India’s government recently presented a draft policy intended to increase the value of electronics products manufactured in the country to $400 billion by 2025. The policy calls for a doubling of mobile phones produced in India, growing from 500 million units annually to 1 billion in this timeframe. This is designed to drive total revenues from mobile handsets to $190 billion, or nearly half of the targeted total revenue. An additional goal is to export 600 million phones to capture export revenue worth $110 billion.
The policy proposed by India’s new government seeks to alter existing incentive schemes to make it easier for businesses to implement and run their operations. The current Modified Special Incentive Package Scheme (M-SIPS), which was implemented by the previous government in 2012, created investment subsidies for manufacturing companies in the electronics sector. Investments of 20% were offered for approved companies establishing operations in Special Economic Zone (SEZ) locations and 25% outside the SEZs.
According to government statistics, under the current policy 265 applications have been received and 139 have commenced production to date. This represents a total investment of over Rs 8,000 crore, or $1.09 billion. Additionally, approvals have been issued to 188 companies and the amount proposed to be invested by them was around Rs 40,000 crore, or $5.5 billion. The most recent proposal would add new incentives for businesses, including direct tax benefits like IT exemptions linked to the investments.
The new policy presented by the government promotes growth in all segments of the electronics industry, including electronic components and semiconductors. Targeted market segments are military electronics, automotive electronics, and industrial electronics. A key area of concern in assessing progress under the previous M-SIPS policy is that only 23 Electronics Manufacturing Clusters have been created compared to a target of 200 that was set in the 2012 policy.
Production Data, Targets Questioned
While government support and plans for economic development of the electronics industry is beneficial, the claims for current levels of production and production targets invite some scrutiny. According to electronics market data published by IHS Markit Technology group in its Application Market Forecast Tool for Q2 2018, total revenues for electronics production in India is forecast to be $34.5 billion in 2018, or 1.5% of total electronics production worldwide. IHS Markit’s forecast calls for India electronics equipment production to grow to $40 billion by 2022.
Clearly, there is a significant difference between the $400 billion targeted by India’s government and the sizing and forecast of India’s electronics production by IHS Markit.
The details related to mobile handset production call into question a major pillar of India’s claims regarding overall electronics production. According to IHS Markit, India is forecast to produce 73.1 million mobile handsets in 2018. This is less than 15% of the production level of 500 million claimed by the Indian government. Two billion mobile handsets and smartphones are forecast to be produced in 2018 by IHS Markit with production dominated by China. Simply looking at the brands that dominate worldwide mobile handset market shares and identifying the production locations for these brands reveals that claims of 500 million units of production in India are significantly inflated.
After placing India’s production in the context of available third-party data, it is clear that the claims and goals of electronics production by the Indian government cannot be used for true planning purposes. While it is important to note the government initiatives to boost electronics production in India, the actual size of the market is much lower than the data published by the government. Partners and suppliers should carefully scrutinize data from business plans presented as part of the Indian government’s M-SIPS policy.