Introduction
In 2024, India stands at the edge of a technological revolution, driven by the exponential growth of its Electronics System Design and Manufacturing (ESDM) sector. This sector, pivotal to India’s ambition of becoming a global hub for electronics manufacturing, is being propelled by robust demand, strategic policy support, and substantial investments. As India continues to set its position in the global electronics landscape, the country’s commitment to the ‘Make in India’ initiative is becoming increasingly evident, showcasing its potential to lead in both innovation and manufacturing.
Robust Demand: A Growing Market
India’s ESDM sector is witnessing a remarkable surge in demand, largely due to its rapid digitalization and the growing consumer base. The country is expected to become the fifth-largest consumer of electronic products by 2025. The market size of the Indian electronics manufacturing industry is projected to reach a staggering Rs. 43.68 trillion (US$ 520 billion) by 2025, with electronic goods exports already reaching Rs. 2.4 trillion (US$ 29.11 billion) in FY24, a 23% increase from the previous year.
The ESDM industry is not only fulfilling domestic needs but is also catering to international markets. This has been driven by India’s strong capabilities in auto electronics, industrial electronics, and a thriving R&D ecosystem. The electronics design segment, which accounts for 22% of the ESDM market, is growing at a rapid pace of 20.1% and is anticipated to expand to 27% of the market by 2025. Such growth reflects the increasing importance of electronics in India’s economy and its potential to drive future innovations.
Competitive Advantage: India’s Strategic Edge
India’s commitment to reaching Rs. 240 trillion (US$ 300 billion) in electronics manufacturing and Rs. 9.6 trillion (US$ 120 billion) in exports by 2025-26 underscores the country’s strategic focus on the ESDM sector. India’s talent pool in electronic chip design and embedded software is significant, providing a competitive edge in the global market. Moreover, the country’s favorable cost structures, coupled with its growing capabilities in manufacturing, are attracting multinational corporations to set up operations in India.
India has been designing chips and hardware products for some time now, but the increase in manufacturing in India now leverages that domestic skillset to produce entire products locally. This, combined with the software prowess of India, makes it possible to have a fully integrated product developed entirely in India.
The ‘Make in India’ initiative has been a cornerstone of this growth, encouraging companies to localize their production capabilities. The initiative’s success is evident in the increase in mobile phone manufacturing, which reached Rs. 4.1 trillion (US$ 49.16 billion) in 2024, making India the second-largest mobile phone producer globally. This achievement is a testament to the country’s robust manufacturing ecosystem and its ability to compete on a global scale.
Government Initiatives Driving Growth
The Indian government has played a crucial role in fostering the growth of the ESDM sector. The Production-Linked Incentive (PLI) schemes have been instrumental in encouraging companies to establish manufacturing plants in India. These schemes, combined with major government initiatives such as ‘Digital India’, ‘Make in India’, and a favorable Foreign Direct Investment (FDI) policy, have simplified the process of setting up manufacturing units, thereby accelerating the sector’s growth.
In March 2024, the Indian government approved a massive Rs. 1.26 trillion (US$ 15.2 billion) investment in three semiconductor plants, signifying a significant leap in India’s technological capabilities. Additionally, the India-Taiwan chip plant deal, valued at Rs 62,800 crores (US$ 7.5 billion), is set to further boost India’s semiconductor manufacturing, positioning the country as a key player in the global semiconductor supply chain.
Increasing Investments: A Bright Future Ahead
The influx of investments in India’s ESDM sector is a clear indicator of the country’s growing importance in the global electronics market. Companies like Advanced Micro Devices (AMD) have committed to investing Rs. 3,355 crores (US$ 400 million) over the next five years to set up their largest design facility in India. Similarly, Elista’s announcement to invest Rs. 100 crore (US$ 12.1 million) in Andhra Pradesh to establish a manufacturing unit for smart LED TVs and other consumer electronics highlights the sector’s potential for growth.
Moreover, the Indian startup ecosystem, supported by initiatives like Digital India and Startup India, is playing a pivotal role in driving innovation in the ESDM sector. However, securing adequate funding remains a challenge for many startups, which is essential for sustaining their growth and competitiveness.
Conclusion
As we move through 2024, the Indian ESDM sector is set to continue its upward trajectory, driven by robust demand, competitive advantages, supportive government policies, and increasing investments. The ‘Make in India’ initiative is not only transforming India into a manufacturing powerhouse but also positioning it as a global leader in the electronics sector. With a strong foundation in place, India is poised to achieve its ambitious goals, making significant contributions to the global electronics landscape and solidifying its place as a key player in the digital economy.
