Electronic Systems

Summary
  • The Electronics System Design & Manufacturing (ESDM) industry includes electronic hardware products and components relating to information technology (IT), office automation, telecom, consumer electronics, aviation, aerospace, defence, solar photovoltaic, nano electronics and medical electronics. The industry also includes design-related activities such as product designing, chip designing, Very Large-Scale Integration (VLSI), board designing and embedded systems.
  • India’s digital base is the second largest in the world and is growing at the second-fastest rate among the 17 leading economies.1
  • The Digital India Program has been transforming the Country into a digitally empowered society and knowledge economy since its launch in July 2015.2
  • India is the third biggest start-up hub in the world.3 In 2019 alone, 1300 new tech start-ups were added.4
Reasons to Invest
  • India is home to considerable talent for electronic chip design and embedded software.
  • Electronic Manufacturing Services (EMS) industry is expected to be a significant contributor to the entire industry’s development.
  • India has strong design and R&D capabilities in auto electronics and industrial economics.
  • The Government is promoting the development of Electronics Manufacturing Clusters (EMCs) throughout the Country to provide world-class infrastructure and facilities.
  • Major Government initiatives such as ‘Digital India’, ‘Make in India’ and supportive policies including favourable FDI Policy for electronics manufacturing have simplified the process of setting up manufacturing units in India.
  • India is the second fastest digitizing economy amongst the 17 leading economies of the world.5
  • There is a huge demand for electronic goods in the Middle-Eastern countries and in emerging markets such as North Africa and Latin America. This provides an export market for ‘Made in India’ electronic goods.

 

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Recent Announcements

22nd April 2021: MeitY announced a #FOSS4GOV Innovation Challenge to accelerate the adoption of Free and Open Source Software (FOSS) In Government. The aims to submit implementable open-source product innovations in CRM and ERP with possible applications for Govtech in Health, Education, Agriculture, Urban Governance etc.

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13th April 2021: Union Minister Shri Piyush Goyal inaugurates e-SANTA, an electronic marketplace providing a platform to connect aqua farmers and buyers.

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08th March 2021: Hon'ble minister Shri Sanjay Dhotre inaugurates International Conference on Multifunctional Electronic Materials & Processing- 2021 to interact with eminent scientists/technologists working in the field of multifunctional electronic materials.

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24th February 2021: Cabinet approves Production Linked Incentive Scheme for IT Hardware.

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16th February 2021: Amazon India to commence Electronic Devices Manufacturing in India.

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Statistics
  • India currently has 687.63 mn internet subscribers and 354 mn smartphone devices (February 2019). Smart users are expected to rise by 84% and reach 859 mn by 2022.7
  • The Consumer Electronics and Appliances Industry in India is expected to become the fifth-largest in the world by 2025.8
  • The groups of Electronic Goods (11.89%) export showing positive growth in June 2021 over June 2019. Drugs and pharmaceuticals (9.9%).
FDI Policy
  • 100% Foreign Direct Investment (FDI) is allowed under the Automatic Route in the ESDM industry.9
  • For defence electronics, up to 100% FDI is allowed, subject to industrial license. Under the Automatic Route, up to 49% FDI is allowed. Above 49% is allowed under the Government Route on a case to case basis, wherever it is expected to result in access to modern and ’state-of-the-art’ technology in the country.10
  • The Government allows 100% FDI in medical devices via the Automatic Route. Investors are no longer required to take the Foreign Investment Promotion Board’s permission to acquire an existing company or set up a new manufacturing unit in the medical devices sector. The investor, however, will need to comply with the reporting requirements of the Reserve Bank of India (RBI) and comply with all other relevant Central and State laws and regulations.11
  • The cumulative FDI equity inflow in the Electronics industry is USD 3,166.43 mn during the period April 2000 to March 2021.6

 

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Sector Policy

National Policy on Electronics 12

The National Policy on Electronics (NPE) 2019 envisions to position India as a global hub for ESDM by encouraging and driving capabilities in the Country for developing core components, including chipsets and by creating an enabling environment for the industry to compete globally.

The NPE 2019 replaces the NPE 2012, which has successfully built the foundation for a competitive Indian ESDM value chain. The NPE 2019 targets to promote domestic manufacturing and export in the entire value chain of ESDM and achieve a turnover of USD 400 Bn by 2025.

