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Electronics industry in India
-PN Dhoot
President, Videocon Group
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About VIDEOCON
25 Years in electronics.
Revenue: $5 Billion ($3 Billion from electronics)
30,000 people worldwide
CE/ HA, Retail, DTH, Oil & Gas, Power & Telecom.
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Agenda
• Market
• Category
• Critical Success factors
• International case-studies
• Opportunities in India
• What can the stakeholders do?
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UNDERSTANDING THE MARKET
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Market Attractiveness
Source: AT Kearney GRDI 2011 Report
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The world is moving to India…
Source: AT Kearney GRDI 2011 Report
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Facts about India
India has the world’s largest single location
forging facility
25% of the world’s new workers in the next 3 years will be Indians
Indian Railways is the largest rail network in
the world
9th largest economy in the world, 3rd largest by
2030
Sustained GDP growth of over 8%
220 out of Fortune 500 companies outsource to
India
India has the 2nd largest pool of engineers and
scientists
India adds 1 “Netherland” mobile users/month, world’s
2nd largest mobile market
India is the 7th nuclear power in the world
India’s GDP/capita will multiply 4 times till 2020
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BUT………
India accounts for only 3.5% of the
global electronics market
Worldwide market size = $1.8 trillion Size of Indian market = $65 billion
(approx.)
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UNDERSTANDING THE CATEGORY
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10
All figures in USD tn
Global Production of Electronics
1.5 1.7
2.0
2.4
2004 2009 2014 2020
CAGR
3%
Size of the global electronics industry vis-à-vis other major industries...
4.40 times Oil, Petrol & Minerals
2.75 times Chemical & Plastics
2.45 times Food, Beverage & Tobacco
2.44 times Transportation
2.20 times Electricity, Gas & water
Global electronics landscape
For the 2004–09 period, the global industry has grown at an annual rate of
3%
At the current pace, the global production is projected to reach USD2 trillion in 2014 and USD2.4 trillion in
2020.
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All figures in USD bn; Source: Ministry of Information and Technology, Govt of India 2008-09 Annual Report
Electronics Hardware Production in India Domestic Demand of Electronics in India
All figures in USD bn; Source :Ministry of Information & Technology; Govt of India 2008-09 Annual Report
20
42
102
2009 2014 2020
Projected at Current CAGR of 16%
45
100
400
2009 2014 2020
CAGR
22%
Indian electronics landscape
Indian electronics manufacturing has seen a CAGR growth of 16 percent
since 2003
Domestic demand is expected to reach USD100 billion in FY14 and USD400
billion in FY20
Electronics segment received less than 1% of the total FDI from April 2000 till date
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(USD billion) Target 2014 Target 2020
Semiconductor design 20.0 58.2
High-tech manufacturing 4.0 22.6
Electronic components 2.6 3.4
Electronic Manufacturing Services 1.4 2.3
Electronic systems
IT systems and hardware 16.7 54.4
Telecom products and equipments 29.5 153.5
Consumer electronics 8.1 17.8
Others (Industrial, Automotive and others) 2.7 7.8
Exports 15.0 80.0
Total of all segments 100.0 400.0
Demand estimates for key segments
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Key drivers for growth
Growth in per capita income
Increased corporate spends
Government focus on infrastructure
Increased investments in automotives
Innovative products at low cost
Retaining intellectual property in India
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CRITICAL SUCCESS FACTORS
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Components import from China
Raw Material
Sourcing
Research and
Development
Equipment
Design
Front End
Assembly
Back End
Assembly
Part of Parts
Manufacturing
Supply to
Manufacturer/OEM
Testing and
Packaging
Tier III import from China Tier II import components
Currently tier I suppliers in India import components from China as linkages to wider value
chain are missing. More than 70 percent of Indian electronic market depends on imports of
finished goods and components
Small Presence in
global R&D network
According to CMIE, as on 31 March 2009, India imported USD 19.77 bn worth of electronics goods and exported worth USD 3.17 bn.
