Union Cabinet approves India's electronics component manufacturing scheme

The Union Cabinet chaired by Prime Minister Narendra Modi approved the Electronics Component Manufacturing Scheme with a funding of Rs. 22,919 crore to make India Atmanirbhar in electronics supply chain.

This scheme aims to develop a robust component ecosystem by attracting large investments (global/domestic) in electronics component manufacturing ecosystem, increasing Domestic Value Addition (DVA) by developing capacity and capabilities, and integrating Indian companies with Global Value Chains (GVCs).

The scheme envisages to attract investment of Rs.59,350 crore, result in production of Rs.4,56,500 crore and generate additional direct employment of 91,600 persons and many indirect jobs as well during its tenure.

Salient features
The scheme provides differentiated incentives to Indian manufacturers tailored to overcome specific disabilities for various categories of components and sub-assemblies so that they can acquire technological capabilities and achieve economies of scale. The target segment covered under the scheme and nature of incentive offered are as under: 

Sub-assemblies: Display module sub-assembly, and camera module sub-assembly.

Bare components: Non-surface mount devices (non-SMD) passive components for electronic applications. electro-mechanicals for electronic applications, multi-layer PCB, Li-ion cells for digital applications (excluding storage and mobility), and enclosures for mobile, IT hardware products and related devices.

Both categories have turnover-linked incentives.

Selected bare components: High-density interconnect (HDI) / modified semi-additive process (MSAP)/ flexible PCB, and SMD passive components. There will be hybrid incentives.

Supply chain ecosystem and capital equipment for electronics manufacturing: Parts / components used in manufacturing of sub-assembly (A) and bare components (B) & (C), and capital goods used in electronics manufacturing including their sub-assemblies and components. This will have capex incentive.

The tenure of the scheme is six (6) years with one (1) year of gestation period. Payout of a part of the incentive is linked with employment targets achievement.

Electronics is one of the highest-traded and fastest-growing industries globally and is expected to play a pivotal role in shaping the global economy and advancing a country's economic and technological development. Since electronics permeates all sectors of economy it has economic and strategic importance. 

With various initiatives of Gol, the electronics manufacturing sector has witnessed remarkable growth in the last decade. The domestic production of electronic goods has increased from Rs.1.90 lakh crore in FY 2014-15 to Rs.9.52 lakh crore in FY 2023-24 at a CAGR of more than 17%. Exports of electronic goods have also increased from Rs.0.38 lakh crore in FY 2014-15 to Rs.2.41 lakh crore in FY 2023-24 at a CAGR of more than 20%.

To accelerate Make in India
Ashok Chandak, President, IESA, remarked: IESA welcomes the government’s approval of the ₹22,919-crore Production Linked Incentive (PLI) scheme for electronic components and Subassemblies manufacturing, a long-standing industry demand. A clear indication of Government's commitment towards growth of ESDM sector for multiple applications. 

As per IESA report, India’s electronics market of  domestic manufacturing and exports expected to grow to $400 billion by the year 20230. One of the key challenges in this growth has been low value addition. India continued to import PCBs, passive components (such as capacitors, inductors, resistors, etc.), display modules, that constituted 15-20% of the bill of material of the electronic products, in addition to semiconductors. 

The component PLI will accelerate the Make in India initiative, driving higher value addition and strengthening the domestic supply chain with import reductions. Alongside the semiconductor manufacturing ramp-up and the existing PLI for electronics manufacturing, these initiatives will enhance India's global competitiveness. With these strategic efforts, India is poised to meet domestic demand and expand exports, cementing its position as a global powerhouse in electronics and semiconductors.

More investments in system products likely
Dr Ajai Chowdhry, Founder, HCL, Chairman, EPIC Foundation, added: The much awaited Electronics Components Manufacturing scheme was announced by Minister Ashwini Vaishnav. From EPIC, we have been requesting for this for a long time. This will enable much higher value addition in the country for electronics manufacturing, and will attract more investments in system products as local availability will enable just-in-time manufacturing. 

Also, it will enable more companies and startups to design and make products to enable India to be an electronics product nation. Moreover, this scheme has an attractive employment linked incentive scheme in addition to PLI and capex benefits, which will further promote employment growth, workforce competitiveness and economic development. We also eagerly await the design in India scheme for chips and systems that will complete the full ecosystem.