ELECTRONICS ELECTRONICS COMPONENT INDUSTRY PERSPECTIVE

BY: PARESH VASANI

Current global & Indian Electronic Component Industry Electronic Component Industry Scenario

PCB

Challenges and Future

GLOBAL ELECTRONICS INDUSTRY

Gl b l El t i I d t US$ 1700

GLOBAL ELECTRONICS INDUSTRY

Global Electronics Industry - US$ 1700 Billion in 2009 – the largest & fastestgrowing manufacturing industry

Global Electronics is projected to to ch Global Electronics is projected to touch US$2000 Bn by 2014 and US$ 2400 Bn by 2020

3Sources: Dept of IT Task Force Report 2009

INDIAN ELECTRONICS INDUSTRY INDIAN ELECTRONICS INDUSTRY

Current Indian market US$ 45Bn; Growing by ~ 22%+y

India would exceed US$ 135 Bn by 2014;

US$ 400 Bn by 2020 !US$ 400 Bn by 2020 !

Sources: Dept of IT Task Force Report 2009

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Present Production @23 Bn (2009) -about 50% of domestic demand and about 50% of domestic demand and 1.3% of global production

M f t i th t 12 15% Manufacturing growth at 12-15% per annum; Demand Supply Gap widening

Share of Electronics Hardware Mfg in GDP ~ 2%; Much below other Asian countries

Sources: Dept of IT Task Force Report 2009

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India Signatory to ITA-1 and many FTAs allowing duty free import of s a o g du y ee po o almost all components and ICT products

Still Focus is on Finished Product Still Focus is on Finished Product Strategy (Sourcing)

Sources: Dept of IT Task Force Report 2009;

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Recent encouraging trend in i t t i h d N ki investments in hardware - Nokia, Flextronics, Jabil, Foxconn; LG, Samsung Panasonic Sharp Sanyo Samsung, Panasonic, Sharp, Sanyo, Denso etc

Major players …. but still low value addition activityaddition activity

Sources: Dept of IT Task Force Report 2009;

Current Trends & Potential

(all figures in US$ Bn) Actuals Forecast

2009 2014 2020

Indian Demand of Electronics 45 135 400

Prod. of Electronics H/W & Components in INDIA 23

@ 15% Growth Rate annually 46 135

I t f El t i H d i t I di 22 89 277Import of Electronics Hardware into India 22 89 277

We must grow @ 25%+ to reduce the i t bill import bill.

Present average growth is 15% and g g %at this rate gap between Demand and Production gap is widening

8Sources: ISA-Frost & Sullivan Report; Ministry of IT, Govt of India Annual Report 2005-06

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Production Target Growth is above 25% to meet projected demand of p jUS$ 135 Bn by 2014 and US$ 400 Bn by 2020.

Demand Supply Gap would be a massive US$ 296 Bn if present $ pproduction growth scenario persists !

It could surpass India’s total Oil It could surpass India’s total Oil Import !

Sources: ISA-Frost & Sullivan Report; Ministry of IT, Govt of India Annual Report 2005-06

INDIAN PCB INDUSTRY

GLOBAL PCB PRODUCING /COUNTRIES/REGIONS

India1%

Europe12%

Others1%

China33%North America

12%

Taiwan 12%

Korea10%

Japan 19%

12%

Market Share (USD) FY’10Market Share (USD) FY 10

Source Indian Printed Circuit Board Association

INDIAN PCB MARKET SIZE

All figures in USD MillionFY’10

ImportsUSD

Domestic (Excluding Exports

USD 600

Million

( gExports)

USD 320 Million

USD 90 Million

Total Indian PCB Market Size = USD 920 MilliMillion

Source Indian Printed Circuit Board Association

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Imports

Imports come mainly from China, Taiwan, Hong Kong, Koreaand the US. The import prices are at almost at par with domestic

i i h diff i d j 5 8% ThImports prices with difference narrowing down to just 5-8%. Theimports are largely due to huge demand-supply gap.

Exports

India is exporting about 30 percent of its production to the US,Germany, Malaysia, Austria, Belgium, Netherlands, the UK,Italy, Spain, Thailand and New Zealand. India exports single-

D i

side, double-side, and multilayer PCBs.

PCB manufacturers in India mostly cater across electronicsDomestic applications in India except motherboards, mobiles and high-

end telecom equipment.

DEMAND-SUPPLY GAP IN INDIAN PCB INDUSTRY AN OPPORTUNITY !!! INDUSTRY – AN OPPORTUNITY !!!

