electronics industry - a sneak peek

8/6/2019 Electronics Industry - A Sneak Peek

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Electronics Industry A sneak peek

Now that Im being trained in one of the leading consumer electronics company of India, it intrigued me

to know and understand how the Electronics Industry as a whole is doing over a period of time. This

minuscule composition is full of interesting facts and figures (pertaining to the Indian context), that Ive

accumulated in this process from the worldwide web. Ive tried to understand the trend of this thrivingindustry and have concluded with my perspective.

In the year 2010-11, the performance of Electronics & IT-ITeS industry was marked by sustained

recovery and revival in momentum of the growth. The total production of Electronics & IT-ITeS Industry

is estimated to grow at 13.1 per cent in 2010-11 as against 11.6 per cent in 2009-10, out of which the

dominating contributor is Software & Service Industry (which mainly drives on exports). However one

can notice (in the chart below) that during the economic slowdown during 2009-10 the IT Industry

growth has changed its speed to lower gears while the Electronics Industry continued to accelerate

without any hassles.

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

56600 66000 84410 97260110720 121760

133700178000

211410275190

304800348330

Electronics & IT Production Profile

Electronics Hardware

Computer Software

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

18000 20000 2260025550 29000

334007000 9500

1870026600

3100032550

880010400

1191012740

1516018190

1080012800

15870

13490

1497014970

32004500

5700

6840

69807680

8800 8800

9630

12040

13610

14970

Electronics Production (in Crores)

Consumer Electronics

Communication & Broadcast EquipmentIndustrial Electronics

Computer HardwareStrategic ElectronicsComponents


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The electronics Industry can be majorly classified into six segments Consumer Electronics,

Communication & Broadcast Equipment, Industrial Electronics, Computer Hardware, Strategic

Electronics and Components. In the graph above, it can be observed that the highest growth is recorded

by Consumer Electronics and Communication & Broadcast Equipment. While others categories are also

growing, they are not moving with the pace the first two are traversing.

Consumer Electronics

Consumer electronics is one of the largest segments in the electronics hardware sector in India. Given

the confluence of information, communication and entertainment, there has been new momentum in

the consumer electronics industry in India. Changing lifestyles, higher disposable income and greater

affordability is fueling the growth in this segment. Products and devices that come with smart

technology, innovative designs and aesthetic looks are gaining preference, of which the premium

products, particularly in the metros and tier 1 cities are the prime constituents responsible for growth.

y Color television is the largest contributor in this segment with its market size in 2010-11 expected tobe at 16.1 mn units (5.5% growth over previous year)

y LCD TV sales are increased from 1.5mn units in 2009-10 to 2.8mn units in 2010-11. The reason beingdeclining prices and increased penetration levels.

y CRT TV segment on the other hand is stagnant around 13.3 million units.y The DVD player market decline from 6.20 mn units in 2009-10 to 5.40 mn units in 2010-11, on an

account of rapid growth and popularity of the DTH.

y Home Theatre segment grows 25% from 0.24 mn units in 2009-10 to 0.30 mn units in 2010-11.y Microwave oven production is estimated to grow by 21.6 per cent to reach Rs.930 Crore in 2010-11

as against a growth of 7.9 per cent in 2009-10.

y Domestic production of Public Address (PA) system is estimated to remain flat at 10 per cent in2010-11 over a base of Rs.410 Crore in 2009-10.

Industrial Electronics

This includes critical hardware technologies and systems with built-in software. It is a very challenging

area, multi-disciplinary in nature, requires high level of technical skill to design systems for applications

in a variety of industrial sectors of the economy. Though we have a considerable expertise in

conceptualizing such systems and its implementation and undertaking, the sector is largely dependent

on critical hardware and associated software imports. It has been a practice that large projects are

implemented with total import of packages from abroad without any knowledge of its design leading to

higher initial cost and a much higher maintenance cost in the long run.

The important devices used in this segment relate to power electronics, medical electronics and other

intermediates like semiconductor. Semiconductors are integral part of most medical equipments,

starting from high end imaging to small hand held devices. The estimated production figure for this

segment for 2010-11 is Rs.18190 crore as against Rs.15160 crore in 2009-10, a growth of about 20 %.

