Electronics Manufacturing
India is working its way to become a major electronics manufacturing hub in the world. Very few products bear a “Made in India” tag, and the Indian government wants to do something about it. In the past decade, the average disposable income of Indian consumers has been rising. More disposable income is creating stronger domestic demand for electronic products. But imports satisfy 75 percent of that demand. Official predictions estimate that by 2020 the electronic imports trade deficit will exceed that of crude oil imports. This clearly is not sustainable. In efforts to solve this issue, the government has launched a “zero imports by 2020” policy. It features a combination of tax breaks, industry-wide incentives, ease in foreign direct investment (FDI) rules and a raise in import duties.
The ongoing pandemic has devastated multiple economies worldwide. Yet one country gained an attractive investment from some of the biggest tech and electronic companies. That is India. More than 15 companies invested almost $20 billion in the India between April and July last year. Some of the investors were Google, Walmart, Facebook, Apple and Qualcomm.
The IMF predicted a negative growth rate of -4.9 per cent for the world economy in 2020 and also projected a sharp contraction by 4.5 per cent for the Indian economy. These investments were made even after this prediction. The China factor. New cold war has started between US and china. And due to this many electronic manufacturing companies are relocating their manufacturing facility. For example, a Major contract manufacturer for Apple is shifting six production lines from China to India with a target to export around $5 billion worth of iPhones from India, while simultaneously catering to the Indian market.
Apple’s vendors aren’t simply looking to make only iPhones, but also planning to shift manufacturing of iPads, Mac Books and other products in the next few years. Similarly, manufacturers like Wistron, Pegatron, Foxconn and Samsung are also thinking to expand their manufacturing facilities in India. So, this leads us to future for electronics manufacturing in India. India is already 2nd largest mobile phone manufacturer in the world. Yet to attract more international electronic manufacturing companies and create electronic manufacturing ecosystem, the Indian government has recently announced production-linked incentive scheme. Government already has received 22 applications from firms ranging from assemblers to electronic component producers. This scheme will provide a 6% financial incentive on additional sales of goods produced in the country over a five-year period. As per the government these companies will produce mobile phones and components worth $153 billion during this five-year duration. And 60% of these products will be exported to other countries. Also these companies agreed to offer direct and indirect employment opportunities to a total of 1.2 million Indians.
But even after being the 2nd largest manufacturer of cell phones only assembly is done in India yet all other major electronic parts are imported from different countries. Apart from this India still lacks in infrastructure, supply chain network, and other facilities which countries like China and Vietnam provide better. Now comes India’s tech industry. India’s is transforming in digital economy, with more than 700 million internet users and roughly half a billion expected to come. And this is an opportunity which no one wants to lose. US tech giants are trying to grab this massive market before others could do. Some big tech giants like Google, Facebook and Qualcomm has invested in the Indian telecom company Reliance Jio.
Jio was launched as a mobile network in 2016 and has quickly gained nearly 400 million subscribers. With recent influence in e-commerce, digital payments and streaming services. Jio appears to be looking to turn the company into an all-encompassing Indian ecosystem. Also Jio is the only telecom company in India who has developed completely end-to-end 5G solution indigenously. Qualcomm which has recently invested 97.1 million dollars in jio. This will help jio to roll out the advanced 5G infrastructure and services for Indian customers. Similarly Google has invested 4.5 billion dollars in jio. By doing this Google is targeting 300 million users in India which are using basic feature phones.
Google is working with Jio to create a custom Android version tailored for entry-level devices. Also Facebook’s 5.7 billion dollars investment in jio seems to create platform for online grocery deliveries through whatsapp and jio mart. So, all these companies are creating an ecosystem by investing in Indian companies. After looking at all of this, still the question remains unanswered. Why India? Well, India is the 2nd most populated globally and obviously no one would like to leave a market of this size. Apart from this the Silicon valley has been shut out by China from years. Many big ones like google, twitter and facebook are completely banned in China. Now, because of this many companies have lost the biggest market of the globe.
So, companies will try to make the most of out of India. Yet India needs to make a ton of reforms to grab this opportunity of becoming a big tech manufacturer.
Statistical Source: Global Index