The Indian ESDM/EMS Industry: Growth, Challenges, and Future Prospects

India's Electronics System Design and Manufacturing (ESDM) sector has experienced remarkable growth, becoming a global manufacturing powerhouse with significant increases in production and exports. Government initiatives like PLI schemes and the Semicon India Program have played a crucial role in this expansion. Despite impressive progress, challenges remain, including funding for startups, external dependence on critical minerals, and the need for a more robust local component ecosystem. To accelerate growth, India must focus on strengthening its supply chain, enhancing skill development, boosting R&D, improving infrastructure, attracting foreign investment, and embracing emerging technologies. By addressing these areas, India can solidify its position in the global electronics value chain and fully realize its potential in the ESDM/EMS sector.

Current Status of ESDM/EMS Industry in India

Impressive Growth

The Indian ESDM sector has shown remarkable progress, becoming the world's second-largest mobile phone manufacturer. The electronics manufacturing industry is projected to reach Rs. 43.68 trillion (US$ 520 billion) by 2025. Electronic goods exports have already hit Rs. 2.4 trillion (US$ 29.11 billion) in FY24, marking a 23% year-over-year increase.

Government Initiatives

The Indian government has implemented several initiatives to boost the sector:

• Production-Linked Incentive (PLI) schemes
• 'Digital India' and 'Make in India' programs
• Favorable Foreign Direct Investment (FDI) policies

Semiconductor Push

In March 2024, Prime Minister Narendra Modi laid the foundation for three semiconductor projects worth Rs. 1.25 lakh crore (US$ 14.97 billion). The government has also launched the $10 billion Semicon India Program to create a sustainable semiconductor ecosystem.

Meeting Expected Growth

While the industry has shown significant progress, there are areas where it may need to accelerate to meet its full potential:

Challenges

1. Funding for startups in the ESDM sector remains a challenge.
2. India still faces high external dependence on critical minerals essential for electronics manufacturing.

Areas for Improvement

1. Developing a robust local component ecosystem to reduce import dependence.
2. Addressing high logistics costs and the lack of local supporting industries.
3. Bridging the skills gap in the workforce.

Accelerating Growth and Momentum

To further boost the ESDM/EMS industry in India, consider the following recommendations:

1. Strengthen the Supply Chain

• Develop reliable partnerships for critical raw materials.
• Invest in R&D to find substitutes or develop domestic refining technologies for minerals like gallium and germanium.

2. Enhance Skill Development

• Expand programs like the "Scheme for Financial Assistance to select States/UTs for Skill Development in Electronics System Design and Manufacturing (ESDM) sector".
• Collaborate with industry leaders to create tailored training programs.

3. Boost R&D and Innovation

• Increase investment in research and development facilities.
• Encourage collaboration between academia and industry.

4. Improve Infrastructure

• Develop more specialized electronics manufacturing clusters like the proposed Greenfield Electronics Manufacturing Cluster in Salarpur, Khushkhera.
• Enhance logistics and transportation networks to reduce costs.

5. Attract Foreign Investment

• Continue to improve ease of doing business metrics.
• Offer targeted incentives for high-value investments in cutting-edge technologies.

6. Focus on Emerging Technologies

• Encourage investment in areas like 5G, IoT, AI, and electric vehicles to stay at the forefront of technological advancements.

The Indian PCB Manufacturing Industry

The Printed Circuit Board (PCB) manufacturing industry plays a crucial role in India's ESDM sector. As a fundamental component of electronic devices, PCBs are essential for various industries, including consumer electronics, automotive, telecommunications, and aerospace.

