Most large economies in the world have significant heft in manufacturing, particularly in electronics and IT hardware. That was the missing piece in India’s growth story, till the production-linked incentive (PLI) scheme worked as a catalyst to attract global and local manufacturers to scale up manufacturing.
The last few years have seen Foxconn, Pegatron, Dixon Technologies, Netweb Technologies, Bhagwati Products, Optiemus, and Tata Electronics, among others, up the game in making in India. Tata Electronics bought out Wistron’s unit in November, becoming the first Indian maker of iPhones.
More than 90% of the mobile phones sold in India are made locally. While IT hardware, including desktops, laptops, and servers, are mostly imported, with local assembly accounting for less than 15% of the 15 million units sold. The revised INR17,000 crore PLI, under which 27 companies have been shortlisted to make IT hardware, will ensure that local manufacturing is boosted further.The foundation has already been laid for a rapid scale-up in manufacturing in 2024. The new year will also see the much-delayed components ecosystem coming to life. Micron Technologies’ ATMP unit will start churning out memory chips, and Apple, via its contract manufacturers, will start making accessories as well.
Indeed, 2024 promises to be a game changer for Make in India, an initiative started by the government to boost local manufacturing, which incidentally will turn 10 in the New Year.
Here are a few key developments that will unfold in 2024:
A growing market for products will prompt companies to make more.
A component ecosystem will come up. So far, mobile handsets have largely been an assembled play, with kits imported from China. Ditto for IT hardware. Local value addition will increase significantly from the current 20% in electronics mobile and very low in IT hardware.
More local and global companies will start manufacturing in India.
Finally, manufacturers in India will be less dependent on imports from China, Vietnam, or Malaysia.
The last three years have set the stage for significant manufacturing build-up in electronics and IT hardware in 2024. According to the Ministry of Electronics and Information Technology (MeitY), domestic production of electronics has increased from USD49 billion in 2016 to USD87.1 billion in 2021-22 and USD100.16 billion in 2022-23, at a CAGR of 15%. India’s electronics production is expected to be USD115.18 billion in 2023-24 and USD132.45 billion in 2024-25.According to consultancy PwC, there are 200 manufacturing units of mobile phones, sub-assemblies, and components, which have been set up in the last few years, employing around 700,000 people. Sudipta Ghosh, partner and leader – manufacturing at PwC India, says, “More companies will venture into manufacturing. The ecosystem will cover capabilities across domains such as display assembly, camera modules, flexible printed circuits, and speakers.”
Satya Gupta, president of industry body VLSI Society of India, adds, “The rise in production in 2024 will add 150,000 to 200,000 more manufacturing jobs. The local ecosystem for manufacture of batteries, memory chips, and displays will add depth and sustainability to electronics manufacturing.” Gupta foresees value addition in electronics manufacturing to increase from 8%-10% at present to about 15%-18% in the new year. VLSI (very large-scale integration) is a process of creating an integrated circuit by combining millions of transistors on a chip.
Apple, Micron ramp up to help IndiaThe game changer for India’s manufacturing story will be Micron, among the world’s top memory chip makers, and Apple — the former with its ATMP unit and the latter with plans to expand iPhone making and shift battery sourcing for its upcoming iPhone 16 to factories in India.
According to a Financial Times report, battery makers including Desay from China have reportedly been encouraged to set up new factories in India. Simplo, the Taiwanese battery supplier for Apple, has been urged to expand its production capacity in India. Japanese electronics parts maker TDK Corp will also start making lithium-ion battery cells for iPhones in India.
Alongside, Taiwan’s contract manufacturers Foxconn and Pegatron also have plans to expand operations in India. Such marquee names expanding in India is similar to GE setting up its back office in India back in the mid-1990s, which eventually led to a business- and tech-services boom, attracting global companies to set up back offices in India.
The INR17,000 PLI scheme for the IT hardware segment, mostly served by imports until recently, has attracted Dell, HP, Lenovo, and 24 other companies, and is expected to significantly scale up. At least half the domestic consumption of laptops, tablets, and desktops, could be served by local assembly from less than 15% at present. With PLI incentives tied to local manufacturing of components, the assembly lines will use more of the locally made parts.
Manufacturing of electronics and technology-hardware products has been part of the DNA of large economies and has defined visible shifts from poor to developing to developed for several Asian economies, including China and South Korea. For India’s much delayed hi-tech manufacturing script, 2024 promises to be the year that the country finally gets recognised as a leading global manufacturing destination.
https://economictimes.indiatimes.com/prime/prime-vantage/why-2024-will-be-a-defining-year-for-hi-tech-manufacturing-in-india/primearticleshow/105847924.cms
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