Electronics Manufacturing Hub

 

India: The Ascending Electronics Manufacturing Hub - Ambition and Progress in Semiconductors and ESDM

India stands at the cusp of a significant transformation, rapidly emerging as a global powerhouse in electronics manufacturing. Fueled by ambitious government initiatives, a burgeoning domestic market, and a strategic focus on both semiconductors and the broader Electronic System Design and Manufacturing (ESDM) sector, the nation is steadily progressing towards its goal of becoming a world-class electronics hub. This article delves into India's ambition, the progress made so far, the key drivers behind this growth, the challenges that remain, and the future trajectory of this dynamic sector.

The Ambitious Vision: A $400 Billion ESDM Ecosystem

The Government of India has set an ambitious target of achieving a USD 400 billion turnover in the ESDM sector by 2025. This vision is underpinned by a series of proactive policies and schemes aimed at attracting both domestic and foreign investment, boosting local production, and creating a robust ecosystem for electronics manufacturing. The focus extends beyond mere assembly to encompass the entire value chain, including component manufacturing, design, and research and development.

Semiconductors: Laying the Foundation for Self-Reliance

Recognizing the critical role of semiconductors as the bedrock of the modern digital economy, India has made the development of a domestic semiconductor industry a paramount priority. For decades, this ambition remained largely unfulfilled, with the nation heavily reliant on imports for its chip requirements. However, recent years have witnessed a renewed and concerted effort to establish a strong semiconductor manufacturing base.

The cornerstone of this effort is the India Semiconductor Mission (ISM), launched with a substantial financial outlay of INR 76,000 crore (approximately USD 10 billion). The ISM aims to provide financial and infrastructural support to companies interested in setting up semiconductor fabrication units (fabs), display fabs, compound semiconductors, silicon photonics, sensor fabs, and semiconductor packaging facilities in India.

Significant progress has already been made in this direction. In February 2024, proposals for setting up semiconductor fab facilities with a combined investment nearing INR 1.52 lakh crores were approved. Notably, Tata Electronics Private Limited (TEPL) received approval for an INR 91,526 crore fab in technology partnership with PSMC, Taiwan. These developments signal a strong commitment to advancing India's position in the global semiconductor landscape.

Union Minister for Railways and Electronics and IT, Ashwini Vaishnaw, recently stated that the first 'Made in India' semiconductor chip is expected to be ready for production by 2025. This marks a significant milestone in India's journey towards self-reliance in this crucial sector. Simultaneously, efforts are underway to train a skilled workforce in semiconductor design and manufacturing, with programs aimed at upskilling thousands of engineers in these advanced fields.

The Indian semiconductor market is projected to grow at a Compound Annual Growth Rate (CAGR) of 13%, reaching INR 8,95,134 crore (USD 103.4 billion) by 2030, according to the India Electronics and Semiconductor Association (IESA). This burgeoning domestic demand further strengthens the rationale for establishing local manufacturing capabilities.

ESDM: A Thriving Ecosystem

The Electronic System Design and Manufacturing (ESDM) sector in India encompasses a wide array of products, including smartphones, consumer electronics, IT hardware, telecom equipment, automotive electronics, industrial electronics, and medical electronics. This sector has witnessed remarkable growth in recent years, driven by increasing domestic consumption, rising exports, and supportive government policies.

India has already emerged as the world's second-largest mobile phone manufacturer. In 2014, only 26% of mobile phones sold in India were manufactured domestically; today, this figure stands at an impressive 99.2%. The manufacturing value of mobile phones has surged from INR 18,900 crore in FY14 to a staggering INR 4,22,000 crore in FY24. Exports, which were negligible in 2014, have now surpassed INR 1,29,000 crore.

The Production Linked Incentive (PLI) scheme for Large Scale Electronics Manufacturing, notified in April 2020, has been instrumental in this success. As of February 2025, this scheme has led to a cumulative investment of INR 10,905 crore, a cumulative production of INR 7,15,823 crore, and cumulative exports of INR 3,90,387 crore, while generating over 139,000 direct jobs.

The ESDM sector's growth is further fueled by the Fourth Industrial Revolution (Industry 4.0), which brings transformative technologies like the Internet of Things (IoT), Artificial Intelligence (AI), robotics, blockchain, and automation. The increasing adoption of these technologies across various sectors is driving demand for a wide range of electronic products and components.

