BackIndia electronics manufacturing may shrink 7% by 2015: report
Local manufacturers could lose out on nearly $200 bn of potential revenue during 2011-2015 period, says report
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Bangalore: India’s electronic products manufacturing sector could shrink by as much as 6.7% in revenue by 2015 with the increase in consumption being more than offset by imports, according to a report, indicating that government efforts aimed at boosting the domestic industry may not succeed.
Local manufacturers could lose out on nearly $200 billion (around ₹ 11 trillion today) of potential revenue in the 2011-2015 period, according to the report by India Semiconductor Association (ISA) in association with researcher Frost and Sullivan. The study covers a range of segments, including semiconductor design, electronic components and electronic manufacturing services, apart from consumer electronics products.
The overall electronics products industry, including imports, will grow by a compounded annual growth rate (CAGR) of 10% to $94.2 billion by 2015 from $64.6 billion in 2011. Out of this, imports are expected to rise 50% to $42 billion by 2015, according to the study. Currently, almost 65% of the demand is met through imports, the study said. It didn’t put a number to the revenue generated by Indian companies.
Although India’s total semiconductor consumption is expected to grow by more than 50% in 2011-2015 to $9.66 billion, it will be heavily reliant on imports from other global chipmakers. Currently, the semiconductor market in India is virtually non-existent.
Some industry executives and commentators expect a slowdown in electronics manufacturing in certain sectors such as older cathode ray tube (CRT) televisions but see a pickup in others, such as telecom and LED lighting.
“It depends from sector to sector. As far as TVs are concerned, local manufacturing of CRTs is very much on the decline and not much manufacturing is happening on that front," said Noida-based Dixon Technologies (India) Pvt. Ltd chairman and managing director Sunil Vachani. Dixon is an electronics manufacturer, the customers of which include Bharti Airtel Ltd, Reliance Retail Ltd and LG Electronics.
“But for a sector like STBs (set-top boxes), there should be tremendous demand over the next two years. Local production will shoot up. As long as the disability factors for all electronic manufacturers are taken care of, manufacturing should also increase overall," said Vachani, referring to the inverted duty structure that the government has imposed on all domestic manufacturers.
Last week, the government said it was considering doing away with the inverted structure, which taxes finished products at a much lower rate than raw materials, hampering local manufacturers.
Vachani said he expects production of CRTs to drop by at least 40% over the next two years, while STB production will rise by 40-50% during the same period.
“Domestic telecoms manufacturing market is definitely on the rise," said Sanjay Nayak, CEO and founder of Tejas Networks, which manufactures telecom equipment. “Currently, a lot of telecom equipment is imported—around $5-10 billion—but going forward, a whole bunch of favourable policies that are in the pipeline will spur local manufacturing."
The government recently proposed a string of initiatives to boost domestic manufacturing under the National Policy on Electronics that include development of electronic manufacturing clusters, a fund to promote research on electronic development and preferential access to locally-manufactured products.
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