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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

April - 2010 - issue > In My Opinion

Indian Electronics Products - A $100 Billion Opportunity

Sanjay Nayak
Tuesday, March 30, 2010
Sanjay Nayak
Indian companies have gained significant success over the last 20 years in the global IT and ITeS industry. However, we still don’t have innovation-driven, globally successful, high-tech product companies from India; despite the fact that people of Indian origin have contributed immensely in building many successful global high-tech product companies and no one doubts the technological and entrepreneurial caliber of Indians.

According to a recent report by Ernst & Young, the Indian domestic demand for electronics products is expected to reach $125 billion by 2014, up from the current level of $45 billion annually. The primary demand drivers are sectors like telecom, defence, IT and e-governance, automotive, consumer electronics, and energy. At these demand levels, unless India creates its own electronics product industry, the imports of such products will create the single largest trade deficit item, which would even be larger than petroleum products. On the other hand, if this unique opportunity is utilized, it can create a large industry catering to domestic consumption, which will help achieve self reliance in strategic sectors like telecom and defence, while leading to large exports.

Most leading countries in the world have nurtured their domestic electronic industry that has not only met their domestic and strategic needs, but also created successful businesses that export several billion dollars worth of products around the world. For instance, electronic products form an insignificant part of our GDP, whereas they contribute to over 22 percent of GDP of Israel and over 15 percent for Korea and Taiwan. Also, as a global player, U.S. has over 40 percent share of global electronic products markets and China has 15 percent, whereas the share of India is close to nil.

Today India has the two most important ingredients that can enable us build global product companies ? a huge domestic market and a large pool of highly talented technical and managerial workforce. In addition, we also have venture capitalists who have the financial resources to provide the necessary funding for capable product startups. Given these ingredients, what is missing and why don’t we have the likes of Cisco, Apple, Nokia, or Huawei from India?

For building an Indian product industry, it is important to focus on activities that contribute to highest amount of value-addition and also lie in the sweet-spot of our core strengths. The majority of value-addition in electronic products comes from R&D, IPR creation, hardware, software, and product design, and then marketing, branding, and sales activities. Fortunately, R&D and IPR creation is a knowledge and people-driven activity, in which India has a global edge that we must leverage, and which requires relatively less capital investments. Due to sophisticated Electronic Design Automation (EDA) tools and emergence of high capacity programmable devices, even hardware design has become similar to software development, an area in which India has established global leadership. The actual manufacturing that requires huge investments in basic infrastructure and logistics can be outsourced to global Electronic Manufacturing Services (EMS) companies that have economies of scale. Once we have Indian product companies, it will have a pull-through effect to create a vibrant eco-system of EMS, semiconductor, and component industries in India.

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