IESA recommends setting up NISER, NEC for electronics and semicon

India’s dependency on imports for its electronics product needs, from smartphones to supercomputers, has been on the rise. The India Electronics & Semiconductor Association (IESA) has put together a report to capture the current status, market trends and opportunities to work closely with Indian Government ( MeitY), and to promote electronics manufacturing in India.

According to Dr. Satya Gupta, vice chairman, IESA, they have recommended the setting up a National Electronics Commission (NEC), on the lines of ISRO. It can bring all of the electronics- and semiconductor-related activities under one single umbrella. It has also suggested setting up a National Institute of Semiconductor & Electronics Research (NISER), on the lines of IMEC, Belgium. We can create products for new use cases, such as medical, agriculture, defence, 5G or 6G, AI-ML, automation, EV, etc.

Electronics a sunshine market

Jitendra Chaddah, senior director, Operations and Strategic Relations, Intel India and chairman, IESA, said the demand for electronics products is growing very fast. The report underlines the strengthening of India's design capabilities. We should enhance our design capabilities, and go to other cities as well, besides the 2-3 cities for now.

The electronics market is a sunshine market. The market grew at a CAGR of 14% from 2016-19. Demand has been growing at a CAGR of 12.6% from 2016-19. The exports will grow at a CAGR of 30% over the next 5 years. We may be around 3-3.5% in GDP. We expect to move to 6-6.5% over the next 5 years.

The manufacturing segment has grown by 19%. The expected rate of growth will be 21.5% by 2025, moving to $260 billion. Our import demand on finished goods will decrease by 29%.

The low value manufacturing and high value manufacturing, and electronics design are among the key constituents. LVM will grow from $73.7 billion in 2019 to $237 billion in 2025, HVM will grow from $7.3 billion in 2019 to $23 billion in 2025, and electronics design will grow from $20 billion in 2019 to $60 billion in 2025.

Chip design grew from $13 billion to $20 billion from 2016-2019 at 15.4% CAGR. It is expected to grow to $60 billion by 2025 at 20.1% CAGR. It has become a great source of foreign exchange.

Focus on HVM products

Among the high-value-add / domestic products, only 9% (2025) of the total products are high value-add. We need to develop products that have domestic value addition > 60%. From 2016, at $ 4 billion, we moved to 2019, at $7 billion. We expect to move to $23 billion by 2025. We need innovation-led design and design-led manufacturing. Design innovation and IP will help create high value-add products. There will be focus on new use cases, such as medical, agriculture, AV/EV, environment, AI/ML, etc.

We also need to look at 1K-10K-100K start-up initiative. The 1K start-ups will do 10K IP creation, and generate Rs 100K crore of business value. India has 100 fabless companies and 900 electronics product companies. There is Rs. 7,000 crore of seed fund. We also need to expand the SFAL Model. There should be 1 fabless incubators/accelerators each in five regions. We also need to expand the Electropreneurs Park model, with one EP in each of the 36 States and UTs.

The overall impact should be 50% increase in high value-add products by 2025. We should be able to make $35B from the current projection of $23B.

India should also increase the value addition in LVM products. The current value addition is ~17% in domestic production. Activities contributing include assembly, testing, PCB, PCBA, etc. We are making the recently announced PLI scheme based on value addition. India should also incentivize the setting up of ATMP facilities, display fabs and display module manufacturing, LED manufacturing fab, power electronics fab, etc. There should be debt venture fund for working capital. There should be an interest relief of 3% on the financing cost.

The impact will be $60B additional value creation by moving from 17% to 40%. It will also help build-up of the components ecosystem and supply chain.

Key recommendations

Dr. Satya Gupta, added some key recommendations from the IESA. There is need to incentivize the training, internship, IP creation for design companies. We need to create a $1 billion seed fund for 1K-10K-100K startup program, and geographic inclusions of all states and UTs for innovation in electronics.

We also need to incentivize setting up ATMP, display, LED, power electronics fab for higher value addition. We must make the PLI incentives link to value add %; and encourage manufacturers with high value-add. There will be debt venture fund and interest relief for working capital and investments in manufacturing.

The plans about NISER and NEC have already been mentioned.

The way forward can be to incentivize and support design companies to grow:

* Subsidize training and internships

* EODB -- simplify transfer pricing

* Upscale capabilities of work force

* Incentivize research, IP development and product engineering

* NETRA model to be implemented across the country.