Electronic Goods Market in India
November 1, 2011
Managing Director, IBI Consulting
Consumer demand for electronic goods in India has grown exponentially over the past few years. This includes demand for home appliances, televisions, computers and mobile phones. The demand for electronics hardware in India is set to grow from $45 billion in 2009 to US$ 400 billion by 2020, according to industry estimates. For example, the total TV market in India for the first quarter was 3.7 million units, accounting for 41.5% of the Asia-Pacific TV market.
The government has taken a number of initiatives to boost the manufacture of electronic equipment in India. For example, in 2007, the government introduced the Special Incentive Package to turn India into a chip production hub. Under the policy, the government offered to underwrite 20-25 percent of the capital expenditure. However, this has had limited success with most companies that manufacture in India only assembling components imported from China and Taiwan. These initiatives have also been negatively impacted by the global economic crisis.
Efforts to reduce reliance on imports:
India’s reliance on imports for electronics goods is a well-known fact. According to India’s National Manufacturing Competition Council (NMCC), by 2050 the country’s highest import bill will be on account of electronics hardware and not oil. According to a study by apex industry body Assocham, more than 70 percent of electronic goods demand in India is met through imports.
The government is looking at measures to use the surging demand for electronic goods in the domestic market to aid the growth of local manufacturing. It is in this background that there have been calls from government bodies such as the Planning Commission to institute a 30 percent domestic quota in government buying of electronic equipment. There are some concerns that such procurement provisions could violate World Trade Organization (WTO) terms. However, according to some experts, government procurement is exempt from WTO norms and the government is only asking companies to whom it gives business to return some to the country in the form of investment.
Outlook and opportunities:
Even with the proposed new government policy on domestic procurement, we can safely say that India will continue to need imports to meet demand for electronic goods. This is because there are few component makers in India and that in the case of products such as computer servers there is very little scope for localization. There is however the opportunity for multinational companies to establish research and development facilities in India given the availability of skilled resources and relevant infrastructure.
Inadequate research and development in this area by Indian companies is one of the reasons for the dependence on imports to meet growing demand for latest technology goods. The semiconductor industry which is a major component of electronic goods is expected to get a boost due to the increase in the domestic consumption of electronics hardware. The market is expected to be driven by products and services such as set-top boxes, wireless handsets, the 3G rollout, deployment of WiMAX, notebooks and smart cards. Opportunities exist for semiconductors in LCD TV, digital camera and storage flash memory markets. This market is expected to reach to US$ 8.04 billion by 2011.
Overall, India continues to be an attractive destination for exporters of electronic goods and also companies that want to invest in research and development facilities.
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