India is stepping up efforts to boost local production of electronic goods to capitalize on demand from global companies whose production extends beyond China.
The South Asian country must seize the opportunity to expand its domestic electronics industry, experts say.
“Fostering domestic electronics manufacturing…can significantly improve our economy by creating jobs and attracting foreign investment,” said Saket Gaurav, chairman and chief executive officer of Elista, an Indian electronics manufacturer.
Earlier this month, India restricted imports of laptops, tablets and PCs in a bid to spur industry growth.
The government announced new rules obliging companies to secure licenses before importing products such as laptops, tablets, PCs and servers into the country. Previously, such licenses were not required.
According to analysts, the move will affect companies such as Apple and Samsung.
The latest regulations were originally intended to take effect immediately when announced on August 3. But the next day, New Delhi backed down and postponed the decision, in what had been met with great surprise and confusion in the industry as companies scramble to try to lay out what they must do to comply with the rules. Businesses now have until November 1st, when the license terms come into effect.
“India is emerging as one of the fastest growing markets for digital products, including laptops and servers,” said the country’s Minister of Electronics and Information Technology, Rajeev Chandrasekhar, in a post on social media platform X, formerly known as Twitter. when explaining the decision.
The “government’s goal is to ensure trustworthy hardware and systems, reduce import dependency and increase domestic production of this product category,” he said.
Sandeep Gupta, chief executive, chief executive and co-founder of Indian consumer electronics brand Skyball, says India wants to reduce its dependence on China in particular and “the initiative is consistent with the government’s expansion of the production-linked incentive scheme for IT hardware, which is attracting investment and a will create favorable business environment for local and international companies.”
“With increasing domestic electronics production, India hopes to strengthen its technological autonomy, protect critical supply chains and strengthen national security interests,” he adds.
Expanding its manufacturing capacity and capacity is a crucial part of India’s effort to expand its economy, which is especially important as the country seeks to create enough jobs in the world’s most populous country of more than 1.4 billion people.
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Make in India, one of Prime Minister Narendra Modi’s government’s flagship initiatives, aims to transform the country into a global manufacturing hub.
The electronics sector is one of the areas that these plans have identified as having tremendous growth potential.
India has set an ambitious goal of reaching $300 billion in domestic electronics manufacturing by 2026.
According to analysts, the country’s young population and growing economy are factors driving local demand for such products.
“As some commodities gain desirable value and discretionary spending increases, this decade will bring great market opportunities for global players to enter India and capitalize on its markets along with its young demographics,” says a recent report by PwC.
As part of the government’s effort to expand electronics manufacturing, it is seeking applications for a 170 billion rupees ($2.05 billion) financial stimulus scheme to attract makers of products like laptops and tablets. This is because many companies are trying to diversify their supply chains beyond China.
The government also encourages initiatives to develop skills in electronics manufacturing.
India has massively expanded its mobile phone production in recent years and has become the second largest producer of these goods in the world. According to PwC, cell phone production increased from 60 million in 2015 to 310 million in 2022.
However, experts say India has an opportunity to produce much more across a range of different electronic products as the country also aims to reduce its trade deficit by reducing its reliance on imported goods.
India’s move to introduce licensing requirements for some products could help speed up this process.
“The intention is to get the multinationals to manufacture these products in India and respond to the market and the needs,” said Sanjay Lodha, chairman and chief executive officer of Netweb Technologies, which manufactures computer hardware products including servers.
“We would say that this is a win-win situation for everyone. India also has long-term security concerns as electronics are on the rise and are a basic building block of everything.”
With servers also falling under the new rules, domestic companies like Netweb could benefit, says Mr Lodha.
“We’re proud to be a domestic server builder and have an early mover advantage here,” he says.
He adds that India “can mitigate the cost of electronics imports in the longer term” by focusing on increasing domestic electronics manufacturing.
However, there is still more to do.
“There’s still a long way to go,” says Mr. Lodha. “Further promotion and creation of real incentives for ecosystem production and development will be required.”
In the near future, global companies importing products to India will have to adapt to the new licensing requirements, which could impact their business.
“This move poses challenges for global technology giants such as Dell, Apple and Samsung and leads to possible price adjustments,” said Jitender Ahlawat, Founder and Managing Partner of HJA & Associates, a commercial law firm in New Delhi.
“However, the decision represents an opportunity for local electronics manufacturers,” he adds.
“The government is focused on increasing domestic production and wants to redirect demand to local laptop and computer manufacturers to spur industry growth. These restrictions are in line with Make in India’s goal of promoting job creation and economic development.”
There are several multinational brands already manufacturing laptops in India including HP and Dell.
Indian companies are also increasingly manufacturing these products.
This month, Reliance Jio, part of the conglomerate controlled by India’s richest man Mukesh Ambani, unveiled a new budget laptop model priced at Rs 16,499.
Other local brands focus on manufacturing a wider range of electronics items.
“We are making significant strides to expand our manufacturing facilities in India,” says Mr. Gaurav of Elista, which makes products like TVs, smartwatches and speakers.
He says that the company recently announced an investment of Rs 1 billion in Andhra Pradesh to set up a new manufacturing unit.
“Our goal is to create more job opportunities, drive technological advances and contribute to the growth of domestic production.”
However, there are some hurdles to overcome that may hamper the sector.
“Electronics manufacturing in India faces significant obstacles that are hampering its growth,” says Gaurav. “Outdated infrastructure and complex logistics systems impede efficient production and distribution.”
There is also a shortage of skilled workers in electronics manufacturing, and “cumbersome regulations and unclear guidelines discourage investment,” he adds [and] Dependence on foreign suppliers and underinvestment in R&D make supply chains vulnerable.”
Better and easier access to finance is also needed, according to Mr Gaurav.
“To address these challenges, infrastructure must be modernized, regulations simplified, local supply chains encouraged, skills developed encouraged, research and development funding increased, and dedicated financial mechanisms created,” he says.
There is progress, but more effort will be needed to move the sector forward.
“While major strides have been made on all fronts in recent years, a concerted effort involving government, industry and education is essential to fostering a thriving electronics manufacturing sector in India,” says Mr. Gaurav.
Updated August 14, 2023 at 4:00 am
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