Market Analysis

India poised to improve domestic manufacturing

A rapidly growing population where a significant majority of that population are between 15-29 years old not only means the emergence of a tech-savvy generation who have grown up using smartphones and laptops, but growing numbers of a population with greater spending power.

India, whose recorded population was approximately 1.4 billion in 2022 and growing, is the second-largest mobile phone manufacturer in the world, with reportedly more than 200 mobile phone manufacturing units set up in the country. According to market analysis from Counterpoint, India’s smartphone shipments grew 8% YoY in volume in Q1 2024, and 18% in value. This value growth could be attributed to the premiumisation trends and new launches during this quarter, which included launches by Samsung and OnePlus.

The aftershocks felt by the Covid-19 pandemic and the impacts it had on the global supply chain created not only uncertainty about the economy, but caused nations to reevaluate their domestic manufacturing and safeguard themselves for the future. Infamously, the semiconductor shortage period between 2020-2023 drove up prices and reselling among consumers and manufacturers for the myriad of applications semiconductor chips are used for including household appliances, computers and other consumer electronics.

However, India is currently heavily dependent on electronic components imports, as complaints circulate around the lack of infrastructure in place for India to be able to manufacture its own components for device manufacturers making smartphones and laptops.

Earlier this year, sister publication Electronic Specifier reported on the Indian government’s mission to bolster its semiconductor and electronics manufacturing capabilities with an investment of $15.2 billion put forward. The investment will be used for establishing India’s first semiconductor fab along with two packaging and test facilities. Another step it has taken to bolster manufacturing includes an $11 billion joint venture between Taiwan’s Powerchip Semiconductor and Tata Electronics.

A recent report put out by the Confederation of Indian Industry (CII) put forward recommendations on how to develop India from an import dependent country to component level value-added manufacturing.

According to the report, the demand for components and sub-assemblies was at $45.5 billion, to support $102 billion worth of electronics production, which is expected to increase to $240 billion to support $500 billion by 2030.

Electronics components categorised as a high priority by the report include lithium-ion batteries; camera modules; mechanicals; displays and PCBs. These components make up 43% of the demand in 2022 which currently have a nominal production in India or are import dependent. The report warned against India continuing to import these priority components, as it said it wouldn’t be able to keep this up.

The competing economies of China, Vietnam, Mexico; a lack of domestic manufacturing corporations; the costs of domestic manufacturing; a lack of a domestic design ecosystem and raw materials ecosystem all present challenges to India becoming more self-sufficient in manufacturing its own electronic components.

The key suggestions presented by the report include creating a scheme aimed at providing financial support for components and sub-assemblies; introduce a subsidy support ranging from 25% to 40% to support potential investors; bringing import tariffs down to 5% or lower and pursuing FTAs with EU, UK, GCC countries and emerging economies in Africa.