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SectorUpdate
EmergingBusinessOpportunitiesforIndianMSMEsinElectronicSystemDesignandManufacturingSector
Mar19,2014(Article)

EmergingBusinessOpportunitiesforIndianMSMEsinElectronicSystemDesignandManufacturingSector

Aggregate demand for electronic hardware in India is expected to increase to a total value of $400 billion by year 2020, up from $40 billion in 2009, whereas domestic
hardware will only reach an estimated value of $100 billion in the next six years. The ensuing demandsupply mismatch of about $300 billion will encourage global electron
manufacturing(ESDM)companiestoconsiderIndiaastheirnextinvestmentdestination.

TheNationalPolicyonElectronicsprovidesfortheestablishmentofsome200electronicmanufacturingclusters(EMCs)whichinturnwillcreatenewbusinessopportunitiesfo
willhelptheESDMenterprisestoraisetheirproductivitylevels,cutcostsandpromoteinnovationsbyleveragingsharedinfrastructureandresources,makingtheICTEmanu
competitive.

GovernmentisofferingvariousschemesandincentivestoencourageMSMEstoforayintoelectronicmanufacturing.Theseincludeschemesforpromotionofleanmanufactur
andcommunicationtools,settingupofminitoolsroomsinthePPPmode,andentrepreneurialmanagementdevelopmentthroughincubators.

ReflectingontheemergingtrendsintheESDMsector,inasessionorganizedbyCIIonEmergingOpportunitiesforSMEsinElectronicsManufacturing,DrAjayKumar,
ofInformationTechnology,MinistryofInformationTechnology&Communications,GovernmentofIndia,saidthattodayelectronicsarekeycomponentsofvariousdevices.
areelectronicallyoperated.Likewise,traditionallightingisgivingwaytoLEDlighting.ElectronicsispervasiveinareaslikeIT,telecom,automotive,solarPV,smartcards,etc.

DemandforelectronicshardwareinIndiaisgrowingat2021%perannum,butmostofitisbeingmetthroughimports.Takingcognizanceoftheimperativeforpromoting
Government has introduced a variety of schemes to encourage Indian electronics manufacturing companies. Dr Kumar said that India will be able to increase its share
manufacturingoutputbyleveragingitslowcostmanpowerresources(visavisChina).Chinaaccountsfornearly40%ofglobalelectronicsmanufacturingoutput.
DrKumarsaidtheNationalPolicyonElectronicshasunderlinedtheneedtodevelopnewchipstomeetlocalneedsataffordablecosts(BillionNeeds,MillionChips).Ona
aimstoincreasedomesticelectronicsmanufacturinggrowthatthesamerateasthedemandgrowth.

Toaccelerateelectronicsmanufacturing,Governmenthasdecidedtomeet50%ofthecostofcreatingcommonfacilitiesinGreenfieldEMCs.Thisamountwillbesubjecttoa
forevery100acres,butwithnoupperlimit.Likewise,Governmentwillmeet75%ofthecostofcreatingcommonfacilitiesinbrownfieldEMCs,subjecttoaceilingofRs50cror

DrKumarsaidthatsincetheintroductionofthisscheme,Governmenthasgrantedinprincipleapprovalfor7greenfieldEMCsGMRissettingupanEMCinHosur,TamilN
IndustrialDevelopmentCorporationissettingup2EMCsnearHyderabadELCINAissettinganEMCinBhiwadiMadhyaPradeshElectronicsDevelopmentCorporation,plan
BhopalandJabalpurKeralaIndustrialInfrastructureDevelopmentCorporationissettingupanEMCinKochi.ToencourageMSMEstosetupEMCs,Governmentofferstom
inthepreparationofDPRs.

Dr Kumar informed that the brownfield EMC in Electronic City, Bangalore has decided to create common infrastructure for which Government will meet 75% of the total
added that Government is developing two incubators one, in the area of chip design and the other to enable small companies to test their new design chips. The first incu
Bangalore.Itwillbeacentralisedfacilitythatcanbeaccessedonline.ThesecondincubatorisbeingsetupincollaborationwithDelhiUniversityandSTPI.