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Critical Success factors for the industry
Semiconductors
• Capital to invest in fixed assets and R&D
• Availability of skilled personnel
• Support from government
EMS/ODM
• Labor, components and resource cost
• Transportation & logistics
• Proximity to suppliers
OEM
• Large & developed local market
• Developed transportation and logistics
• Government incentives (tax breaks and lower import duties)
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INTERNATIONAL CASE STUDIES
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Learning from the dragon
COLLABORATION
PRIVATE COMPANIES
BANKS AID
AGENCIES
DIPLOMATS
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Dragon’s obsession with energy
• 10,000 workers in Sudan
• $25 billion loan to Russia, for 300,000 barrels of crude oil/day
• $1.7 billion deal with Iran to develop oilfields
• CNPC - 1 of the 2 companies to win contracts to develop Iraq’s oilfields
• CBC finances $1.2 billion Iran-Pakistan pipeline
• Eximbank - $2 billion low-interest loan to Angola – Oil for infra
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State Capitalism
• Biggest importer of oil and largest exporter of manufactured goods from Middle East
• CAB’s investors are the Qatar Investment Authority ($2.8 billion) and the Kuwait Investment Authority ($800m).
• Important tourist destination for ME businessmen
• King Abdullah’s first visit abroad was China
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Approach of the Taiwanese Tiger
Material (6) Glass Substrate
(7) ITO Glass (3) Color Filter (4)
Polarizer Film (5)
Liquid Crystal (3)
Back Light Module (4) Photo Mask (5)
(Figures in brackets represent the number of players in Taiwan in LCD TVs)
TN LCD(5) STN LCD (4) TFT LCD (7) LCOS (3) LED(3)
Mid-stream: Types of displays
Consumer(6) Telcom (4) Information (5) Dashboard (4) Display(5)
Downstream: End products
Core: Materials & Components
Multiple players in every sub-segment, organized in a given corridor.
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The Taiwan Progression
‘85 ‘90 ‘95 ‘00 ‘05 ‘09
Brands
Inv. In
PRC,
Vietnam
Build
Local
market
Labor
Cost
Advantage
Import
Substitution
Opening for
exports
Trade protection
Public R&D
Fiscal Incentive
Education
Industrial Climate
FDI Control
Special Human -
Resource Strategies
Aspire!
Industrial Policy and Indian Technology Industry, Master’s Thesis at MIT 2008
15+ years of focused effort from govt. &
industry to build full fledged eco-system.
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Creating Institutions:
Industrial Technology Research Institute
Works closely with the companies. Alliances with MIT, UC Berkley, Carnegie Mellon.
$10B of public R&D investment – working
closely with the industry.
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South Korea – House of giants Role of government
• Promote industry growth through national banking regulations, low-interest loans, tax incentives and duty-free import of capital goods.
• Encourage education and R&D through MOST, MOTIE and MOIC
• Fund infrastructure development, including highways and transportation systems, etc.
• Establish communication between industry, educational establishments, and the media
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Role of “Chaebols” (from chae: wealth or property + pŏl: faction or clan)
• 1961 – Korean government realizes they need entrepreneurs to
modernize the economy
• Reasons for growth – Foreign loans
– Special favors
• Government acted as guarantor for foreign loans
• Chaebol representation in the government (Chung Moon-Joon)
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OPPORTUNITIES IN INDIA
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Opportunities in India
Security (Integrated
Surveillance Systems)
Access (Wireless)
Digitization (Electronic Society)
Education (Digital Classrooms)
Energy (Smart Meters,
LEDs, Green Energy Wireless)
Healthcare (Affordable medicine/
Telemedicine)
Automotive (Low cost/zero
emission)
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WHAT CAN THE STAKEHOLDERS DO?
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Stakeholders in Electronics value chain
Industry Organizations
Indian Government
Private Sector
Educational & Research
centers
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Industry organizations
• Combine electronics hardware sector expertise and resources
• Improve public knowledge
• Understand the role of industry in India’s potential
• Appreciate the rewards of participating on a global level
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Educational & Research centers
• Provide expertise in industry-building initiatives
• Form partnerships emphasizing the needs of JVs
• Vocational training/educating of relevant personnel
• Define industry skill sets for future researchers, engineers and management leaders
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Private Sector
Alliances with MNCs, business leaders and industry experts
Active part in advisory boards designed to guide EMS ventures
Research/manufacturing initiatives that address regional & international concerns
Support and adopt collaborative research approaches
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Indian Government
Develop tech-parks and high-tech
industry clusters
Share risks in launching and
running industry initiatives
Coordinate efforts by ministries, private
sector, research labs and academic circles.
Increase core spending on sector
related R&D
Provide financial backing for initiatives,
including human resource development
Encourage partnerships and foreign technology-
based venture capital investments
Corporate rewards for the private sector
Strict implementation of IP rights to
promote innovation
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How can India do it???
Industry Organizations
Indian Government
Private Sector Educational &
Research centers
Collaboration
Clear road map & policies
Focused approach
Liaison with Semiconductor manufacturers
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