Computer Hardware


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India is one of the fastest-growing IT systems and hardware market in the Asia-Pacific region. Most of

the prominent global and some local vendors have strong presence in the Indian market. Most MNCs

have their assembly units in India. BFSI (Banking, Financial Services and Insurance), telecom, ITeS

(Information Technology enabled Services), manufacturing verticals, Small & Medium Enterprises

(SMEs), e-Governance and households are the key drivers of the IT systems and hardware market in

India. With significant IT adoption plans to be carried out, the IT systems and hardware market is

expected to expand rapidly in the coming years.

y PC sales are expected to record a growth of 12 per cent in 2010-11 to touch 9.7 million.y Notebook sales are estimated to grow by 40% from 3.5 million in 2010-11 to 2.5 million in 2009-10,

indicating that the laptop computers have caught the fancy of the consumers.

y Desktop sales are expected to reach 6.2 million in 2010-11 against 5.5 million in 2009-10, a growthof 12.7 per cent.

y Sales of servers posted a growth of 41 per cent during second quarter 2010-11 on account of theeasing of the Economic slowdown. Establishments which had been postponing their major IT

purchases in last few quarters are now ready to invest in IT, which could be the major reason for the

growth in the server sales. The Server market is expected to register positive growth in the future as

the Server market expands to smaller cities (whose growth is largely fuelled by the larger

organizations strengthening their base here on account of cost advantages) and Small and Medium

Businesses (the growth of these is propelled by the adoption of non-traditional businesses like

education, retail, healthcare & hospitality).

y Domestic production is estimated to remain flat in 2010-11 at Rs.14970 crore because ofdecelerating growth in exports and substitution of domestic production by cheaper imports and

rising input cost.

Communication and Broadcasting Equipments

y As on December 2010,India is third largest in the world in terms of gross telephone subscribers (787.28 mn by Dec

2010, of which 752.19 mn are wireless and 35.09 are wireline), and second largest in Asia.

The overall Tele-density in India reached 66.16 per cent in with overall urban and rural tele-

densities being 147.88 and 31.18 respectively.

The total broadband (256 kbps download) subscriber base of India is 10.92 million.

y The FM radio policy has been well received and there are a total of 248 channels operated by 42operators in 84 cities at the end of September, 2010.

y Besides the free DTH service of Doordarshan, there are 6 private DTH licensees, offering theirservices to the DTH subscribers. As on 30.9.2010, their reported subscriber base is 26.44 million. It is

set to overtake the US as the largest DTH market in the world by 2012, anticipating an addition of

10-12 million subscribers every year. The growth is from both the urban area (where subscribers

are moving away from cable) and rural area (where cable has not reached).

y Local manufacturing of DTH Set-Top Box has now commenced and is meeting about 25 per cent ofthe total requirement of the DTH industry. Number of Set Top Boxes (STBs) installed in CAS notified

areas of Delhi, Mumbai, Kolkata and Chennai increased from 770,519 in June-2010 to 775,876 in

September-2010.


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Strategic Electronics

This encompasses satellite based communication, navigation and surveillance system, radars,

navigational aids, sonar, underwater electronic system, infra-red based detection and ranging system,

disaster management system, internal security system, etc. The Indian strategic electronic industry has

been able to meet the bulk of the requirements of Indias defense and paramilitary forces. Indias

defense, aerospace and nuclear sectors are poised for substantial growth on the back of economic

growth and the need to maintain national and energy security. The role of IT in defense is expanding

with the new focus on cyber security, thereby indirect increase in computer hardware requirement.

India is expected to be one of the top-5 markets for defense equipment by 2015. Similarly, economic

growth and a focus by commercial aircraft manufacturers on low-cost countries are expected to create

growth in the aerospace market in emerging markets in general and India in particular. The civilian

nuclear agreement between the US and India will enable commerce and cooperation, in particular

allowing India to collaborate with global companies on nuclear projects. India has an opportunity to

play an important role in this global phenomenon. The estimated production figure for this segment for

2010-11 is Rs.7680 crore as against Rs.6980 crore in 2009-10, a growth of about 10%.

Electronic Components

The electronic component segment caters to the consumer electronics, telecom, defense and IT

verticals. The growth in these segments is key determinant for the growth of electronic components.