The Indian ESDM industry is projected to surpass INR 9 lakh crore (approximately USD 109 billion) by FY28, with a robust CAGR of 34%. This growth is driven by factors such as the rising outsourcing of manufacturing by Original Equipment Manufacturers (OEMs) to specialized ESDM providers, the growing demand for electronics, a large and expanding domestic market, the 'China + 1' strategy adopted by global companies, and various government initiatives.   

Key Drivers of India's Electronics Manufacturing Ambition

Several factors are contributing to India's emergence as an electronics manufacturing hub:

1. Government Support and Policy Initiatives: The "Make in India" initiative, coupled with specific schemes like the PLI for large-scale electronics manufacturing, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the Electronics Manufacturing Clusters (EMC 2.0) scheme, provide significant financial incentives, infrastructure support, and a favorable regulatory environment for electronics manufacturers. The recent notification of the Electronics Components Manufacturing Scheme further underscores the government's commitment to strengthening the component ecosystem.

2. Burgeoning Domestic Market: India boasts a large and rapidly growing domestic market for electronics products, driven by a young and aspirational population, increasing disposable incomes, and growing digital adoption. This strong local demand provides a significant advantage for domestic manufacturers.

3. Skilled Workforce: India has a large pool of skilled engineers and technicians, which is crucial for the labor-intensive electronics manufacturing sector. The government is also actively investing in skilling and upskilling programs to meet the evolving needs of the industry, particularly in high-growth areas like semiconductor manufacturing.   

4. Strategic Location and Global Supply Chain Dynamics: India's strategic location provides access to major markets in Asia, Europe, and Africa. Furthermore, global supply chain diversification trends, often referred to as the 'China + 1' strategy, are making India an increasingly attractive alternative manufacturing destination for international companies.

5. Growing Exports: India's electronics exports are witnessing significant growth, surpassing traditional sectors like textiles. This increasing export competitiveness is a testament to the improving manufacturing capabilities and cost-effectiveness of the Indian electronics industry.

Challenges and the Path Forward

Despite the significant progress, India's ambition to become a global electronics manufacturing hub faces several challenges:

1. Component Ecosystem Dependency: While assembly of electronic goods has grown, India still heavily relies on imports for critical components, including semiconductors and advanced printed circuit boards (PCBs). Strengthening the domestic component manufacturing ecosystem is crucial for reducing import dependence and enhancing value addition. The recently announced Electronics Components Manufacturing Scheme is a step in the right direction.

2. Infrastructure and Logistics: While the government is investing in infrastructure development, challenges related to road connectivity, power supply, and logistics inefficiencies persist in some regions. Efficient supply chain management is essential for global competitiveness.

3. Cost Competitiveness: Manufacturing in India still faces a cost disadvantage compared to some other major manufacturing hubs due to factors like high import duties on raw materials, expensive finance, and tax complexities. Rationalizing the tariff structure and reducing operational costs are crucial.

4. Skilled Workforce Development: While India has a large workforce, continuous efforts are needed to upskill and reskill the workforce to meet the demands of advanced manufacturing technologies, particularly in areas like semiconductor fabrication and design. Industry-academia partnerships and targeted skilling programs are essential.

5. E-waste Management: As the electronics manufacturing sector grows, so does the challenge of managing electronic waste. Strengthening the e-waste recycling infrastructure and ensuring proper disposal mechanisms are crucial for sustainable growth.

To overcome these challenges and realize its full potential, India needs to continue its focus on:

• Deepening the component manufacturing ecosystem through targeted incentives and infrastructure development.
• Improving infrastructure and logistics to reduce transportation costs and enhance efficiency.
• Rationalizing the tariff structure to lower input costs and improve competitiveness.
• Investing in large-scale skilling and upskilling programs to create a globally competitive workforce.
• Developing a robust and sustainable e-waste management framework.
• Promoting research and development to foster innovation and move up the value chain.

The Future: A Global Electronics Powerhouse

India's journey towards becoming a global electronics manufacturing hub is gaining momentum. The confluence of ambitious government policies, a thriving domestic market, a growing skilled workforce, and favorable global trends positions the nation for significant growth in the coming years. While challenges remain, the commitment and strategic focus on both semiconductors and the broader ESDM sector indicate a promising future.

The target of USD 400 billion in ESDM turnover by 2025 may seem ambitious, but the progress made so far, particularly in mobile phone manufacturing and the growing interest in semiconductor production, demonstrates India's potential. As the ecosystem matures, with increasing domestic component manufacturing and improved infrastructure, India is poised to become a key player in the global electronics value chain, contributing significantly to the world's technology landscape and its own economic growth. The vision of a self-reliant and globally competitive electronics manufacturing hub in India is steadily becoming a reality.