Demand = USD 1700 Million

GAP USD 950 MillionConservative Growth Rates have been considered

With 11% CAGR

Supply = USD 750 Million

Demand = USD 920 MillionWith 15% CAGR

(Write full name)

GAP USD 600 Million

Demand = USD 920 Million

Supply = USD 320 Million

Realistic Growth rates have been considered

2009-10 2014-15

Source – IPCA

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The market demand is expected to grow to about 45Mn Sqm by o g o o abou 5 Sq by 2015 from current 17.7 Mn Sqm

The increasing Demand-Supply Gap gives enough opportunity for new manufacturing plants in I diIndia

NEED-GAPS IN PCB INDUSTRY –CONVERT THIS FOR ELECTRONICA INDUSTRY

Dependency on imports of raw material (Laminates, Dry Film, etc.)

Technological capabilities - not been able to scale their technology and business models to serve a larger number of customers due to the inherent lack of technical and to the inherent lack of technical and delivery capabilities.

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Inability to scale operations - access to capital, mentorship, technology o cap a , e o s p, ec o ogy partners and lack of go-to-market expertise

Productivity – Lack of automation

Environmental friendly manufacturing - CSR

Exposure to overseas market

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Local manufacturing without or limited FDIed

Integrated plant (Backward, Forward) Total Solutions short Forward) – Total Solutions – short of offering core manufacturing solutionssolutions

Innovation

Eco System is missing Completely

CHALLENGES IN ELECTRONICS MANUFACTURING INDUSTRY MANUFACTURING INDUSTRY

Lack of component base

Possibly the biggest challenge to the Possibly the biggest challenge to the growth of electronics manufacturing

I f t t b ttl kInfrastructure bottlenecks

High costs of Power, transport & g , plogistics, Finance; poor availability of power

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Economics of scale lacking due to ll f t i bsmall manufacturing base

Lagging in implementing environmental gg g p gmeasures - RoHS, WEEE, EuP, REACH, etc.

Resulting in dumping of non-standard imports

E-Waste Legislation

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Zero import Tariff on most itemsp

ITA-1, FTA regime – leaves little ITA 1, FTA regime leaves little scope to cover disability costs

Complex tax regime (GST from 1st April 2012)1st April 2012)

DRIVERS FOR MANUFACTURING COMPETITIVENESS - GLOBALLY

Talent – Drives Innovation

COMPETITIVENESS GLOBALLY

Productivity Labor & Material Costs Energy

Steady Supply of highly skilled workers R&D, Manufacturing via world class practices,

After sales – Value AddAfter sales Value Add Network of Suppliers, Customers Effective Management

Policy support

Industry

Policy support Infrastructure Cost of Finance

Industry /Government

Government

Reducing Labor and material costs is the key to manufacturing competitiveness

Key Challenges

1) Infrastructure Related challenge

Poor quality I f Infrastructure

High cost of powerp

High power outage

P i i f h Poor connectivity of the industrial hubs with ports and marketsports and markets

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2) Funds & Investment Related Challenge

Lack of availability yof cheaper and easily accessible capitalcapital

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3) Policy related Challenge

Multi-tiers commercial taxation- Central, State and

l b diLocal bodies

Complex procedures and p papproval processes

The ‘Inverted duty The Inverted duty structure’

OTHER CHALLENGES

Skilled labor

Lack of skilled labor especially outside the metros

Lack of domain specific competencies.

R&D F ilitiR&D Facilities

Lack of technological expertise.

Lack of a strong R&D b base.

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Availability of Raw Materials

Lack of good quality t i lraw materials

Relatively higher t ti f f taxation on a few of Imported raw materials.

DIRECTIONS FOR GROWTH OF INDIGENOUS MANUFACTURINGINDIGENOUS MANUFACTURING

Direction #1: Promote electronic Components that have shown high growth

t ti l potential

Direction #2:

Develop & promote Electronic

Direction #2:

Hardware Technology Park & Electronic Clusters

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Direction #3:Continue…

Direction #3:

Develop & promote R&D centers across country

Direction #4:

Rationalize tax policies

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Direction #5:

Improve overall infrastructure in and around major Industrial Hubs and connectivity with major markets & ports

OTHER RECOMMENDATIONS

Develop & Establish/ adopt a technical Standard

D l C h i Develop a Comprehensive developmental plan by setting up a

‘Electronic components mission plan’Electronic components mission plan

Engage in technology transfers/ joint technology partnerships

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Preferential Access to Indigenous products in Government PSUs and products in Government, PSUs and

Government executed projects

Promote Indigenous production Promote Indigenous production by setting up easier approval

processp oce

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