The key constituents include semiconductor, capacitors, and resistors, picture tubes, X-ray tubes and

cathode ray tubes. Its production for the year 2010-11 is estimated to be around Rs.14970 crore as

against Rs.13610 Crore in 2009-10, registering a growth of about 10%. The emergence in this pie of

electronics industry has been driven by increase in domestic consumption of IT products, e-Governance

initiatives of the GoI, and rise of semiconductors (solar photovoltaic, optical LEDs, displays, display

panels, storage devices and advanced micro and nanotechnology products).

The reason behind

It will highly interest everyone, and Im no exception, as to why the total Electronics Industry led by

steep incline in demand and production of Consumer Electronics and Communication & Broadcast

Equipment was least fumbled during economic slowdown when even the closely associated IT and ITeS

industries, let alone others, took a notable hit.

No matter which part of the globe it was, in the tougher times the electronics industry, though might

not have been at its full potential, has been above par compared with the other counterparts, one of the

biggest reasons is that consumer electronics (CE) has started becoming a necessity, and less thought ofas a luxury these days, and CE is an area where consistent and continuous innovation in technology and

products is ingrained, which has been fruitful and making life even easier. Also the slowdown time was

when the prices of the electronic products were relatively lower and the obvious trend would solely be

that more technology and features come with lesser prices in the future. The only thing that changed

with consumers during low economic activity was that unlike other areas viz. real estate, automobiles

etc, they were spending their money on CE, but in a cautious manner, and were looking for more


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value in any product they might like to purchase. The CE companies had no problem coming up with

products that had higher customer perceived value and innovative features, because of which there has

been a consistent incline in the demand and production of CE in India. Though the customers might not

want to go with the premium products during the downturn, they were certainly not backing up from

buying any product that they deem as relevant and necessary. With the advent of internet revolution

and ingress of large number of companies into the tele-services and broadcasting segments the demand

for mobile phones, smart phones, mobile devices, mobile computing devices, high definition television

sets, DTH set top boxes, DVD/Blu-Ray players, and other wireless devices has only been escalating.

With respect to the other consumer electronics like washing machines, microwaves, home theater

segments, portable music players, the increased market for these devices can be accounted to the

changing life styles and preferences of the consumers. Urban and semi-urban citizens are into this mode

of lifestyle where they hardly have enough time to do daily chores like washing, cleaning and cooking

which have been made easier with devices smart washing machines, microwave ovens, dishwashers etc.

Also, they have been growing conscious of appealing and thrilling TV viewing and music listening

experiences, which is why the demand for the entertainment segment devices like home theaters,portable music players (to relax when stressed out or to use while traveling or exercising).

There is another, important, reason why the industry is able to bloom in the country. It is because ofthe

measures that the Government of India (GoI) has been taking to promote this thrust area, which is

increasingly finding its applications in all sectors of the economy and thus is accepted as a prime

facilitator in development. Given the telling growth of economy (one of the fastest growing economies

in the world), steady rise in disposable income of the people and inclination of the young generation

towards technology, the consumption of electronic appliances and gadgets in the country is acquiring

pace making India one of the fastest growing electronics hardware markets, here the domestic demand

of electronics hardware is estimated at US$ 400 billion by 2020. Hence India has a huge opportunity athand to turn itself into an electronics hardware manufacturing hub to meet its domestic requirements

as well as the global requirements, which is the reason why the Government of India (GoI) has accorded

high priority to this sector. The promotional steps that GoI has been taking include Special Incentive

Package Scheme to create a conducive environment for manufacture of high technology capital

intensive semiconductors and other high tech products, and to attract global investments and bridge the

viability gap due to lack of adequate infrastructure and ecosystem, Export Promotion of Capital Goods

Scheme imposition of relatively very low customs duty on import of capital goods with certain export

obligations, setting up Special Economic Zones (SEZs) to enable hassle free manufacturing for export

purposes, Relaxing Excise and Custom duties significantly on component parts and raw materials to a

large extent to promote indigenous production.

With 1/6th

of the worlds population in India, more liberal policies of GoI which are tending to promote

any business in India, tremendous advances in the technology, reduction in the prices of components,

enormous technical workforce, additional support schemes from the Government (like ones mentioned

above), foray of more players into this industry and their attempts to penetrate deeper into unexplored

areas of the market, competition nearing the perfect situation, I can only foresee a huge unrealized

potential in the Electronics Industry where, I believe, all this is just the beginning!

electronics industry - a sneak peek

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