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Introduction: Large-Scale Electronics Manufacturing in India

Introduction: Large-Scale Electronics Manufacturing in India

Electronic products have continuously impacted and shaped our lifestyles in the current digital era. 

The advent of technology and initiatives such as ‘Digital India’ and ‘smart city project’ has raised the demand for machine learning and internet of things. Due to these reasons, electronics industry is anticipated to be one of the key economic drivers worldwide.

Categories of Electronic Manufacturing

Electronics goods are ubiquitous in this digital era. They encompass a broad range of items such as mobile phones, microwaves, air conditioners, refrigerators, LED lights, laptops, etc. PLI scheme concentrates on following four categories:

  1. Smartphone Manufacturing
  2. Information and Communication Technology (ICT) Hardware
  3. Consumer electronics
  4. Electronic components88
  5. Growing focus on electronics exports

In FY13, India’s share in global electronics hardware production was just 1.6%. The communication and broadcasting equipment segment constituted 31℅, thereby having a dominant share in the total production of electronic goods in India in FY13, followed by consumer electronics at 23℅. In 2014, India was increasingly dependent on Electronics imports. Of the smartphones shipped in the country in the first quarter of 2015, 24.8% were either manufactured or assembled in India, up from 19.9% in the previous quarter.

Presently, the Indian electronic industry is valued at $75 billion with $16 billion of exports in FY 2021-22. India is the 6th largest exporter of electronics goods. Mobile phones constitute the single largest component of electronics exports from India. They are expected to contribute nearly 50% of the total electronics exports by next year.


  • By 2026, India has clearly laid out a goal of $300 billion manufacturing with a 120 billion dollar of exports
  • The aim is to emerge as a reliable and trusted partner in Global value chains.
  • For this, the government always emphasised on strengthening its domestic manufacturing ecosystem to make India more resilient to supply chain disruptions. 
  • That strategy talks about broadening and deepening the electronics ecosystem.
  • The Indian electronics manufacturing industry is projected to reach US$ 520 billion by 2025. The demand for electronic products is expected to rise to US$ 400 billion by 2025 from US$ 33 billion in FY20.
  •  The demand for Electronics system is expected to more than double of its current size (FY19) to reach US$ 160 billion by FY25. The top products under the ESDM sector with the highest CAGR include IT at 54%, followed by industrial electronics at 38% and automotive electronics at 10%.
  • From a country that had only two mobile phone manufacturing facilities in 2014, India now is the second-largest mobile phone manufacturer in the world. 
  • Currently, China, Hong Kong, and the U.S. are the global leaders in manufacturing electronics. In the Indian context, Chennai has emerged as the Electronics Manufacturing Services hub of India. It already has strong base in Automotive, IT and many other Industries.
  • With regards to further market growth in the consumer electronics market, the demand is likely to rise in view of introduction of 5G networks, the increasing popularity of smart homes, and the development of augmented and virtual reality. With these trends revolutionizing the world, the electronics sector is bound to boom and experience a robust growth amid the aforementioned policy support and increasing investments.
India’s electronic goods exports and production by value (US$ billion)

India’s market share in the global electronics manufacturing industry has increased from 1.3% in 2012 to 3.6% in 2020. The Production Linked Incentive (PLI) scheme has effectively enticed international champions while giving an impetus to domestic manufacturers and creating national champions with global ambitions.

Government initiatives

The Government of India has adopted few initiatives for electronic system design and manufacturing (ESDM) sector in the recent past, some of these are as follows:

  • National Policy on Electronics (NPE 2019) aims to facilitate a turnover of US$ 400 billion in domestic manufacturing by 2025. NPE 2019 envisages India as a comprehensive hub for Electronics System Design and Manufacturing (ESDM) by developing a supportive environment for the industry to compete with global peers.
  • The ESDM industry is one of the top 25 priority sectors in the government’s Make in India initiative.
  • As per Union Budget 2022-23, the Ministry of Electronics and Information Technology (MeitY) has been allocated Rs. 14,300 crore (US$ 1.85 billion).
  • The government has launched schemes such as Manufacturing of electronic components and Semiconductors (SPECS), Modified Electronic Manufacturing Clusters (EMC 2.0) etc. to give impetus to electronic industry.
  • Ministry of Electronics & Information Technology (MeitY) has announced “Scheme for Promotion of Semiconductor Eco-System” in India with a massive outlay of Rs. 76,000 crore in 2022.
  • In September 2021, India started discussions with Taiwan to alleviate the global semiconductor chip shortage. According to an exclusive Bloomberg report, this may bring chip production to South Asia by end-2021, coupled with tariff reductions on components used to make semiconductors.
  • Officials from New Delhi and Taipei recently negotiated a proposal to set up a semiconductor facility worth US$ 7.5 billion in India. The facility will supply everything from 5G devices to electric cars.
  • In 2021-22, the total budget allocation towards the ‘Digital India’ programme is Rs. 6,806.33 crore (US$ 936.19 million)..
  • On November 11, 2020, Union Cabinet approved the production-linked incentive (PLI) scheme in 10 key sectors (including electronics and white goods) to boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative.
  • About 80% of the Production-Linked Incentive scheme (PLI) is concentrated in only three sectors: electronics, automobiles, and solar panel production.
  • A fund of Rs. 3.2 crore for three years has been approved by the Department of Electronics, IT, BT, Science & Technology.

Production Linked Incentive (PLI) Scheme

The Production Linked Incentive (PLI) scheme has been notified for Large Scale Electronics Manufacturing in India. The scheme aims to attract large investments in the mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. The PLI scheme for Large-Scale Electronics Manufacturing, mapped to the Union Ministry of Electronics and Information Technology (MEITY), is expected to make India a competitive destination for electronics manufacturing and give a boost to Aatmanirbhar Bharat while creating more global champions.

Under the PLI scheme, 4% to 6% incentive will be provided on incremental sales of goods manufactured in India. These incentives will be offered for a period of 5 years subsequent to the base year (FY 2019-20). The total spending under the scheme is Rs. 38,645 crore (US$ 4.7 billion). 

The PLI scheme on Large-Scale Electronic Manufacturing, which includes manufacturing of mobile phones and manufacturing of specified electronic components, was approved in March 2020, with a total outlay of Rs 38,645 crores. The scheme is expected to bring in additional production to the tune of Rs 10,69,432 crore and generate employment for 7,00,000 people.

Raw materials required for production

The electronic devices are made of many tiny components which are made from a variety of raw materials such as copper, plastics and other petroleum-based materials, silicon, ceramics, microchip, quartz crystal, etc.

Challenges in Electronics Sector in India

  • Chip shortage: The biggest hurdle for the electronic sector would be semiconductor supply shortage aggravated by Covid-19 and Russia’s invasion of Ukraine. India imports 100% of its semiconductors and achieving the targets proposed under PLI scheme could be a tedious task considering the worldwide chip shortage.
  • High tariffs: India has the highest tariffs on import of components for electronic products, compared to competing electronics hubs like China and Vietnam. 
  • Lack of component ecosystem: India lacks a robust ecosystem required for electronic products. 
  • High import costs: High cost of importing these components is listed as a challenge. 
  • Less favorable subsidy: Vietnam and China have more favorable subsidy structures than India does in areas like machinery used for manufacturing, and research & development.
  • Taxation: Compared to China and Vietnam, India provides lower income tax exemptions and reductions to electronics manufacturers. 
  • Global value chain: The global electronics trade is dominated by global value chains. India will have to find a way of integrating into global value chains to increase production and exports.
  • To meet the future needs in the electronics sector, high investment in the R&D sector is an absolute must. NPE 2019 seeks to create IPRs for the domestic as well as global markets.  Indian manufacturers must be able to make original products and create demand for them. 
  • India has languished in chip manufacturing.
  • Just like cell is the building block of all living organisms, semiconductor is the basic unit of all electronic devices. Although India has the human capital in terms of vibrant young population, we do not have chip manufacturing capabilities. Besides semiconductor FAB units require huge investments, gallons of water for production, uninterrupted electricity supply, high operating costs, which presents a huge infrastructural constraint for India.
Rashmie Parmour
Rashmie Parmour is currently pursuing PhD from Mumbai School of Economics and Public Policy, working as PGT Economics in Navy Children School. Her keen interest include education, health, and macroeconomics.

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