For more details on the NPE 2019, please refer to NPE 2019.

Modified Special Incentive Package Scheme (M-SIPS) 12

THE M-SIP Scheme, launched in 2012, provided capital subsidy of 20% to electronic industries in Special Economic Zones (SEZs) and 25% to industries outside SEZs. As of 30th November 2019, 407 applications with a total proposed investment of INR 1,09,768 cr are under consideration. Out of these 407 applications:

  • 235 applications with about INR 66,407 cr proposed investment have been approved
  • 31 applications with about INR 13,072 cr proposed investment have been recommended by the Appraisal Committee for approval
  • 141 applications with INR 30,289 crore proposed investment are under appraisal process  

Electronics Development Fund (EDF) 13

This Scheme helps promote start-ups and innovation. The EDF is a fund of funds that invests in venture funds, which in turn invest in innovation ventures/ start-ups in electronics, nano-electronics and IT. The EDF will invest about INR 659 cr in 11 Daughter Funds which have a total targeted corpus of INR 5576 cr. As of 30th November 2019, INR 117.89 cr has already been invested by EDF in 7 Daughter Funds, which have made a total investment of INR 560.98 cr in 75 Ventures/Startups. 

Electronics Manufacturing Clusters (EMC) 13

The Scheme, launched in 2012, encourages entities including State Governments to provide good quality infrastructure within a cluster. Under the Scheme, up to 50% of the project cost for greenfield EMC and 75% for brownfield EMC is given as a grant. As of 31st December 2019, 20 EMCs have been provided grant-in-aid of INR 520.88 cr by MeitY.

Electronics Manufacturing Schemes 2020 14

To further strengthen the ESDM ecosystem with a complete value chain and position India as the global hub for ESDM, the following schemes have been notified by the Ministry of Electronics and Information Technology (MeitY):

  • Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): SPECS has been notified to strengthen the value chain for electronics manufacturing in India with the target segment comprising of downstream value chain products such as electronic components, semiconductor/ display fabrication units, ATMP units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods. Under the scheme, 25% incentives will be provided on capital expenditure (on a reimbursement basis) in new units and expansion/ modernization/ diversification of existing units. The scheme will be open for applications for a period of 3 years from the date of notification. All investments made within 5 years from the date of acknowledgement will be eligible for receiving incentives under SPECS which has an outlay of about USD 440 Mn.
  • Modified Electronics Manufacturing Clusters Scheme (EMC 2.0): The scheme has been notified to support the creation of quality infrastructure with common facilities and amenities, including Ready Built Factory (RBF) sheds/ Plug and Play facilities. Under the scheme, financial assistance of 50% of the project cost will be provided to EMC projects subject to a ceiling of INR 70 Cr for every 100 acres of land while 75% of the project cost will be provided for Common Facility Centres (CFCs) subject to a ceiling of INR 70 Cr. The scheme will be open for applications for a period of 3 years from the date of notification and disbursement of funds to the approved projects will be done in a period of 5 years. EMC 2.0 scheme has an outlay of about USD 500 Mn.

Production-Linked Incentive Schemes21

  • Hon’ble PM, Shri Narendra Modi has approved PLI Scheme in  Electronics System Sector through the MeitY with a financial outlay of INR 5000 cr over a five-year period for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.
  • 16 applications were approved under the first round of the scheme (5 companies under Global Champions Category, 5 companies under Domestic Champions Category and 6 companies under the Electronic Components category) with an incentive outlay of INR 36,440 crore.
  • Additional employment generation during this period stands at around 22,000 jobs.

 

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Financial Support

Key Points in Union Budget 2020-21

  • Ministry of Electronics and Information Technology has been allocated USD 919.87 Mn.19
  • Out of the USD 919.87 Mn budget allocation, the revenue expenditure allocation is USD 869.87 Mn and capital expenditure allocation is USD 50 Mn.20
  • The total budget allocation towards the Digital India Program is USD 527.73 Mn. 17

Export Incentives

Export incentives of 2-3% are available under the Merchandise Export from India Scheme (MEIS). Products such as air conditioning parts and compressors, refrigerating equipment compressors, fully automatic washing machines, colour televisions, and set top boxes for accessing files are included in the list of products that get export incentives.

