Make in India Electronics: Boosting Local Production
India’s government, led by Prime Minister Narendra Modi, has been closely monitoring economic data for three years now. The Make in India electronics initiative, vigorously promoted by the prime minister and his team, reveals varying success across sectors. Electronics manufacturing stands out as one area where notable progress has been made.
Foreign direct investment (FDI) in India surged by 18% in 2016, reaching a record $46.4 billion. Services attracted the largest share at $7.5 billion, followed by telecommunications at $5.5 billion, according to the Department of Industrial Policy and Promotion.
A closer look shows that most investments under Make in India electronics continue to flow into services, software, and trade. FDI growth of 48% has barely impacted manufacturing, except in automobiles, which aligned with Modi’s vision even before the program.
The Niti Aayog report highlights that electronics received only $1.68 billion from 2000 to 2015, or 0.66% of total $258 billion FDI. In a December 2016 parliamentary session, Commerce Minister Nirmala Sitharaman stated that FDI in electronics rose from $96.94 million in 2014/2015 to $208.39 million in 2015/2016.
Electronics and IT Minister Ravi Shankar Prasad claimed investments hit 1.23 trillion rupees ($18 billion), possibly referencing the India Electronics and Semiconductor Association (IESA) report. IESA noted 156 proposals for 1.14 trillion rupees ($17 billion) in electronics system design and manufacturing (ESDM) since Make in India began—six times previous levels. Key here: these are proposed investments.
Strong domestic demand from a growing middle class, internet penetration, and digitization drives Make in India electronics growth. An IESA and EY study projects 16-23% annual growth, reaching $171-228 billion by 2020.
Government Policies Driving Electronics Growth
Government measures include special customs and tax regimes, the Modified Special Incentives Package Scheme (M-SIPS) for subsidies, and the Preference for Domestically Manufactured Electronic Goods (PMA) policy favoring locals. An Electronics Development Fund supports tech ventures.
This has attracted global players like Samsung, Foxconn, LG, Lenovo, and Xiaomi to set up in India, alongside local firms.
In 2015, Karbonn Mobile opened a factory in Noida, Lenovo started assembly in Chennai with Flextronics, and Xiaomi partnered with Foxconn in Andhra Pradesh. The list grows.
“We’ve invested over $500 million in India as it’s our key market outside China,” said Manu Jain, Xiaomi India’s Managing Director, to BRICS Business Magazine. “With two factories via Foxconn in 2015 and 2017, over 95% of Xiaomi smartphones sold in India are now made locally.”
Jain notes Make in India electronics improved quality and efficiency, keeping prices low for consumers. Xiaomi’s 2016 India revenue exceeded $1 billion.
Micromax founder Vikas Jain aimed for 100% local production, planning three more factories with over $460 million investment and 10,000 jobs by 2017. Micromax did not respond to inquiries.
Per the Ministry of Electronics and IT, over 40 mobile phone plants and 30 component facilities launched in two years. Production rose from 110 million units ($8 billion) in 2015/2016 to 175 million ($14 billion) in 2016/2017.
The Apple Dispute in India Manufacturing
The true scope of Make in India electronics sparked debate when Apple proposed manufacturing in India, demanding 15-year tax and duty exemptions on imports.
As of press time, no official response, and Apple declined comment. Media suggests rejection due to the upcoming Goods and Services Tax (GST) in July 2017, replacing multiple indirect taxes.
Currently, most phone materials (except chargers, batteries, headphones) face no basic or countervailing duties. Apple seeks assembly from imported parts, needing duty waivers pre- and post-GST.
The Phased Manufacturing Programme, started in 2016, imposes 12.5% duty on imported headphones, chargers, and batteries, while locals get component exemptions but pay 2% excise on finished goods. In 2017, the ministry proposed extending to five more components, but finance opposed.
For Apple, it’s about securing policy clarity and consistency. India is known for unpredictability—policies, rules, and laws can change abruptly, as seen with telecom license revocations.
[Link to related BRICS article on Asia-Pacific growth]
For more on global economic trends, check IMF reports on foreign investments and OECD insights on China innovation.
Challenges: From Assembly to True Manufacturing
Niti Aayog reports 2014-2015 electronics consumption at $63.6 billion, with 58% imported. Experts say even full Make in India electronics implementation won’t cut component imports, as India focuses on assembly, not full production. Most parts come from China, with local value addition at 5-6%.
Estimates show 180 million phones produced in 2016 ($9 billion retail), but local value at $650 million—under 6% of price, per Indian Institute of Management Bangalore and Counterpoint Research.
China achieves 70% local value after decades; Korea and Taiwan over 50%; Vietnam 30%; Brazil 20%.
Producers import major assemblies like motherboards (over half the cost), plus screens, antennas, microphones. Local additions: batteries, chargers, cables, headphones, then packaging.
CMR’s April report names Samsung, Intex, Foxconn as top OEMs. Foxconn in Andhra Pradesh makes for Asus, Gionee, InFocus, Microsoft, Oppo, Xiaomi.
A positive of Make in India electronics is attracting foreign assembly, gradually succeeding. Yet, true manufacturing requires more.
