USA companies keen to invest in India’s electronics sector

Growing market for local consumer electronics and select telecom products is also attracting investors into the segment, says an IESA report

By Sai Nikesh D

Catherine Novelli, the United States Under Secretary, has said this week that several companies in USA are keen to join India in promoting electronic manufacturing in the country. However, she felt that the constraints of global supply chain must be considered while implementing the “Make in India” programme.

Responding to Novelli’s statement, Ravi Shankar Prasad, India’s Minister of Information Technology, promised US companies of unbiased treatment with Indian companies and assured that US companies manufacturing in India can also avail export incentives offered by the Indian government to domestic companies.

Manufacturing in the electronics sector in India is a priority for the India which meets up to 90% of the domestic requirement through imports. According to Ajay Kumar, Head of the Electronics and Hardware Manufacturing Division, Department of Electronics and Information Technology (DeitY), India’s dependence on electronic imports is expected to cross $300 billion (around Rs.19 lakh crore) by 2020 and exceed that of crude oil. Significantly, consumption of semiconductors in India is almost completely met by imports.

Growing dependence on imports, and almost negligible presence of electronic manufacturing in the country has forced the Indian government to seek investments in the sector. In this regard, DeitY is already in talks with leading Indian companies and the Department plans to invest up to Rs.100 crore to kick-start electronic manufacturing in India.

Imports-TheDollarBusiness1

Source – IESA

Kumar said that the government will invest for a 15% to 20% stake in each company and the remaining funds will come from venture capital firms that are currently short-listing start-ups in the hardware segment in India.

According to the Indian Electronics & Semiconductors Association (IESA), the market for local consumer electronics and select telecom products is expected to surge in coming years in India. Emerging segments like medical and aerospace/defence are also expected to the leverage the existing capabilities of the Electronics Manufacturing Services (EMS) industry.

According to an IESA and Frost & Sullivan report, the Electronic System and Device Manufacturing (ESDM) industry in India is expected to grow to around $94 billion by 2015, while the EMS sector is expected to grow to around $1 billion in 2015, up almost three times from $300 million in 2010.

This article was published in The Dollar Business on January 16, 2015.

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