Having 35+ years’ of working experience as India Country Head in renowned American companies in India, National Semiconductor, AMD, Freescale Semiconductor, PMC Sierra and Arrow Electronics Sanjeev contributes impeccably to component and electronic industry. He is also Ex Chairman of IESA.
The electronics industry is one of the fastest-growing industries in India where a major section of the society is handholding smartphones or tablets, or they are delved into working in laptops, which are connected to routers for internet connection. Electronics at home include televisions, printers, washing machines and air-conditioners. Because of this, the total electronics consumption market in India in recent times in 2019 was around $160 billion according to IESA report. 50 percent of the products are imported and 50 percent of the products are produced domestically. However, the 50 percent domestic manufacturing value add was only 15 percent to 20 percent, which is a very big challenge.
Analyzing the value chain of any electronic product suggests that 40 percent value is in to components of PCB which are semiconductors, passives, connectors, display and battery. Now, there is hardly any component manufacturing ecosystem existing. So, we are importing more than 80 percent components as we don't have domestic manufacturing of these components, missing out on 40 percent value.
Next big value is into IP and Technology design. We are doing very well as design services for the world or in captive design centers of the global company however IP value does not get recognized for India. There are very few product companies that are designing and manufacturing electronics products from India. So, many times again, we miss out on the value of IP technology by acquiring a CKD or SKD kits from a global companies and only do SMT assembly or system integration in India, which gives only 10 percent to 12 percent in local value addition. In the whole process what’s happening is that we are ending up doing very low value add manufacturing. This is the biggest challenge that the Indian electronics ecosystem has.
Development Of Electronics Ecosystem
Creating a component manufacturing ecosystem or supporting the Indian startups and Indian IP creator companies for successful product development is a step towards development of electronics ecosystem. Recognizing IP Technology in India also creates high manufacturing value addition. And anytime we start talking about component manufacturing, we start talking about the highly capital-intensive business - semiconductor wafers.
Already there are established players like TSMC, Global Foundries, and UMC and there are different nodes like 90 nanometer, 65 nanometer, 45 nanometer, 20-nanometer semiconductor wafers. Now people are talking less than 10 nanometer! India strength is VLSI Chip Design so we should focus on developing next generation fabless designs for the world. There are other components which also contribute around 15 to 20 percent value which does not requires high investments like Semicon wafer fab, components like capacitor, resistor, inductors don't require a very high investment or high tech management chain.
Also, the Bare PCB, Connectors and Displays, LEDs, Analog ICS or MOSFETs - all these components don't really require a very high 4 or 5 billion dollar investment. So, we should be focusing on at least going after these low-hanging fruits. And that will also give 15 to 20 percent value addition.
The Indian Government is driving the Make in India program and Production Linked Incentive Scheme to encourage the development of electronics manufacturing ecosystem. But my point is, these incentive schemes should leverage developing local high value added ecosystem not just CKD assembly of the kits.
Mindset For Success
Manufacturing things in India requires strong technology differentiating products, as without a differentiator, developers will be always competing on the price and not be competing on technology and feature. When developers are thinking of any high-volume product development or design, they should think what differentiator they are bringing, what is the unique selling point in their design. A developer should be creative, innovative, and have some next generation technology differentiator like IoT/ AI/ ML which is a breakthrough technology.
Indian Electronics manufacturers cannot compete with global players without proper planning as global players strategize and manufacture at a larger scale of volume. They get better costing and support from the component manufacturing system.
The total electronics consumption market in India in recent times in 2019 was around $160 billion according to ESA report. 50 percent of the products are imported and 50 percent of the products are produced domestically. However, the 50 percent domestic manufacturing value add was only 15 percent to 20 percent, which is a very big challenge
The $160 billion market is moving forward to reach $400 billion by the year 2026-27. It is evident that the market is growing and the OEM’s have to create products designed in India, create a component ecosystem in India as well as focus on qualifying the products at global markets.
Okay, so what I found now 35 years worked in a corporate career I worked for you American companies in India, National Semiconductor AMD Freescale Semiconductor, PMC Sierra and finally Arrow Electronics in my journey in to component industry and electronics industry for 35 years, what I realized that our local designs have to meet global standards and manufacturing has to be at a global scale. We cannot compete with the global players because they are planning and manufacturing at a much larger scale of volumes and they get much better costing. Then the next point is about having testing qualification and certification labs in India. We should have a test setup and this facility's to qualify the product designed and developed in India to global standards.
Solutions Forgaps In Electronic Ecosystem
In India, many companies just go ahead with the available components or available microcontroller or processor and after working hard for one or two years, they realize that whatever product they have developed, either it is too expensive or it is not meeting the market specifications or expectation fully. They again go back to drawing board and start redesigning or redevelopment.
So, one piece of advice for all the design teams or CTOs is to ensure that when developing any new solution or any new platform, you have to take care of techno-commercial aspect of the architecture or at the design stage. During the design stage, you have to spend quality time to explore what are the options available to develop any particular solution. If you have a technically competent team, then your design cycle time is shorter. Ultimately success of any project or any program depends on the time to market, how quickly you complete the projects, how quickly you qualify that project, and how quickly you manufacture and take that product into the market.
Another important thing is when you are starting any new program or project, we must be doing the TAM (Total Available Market) analysis for a particular product. Your entire planning of manufacturing should be based on market competition, product price point, features offered by competitors and how your product can be different and affordable. Once you know the potential of the opportunity which you are developing, you can really plan based on target market share you wish to capture. All these points are very important for project planning and successful electronics product development. Electronics is a very large opportunity for India and developing High Value add eco system is a need of the hour.