Market Status and Growth

The Indian PCB market has shown impressive growth, reaching a value of US$ 5.4 Billion in 2023. Projections indicate robust expansion, with the market expected to grow at a CAGR of 18.1% between 2024 and 2032, potentially reaching US$ 21.3 Billion by 2032. This growth is driven by several factors:

1. Increasing demand for consumer electronics
2. Rising adoption of PCBs in the automotive industry, particularly for electric and hybrid vehicles
3. Government initiatives like "Make in India" and "Digital India"
4. Growing popularity of miniaturization in electronic devices

Advantages of Indian PCB Manufacturing

1. Cost-effectiveness: Indian manufacturers offer prices 20-30% lower than Western counterparts.
2. Skilled workforce: Access to talented engineers and technicians at competitive rates.
3. Faster time-to-market: Proximity to a large electronics market enables quicker product delivery.
4. Improving technology and quality standards
5. Favorable government policies and tax benefits
6. Lower logistics costs for domestic and regional markets

Challenges in PCB Manufacturing

Despite the growth, the Indian PCB industry faces several challenges:

1. High logistics costs for imported raw materials
2. Lack of local supporting industries
3. Shortage of skilled workforce in specialized areas
4. High import dependency for critical components and raw materials
5. Competition from established manufacturing hubs in East Asia

High-Density Interconnect (HDI) PCB Manufacturing

HDI PCBs represent a significant opportunity for the Indian PCB industry. The demand for HDI PCBs is driven by technological innovations in consumer electronics, automotive, and telecommunications sectors[6]. Key aspects of HDI PCB manufacturing in India include:

1. Growing demand due to rapid digital transformation and the need for more sophisticated, compact electronic components.
2. Opportunity for manufacturers to invest in advanced manufacturing technologies for HDI PCBs.
3. Government support through initiatives like the Production Linked Incentive Scheme for Electronics Manufacturing.
4. Potential for substantial growth in the Indian market by meeting emerging needs for high-performance, miniaturized electronics.

To capitalize on this opportunity, Indian PCB manufacturers need to:

• Invest in advanced manufacturing technologies
• Expand capacity for HDI PCB production
• Focus on R&D to improve HDI PCB performance and miniaturization capabilities
• Collaborate with global technology leaders to acquire expertise in HDI PCB manufacturing

By addressing these challenges and capitalizing on the opportunities in HDI PCB manufacturing, India can strengthen its position in the global PCB market and contribute significantly to the growth of the ESDM sector.

Conclusion

The Indian ESDM/EMS industry stands at a pivotal juncture, poised for significant growth and transformation. With impressive progress in mobile phone manufacturing, burgeoning electronics exports, and ambitious government initiatives like the Semicon India Program, the sector has laid a strong foundation for future success. The PCB manufacturing segment, particularly with the emerging opportunities in HDI PCBs, represents a crucial component of this growth story.

However, to fully capitalize on its potential and meet the projected growth targets, the industry must address several key challenges. These include reducing dependence on imported components, developing a robust local supply chain, bridging the skills gap, and enhancing R&D capabilities. The focus should be on creating a self-reliant ecosystem that can compete globally while meeting domestic demand.

As India continues its journey towards becoming a global electronics manufacturing hub, collaboration between government, industry, and academia will be crucial. By leveraging its strengths in cost-effective manufacturing, skilled workforce, and growing technological capabilities, India can accelerate its growth in the ESDM/EMS sector. The coming years will be critical in determining whether India can transform these opportunities into tangible successes, solidifying its position in the global electronics value chain and driving economic growth through innovation and manufacturing excellence.

About the Author

Devraj Sathyadevan is a seasoned professional with many years of experience in the electronics manufacturing industry. He currently serves as independent consultant for ESDM/EMS Industry. He also worked in senior positions with Kaynes Technology India Limited, a leading EMS company. Devraj's expertise spans across various domains including Business Development, operations management, and strategic planning in the ESDM sector.

Throughout his career, Devraj has demonstrated a strong commitment to driving operational excellence and fostering innovation in electronics manufacturing. His deep understanding of the Indian ESDM landscape, combined with his hands-on experience in managing large-scale manufacturing operations, provides him with unique insights into the challenges and opportunities facing the industry.

Devraj is an active contributor to industry discussions and frequently shares his thoughts on the latest trends and developments in the ESDM sector. His articles on LinkedIn offer valuable perspectives on topics such as supply chain resilience, technological advancements in manufacturing, and the impact of government policies on the electronics industry in India.

As a thought leader in the field, Devraj is passionate about promoting the growth of India's electronics manufacturing ecosystem and contributing to the country's vision of becoming a global hub for electronics production.