SUPPORT FOR INTERNATIONAL PATENT PROTECTION IN E&IT 18

To encourage filing of international patents, a scheme to Support International Patent Protection in Electronics & IT (SIP-EIT) has been commissioned. The Scheme provides financial support to Small and Medium Enterprises (SMEs) and tech start-ups by supporting international patent protection in electronics and IT.

Reimbursement is limited to a total of around USD 21,650 per invention or 50% of the total expenses incurred in filing and processing of patent application up to Grant, whichever is lesser.

Investment Opportunities
  • Mobile phone manufacturing 16
  • Semi-conductor wafer fabrication manufacturing 16
  • Light Emitting Diode (LED) manufacturing 16
  • Wearable devices manufacturing 16
  • Solar cells and modules manufacturing 16
  • LED and Liquid Crystal Display (LCD) manufacturing 15
  • Research, innovation and skill development support in emerging technology areas such as Augmented Reality (AR), Virtual Reality (VR), drones, robotics, additive manufacturing, etc 15
  • Medical electronic devices manufacturing 15
  • Research and development of automotive electronics and power electronics for mobility 15

 

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Foreign Investors
  • Qualcomm (US)
  • Samsung (South Korea)
  • LG (South Korea)
  • GE (USA)
  • Bosch (Germany)
  • Amphenol (US)
  • Motherson Sumi system (Japan)
  • Nidec (Japan)
  • Magneti Marelli (Italy)
  • Continental (Germany)
  • Delphi (USA)
  • Mando Hella (South Korea)
  • Mitsubishi (Japan)
  • Harman (USA)
  • Perto (Brazil)
  • Giesecke and Deverient (Germany)
  • Haier (China)
  • Philips (Netherland)
  • Panasonic (Japan)
  • Huawei (China)
Agencies
Sources

 

  1. "India’s Trillion-Dollar Digital Opportunity", Ministry of Electronics and Information Technology, https://meity.gov.in/writereaddata/files/india_trillion-dollar_digital_opportunity.pdf
  2. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  3. Indian Tech Start-up Ecosystem 2018: Approaching Escape VelocityNASSCOM, https://www.nasscom.in/knowledge-center/publications/indian-tech-start-ecosystem-2018-approaching-escape-velocity
  4. Indian Tech Start-up Ecosystem: Leading Tech In The 20sNASSCOM, https://www.nasscom.in/knowledge-center/publications/indian-tech-start-ecosystem-leading-tech-20s
  5. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  6. Factsheet on FDI - April 2000 to March 202Department for Promotion of Industry and Internal Trade, https://dipp.gov.in/sites/default/files/FDI_Factsheet_March%2C21.pdf
  7. Report on India’s Trillion Dollar Digital Opportunity Released, Ministry of Electronics and Information Technology, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565669
  8. "Session 5:- Promoting “Make in India” through Policy guidelines & Communication Broadband Equipment’s by use of hackathon", Ministry of Home Affairs, https://dcpw.gov.in/session5.php
  9. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,  https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf
  10. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,  https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf
  11. FAQs on Foreign Direct Investment & Electronic System Design & Manufacturing (ESDM), Ministry of Electronics and Information Technology,   https://meity.gov.in/writereaddata/files/FAQ_FDI_ESDM.pdf
  12. Cabinet approves the proposal of National Policy on Electronics 2019, PIB, http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1565285
  13. Annual Report 2019-20, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/Annual_Report_2019%E2%80%9320.pdf
  14. Electronics Manufacturing Schemes (2020), Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/Presentation-Electronics_Manufacturing_Schemes.pdf
  15. National Policy on Electronics 2019, Ministry of Electronics and Information Technology, https://www.meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf
  16. Electronic System Design & Manufacturing (ESDM) – Sector Profile", Government of Gujarat, http://vibrantgujarat.com/writereaddata/images/pdf/electronic-sytem-design-and-manufacturing-sector.pdf
  17. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf
  18. Support for International Patent Protection in Electronics and Information Technology, Ministry of Electronics and Information Technology, http://www.ict-ipr.in/sipeit/SIPEITForm
  19. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf
  20. “India Budget”, Ministry of Electronics and Information Technology, https://www.indiabudget.gov.in/doc/eb/sbe24.pdf
  21. PIB Release,  https://www.pib.gov.in/PressReleasePage.aspx?PRID=1710134

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