Electronics component manufacturers eye govt support in Budget 2025

Electronics manufacturers hope for a production-linked incentive scheme in the upcoming Budget, while the government hopes production can move to Tier II towns to generate jobs

Companies in the electronics supply chain believe they can break the long line of Indian manufacturing sectors which have struggled to expand without government patronage. But for now they are hoping for a production-linked incentive (PLI) scheme in Budget 2025 based on their performance so far.  

 

They might get additional support from a soon-to-be-released government plan to nudge their production bases to Tier II towns. The move is likely to be announced at a meeting of state chief secretaries with Prime Minister Narendra Modi later this month. 

 

“We need to believe, though, that we can continue to maintain a robust supply chain for the semiconductor industry, even without PLI support in the future,” says Vinod Sharma, chairman, CII National Committee on Electronics Manufacturing.  

 

According to government estimates, the electronics manufacturing sector could create an additional employment of 5.5 million to 6 million. This is being seen as a significant employment-generator, unlike the semiconductor sector that has limited, even scant, employment potential. The semiconductor industry, though, acts as an umbrella industry and is the reason for the upbeat tone of company leaders. 

 

“Whatever we have earned in the last three decades we have now put into the semiconductor sector,” said Amrit Manwani, chairman and managing director of Sahasra Electronics. The company, which writes printed circuit boards and LED lightings, among other products, saw a bumper market debut for its public issue, listing at a 90 percent premium in October this year.  

 

While the government and industry captains have different reasons to be happy, the beneficiary could be the elusive manufacturing mantra for India.  

 

“The electronics industry gives us hope for the future”, said Rajeev Singh Thakur, additional secretary, Department for Promotion of Industry and Internal Trade in the central government. 

 

More than mobiles, component manufacturing needed  

 

The turnover of electronics components manufacturers, which was $15 billion in FY23, could expand ten times to $150 billion by 2030, as per estimates from a Niti Aayog paper released in July 2024. The total production from the electronics manufacturing sector could reach $500 billion in the same period, says the paper, titled “Electronics: Powering India’s Participation in Global Value Chains”. Most of this growth, though, will come from production of mobile phones.  

 

In a seminar organised by the Confederation of India Industry (CII) in New Delhi last month, component manufacturers, however, sought to draw attention away from just mobiles. Sharma said the government needs to pay more attention to vendor development, or component manufacturers, to develop the ecosystems required for the Make In India thrust. “The government has begun to believe in us,” he said.  

 

Divyanshu Gautam, senior commercial director of Corning India, the manufacturer of the Gorilla glass widely used for mobile phone screens, said 10 years ago one would not have imagined a company like his to have come and invested in India. “We chose to believe in the India story as some of our large customers were moving to India. We believe that a favourable govt policy with the range of tech talent India provides, is a great combination.” In January this year, Corning signed a joint venture with Optiemus Infracom to manufacture what Gautam described as “start to finish of Gorilla glass”.  

 

There are other similar success stories. M A Johar, president of CP Plus, India’s largest manufacturer of close circuit cameras said “From 2017 when we set up our first factory at Kadappa (Andhra Pradesh), we have moved very fast”. A key reason, he said, was that markets for the security industry needed to shift from one country domination (read China), and that India has been the beneficiary. 

 

External affairs minister S Jaishanker has said self-sufficiency in semiconductors and the electronics sector are essential for a country’s security. Through the India Semiconductor Mission launched in 2021, India has managed to attract investment of over $1 trillion so far. Launched in December 2021 with an outlay of $ 9.5 billion, the scheme offers production-linked and design-linked incentives for firms to establish semiconductor fabrication units, testing facilities, and design centres within India. The scheme is slotted for further expansion, likely to be announced in Budget 2025.  

 

Lack of talent biggest challenge  

 

The elephant in the upbeat room, though, is the shortage of talent. According to Thakur, this is a greater concern than the cost of capital or the impending global tariff war, a position other company leaders agree with.  

 

Human resource firm TeamLease in one its reports has forecast India will encounter a shortage of 250,000 to 300,000 professionals, just in the semiconductor industry by 2027. 

 

Those concerns are even larger for the component manufacturers. Vinayak Dalmia, managing director of 3rdi Tech, too, describes the flight of talent as his biggest risk. 

 

“The scope of talent, capability and capacity is what drives us”, said Suraj Rengarajan, managing director of Applied Materials. To build scale, he says, academia must work with startups to figure out where shortages are anticipated.