 60% value of imported components. Even in such a scenario, the total net foreign exchange earnings of India will be about $280 billion.
We need to build an ecosystem capable enough to support the entire world manufacturing and for this we will have to incentivise exports for next 5-7 years in a gradually declining manner.

Specific to the Indian mobile handset industry—it has undergone a remarkable change due to the government’s focus on the ‘Make in India’ campaign. Mobile handset manufacturers now look towards establishing the complete mobile manufacturing ecosystem in the country. For this, the phased manufacturing plan will be pivotal which will also make Indian manufacturers less reliant on imports. It will also lead to more investments in component manufacturing from both foreign as well as local players which will go a long way in establishing India’s own mobile manufacturing ecosystem. Post Make in India; the mobile handset industry is now leaping towards ‘Design in India’.

Further, the framework of the Make in India initiative, provides the perfect opportunity for stakeholders to transform the skill imparting avenues and trigger knowledge as well as skill development pursuits with the employee communities. For instance, the electronics industry that is labour intensive finds it hard to find skilled workforce. The emerging focus on STEM skills along with vocational training for the labour workforce can certainly work wonders to the PM’s vision of making India a global hub for skilled workforce.

-The writer is CMO, Lava International

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition