Investment Opportunities in Electronics Hardware

Current Status and Size of the Market

• By revenue, Electronics Hardware in India is a $11 billion industry .India's share of the global market is just 0.6%
• Fast becoming a manufacturing base for consumer electronics and telecom equipment; the sector includes design, manufacture and assembly of products related to:

1. Consumer Electronics (TV, DVD, Audio systems): about $3.9 billion (FY 05)

2. Industrial Electronics: about $2.1 billion (FY 05)

3. Computers (PC, Servers, Laptops): about $1.4 billion (FY 05)

4. Telecom Equipment (Phones and Network Equipment): about $1.6 billion (FY 05)

5. Electronic Components: about $1.6 billion (FY 05)

Structure of Indian Electronics Hardware Industry

• Indian Electronics Hardware industry supplies primarily to the domestic market. Exports are limited to passive components like capacitors, resistors, wound components, CD-ROMs, colour picture tubes, etc.
  
• In the areas of consumer electronics and telecom equipment, India is fast becoming a manufacturing base
  Almost all major global players, such as Siemens, Texas Instruments, Matsushita, Alcatel, LG, Samsung, Sharp and Lenovo have already set up manufacturing operations in India. Many more have R&D centres
  
• Flextronics, Solectron, Jabil Circuit and other international contract manufacturers have already set up base in India
  

GOI Policy

• 100% FDI is allowed under the automatic route with a few exceptions:


• An Industrial license is required in case of aerospace and defense equipment manufacturers


• The National Electronics Hardware Manufacturing Policy is proposed to resolve tariff and duty related issues and set up hardware manufacturing clusters/ parks


• Electronic Hardware Technology Parks set up to encourage investment in the sector in several cities e.g. Bangalore and Cuttack
  

Potential & Opportunities

• Indian Electronics Hardware industry is forecast to grow very fast in the coming years


• Will reach $62 billion by 2010 from about $11 billion in 2005


• Domestic consumption will see 33% CAGR


• Exports will grow faster


• Four countries – China, South Korea, Taiwan and Malaysia – account for over one-third of world production
  India’s inherent advantages of availability of adequate engineering talent and low cost structure can be leveraged to advance its position in the global market


• Growing domestic market fueled by increase in penetration


• Domestic market provides opportunities in manufacture of consumer electronic goods and mobile handsets


• New SEZ Act with duty-free imports and income-tax concessions will facilitate creation of large-scale manufacturing units for the world market

Global market opportunities in Electronics Manufacturing Services include:

• Contract Manufacturing: $500 billion outsourcing opportunity by 2010 of which India can tap $11 billion


• Design Services: $7 billion projected by 2010


• Component Exports: $5 billion projected by 2010


• The sector requires large investment of about $17 billion over the next 5 years – Some mega projects have already been announced and there is visibility for about one third of the investment required