Government is also offering 25% investment subsidy to electronic manufacturing units being set up in nonSEZ areas, and 20% investment subsidy to units coming up in S
beingextendedtounitsacrosstheentireelectronicmanufacturingvaluechain,withalowminimumthresholdlimitofRs1crore.Thethresholdlimitvariesforeachmanufactur
cantakeadvantageofthis,hesaid.Earlier,theminimumthresholdlimitwasashighasRs1,000crore.
Inaddition,Governmentprovidesforreimbursementofcounterveilingdutyandexcisedutyforcapitalinvestedinthissector.Thisisavailableforsettingupnewunits
relocationofexistingunits.Hence,aunitthatisnotviableinEuropecanberelocatedtoIndiaandthedutyconcessionscanbeavailedthereof.

ReferringtotheModifiedSpecialIncentivePackageScheme(MSIPS),DrKumarsaidthatGovernmenthasreceivedproposalsworth$12billionundertheschemeuntilendMa
Stating that Union Cabinet has given its approval for setting up two wafer fabs in the country, Dr Kumar said an ecosystem will come up around the fabs which will
opportunitiesforMSMEvendorsandsuppliers.TheprojectinvolvesRs65,000croreworthofinvestments.

HealsosaidthatGovernmentisgivingpreferencetodomesticmanufacturedelectronicgoodsinpublicprocurements.Asacaseinpoint,1213Indiancompanies(workingon
Intelbasedplatforms)havebidfortheprocurementofAkashtablets.DomesticmanufacturersarealsoinvitedtoparticipateinthetendersfortheGigabitPassiveOpticalNetwo

Besides,DGS&Dhasfinalisedseparatemanualforprocurementsfromdomesticandnondomesticmanufacturingcompanies.DrKumarsaid,Wealsowanttoincreasetheit
buys.
He informed that Government is planning to create venture funds to support startup electronics manufacturing activities. Besides, 25% export incentives are being
electronicitemsmanufacturedinthecountry.

Highlightingtheimportanceofcreatingastrongmanpowerbase,DrKumarsaidthetrainingprogrammesrelatedtothisindustryhavetobealignedwithcurrentindustry
proactively promoting skill development for this industry through different schemes. Industry is required to identify the training needs and recommend the training centr
Governmentwillmeet75%ofthetrainingcosts.DrKumarsaidthatonelakhpeoplewillbetrainedunderthisscheme.

He added that Government is also aiming to increase the number of PhD submissions per annum in the electronics discipline to about 1,500 by 201718. Toward this, R
earmarkedforallPhDgrantinginstitutestoincreasetheirintakeofscholars.ThePhDtopicswillbeidentifiedbyindustry.Wewillcreateaplatformwhereindustrycanhighli
researchistobecarriedout,hesaid.TheUnionCabinettookthisdecisioninFebruary2014andtheschemewillbeimplementedfromthenewacademicyearbeginninginJun
UnderliningtheimportanceofR&D,DrKumarcitedtheexampleofanSMEinTaiwanwhere50%ofits115peoplehaveaPhD.Thecompanyislookingtoexportmedical
HeassertedthatIndiancompaniesshouldbekeentopursueresearch,innovationandIPs.

GovernmenthasalsointroducedaschemetosupportMSMEstocomplywiththeelectronicssafetystandards.ThesestandardscameintoeffectonJanuary3,2014.Compa
thestandards,forbothmanufacturingandimports.Governmenthasagreedtoreimbursethetestingandcertificationcostsincurredbythesecompanies.
Inaddition,Government has recently approved a scheme to help MSMEs meet the quality standards in export destination markets. Under the scheme, Government will
costs.
DrKumarsaidthathisministryisplanningtofundtechnologydevelopmentalsothroughitspartnershipwithGlobalInnovation&TechnologyAlliance(GITA).Besides,the

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setupaTechnologyCentreexclusivelyforelectronics.
Later,whilerespondingtothevariousqueriesraisedbytheparticipants,DrKumarsaidthattopromotecollaborationshisministryhascreatedanonlineB2Bplatformand
newsletterthatgoestoover1lakhreaders.

ReferringtotheplanforsettingupEMCs,hesaidtheprimaryobjectiveistosupportgloballycompetitiveclusters.However,theclusterswillbemarketdriven.Healsosaid
comeupinareasthathavehighsuccessfactors.
Statingthatinvestmentsaremainlyflowingintoareaslikeautomotivecomponents,LED,consumerelectronics,DrKumarsaidthatdueeffortsarebeingmadetodraw
promisingsegmentsofelectronicsmanufacturing.Towardthis,thedepartmentiscreatingajointworkinggroupforsmartcards.
Further,GovernmentisfacilitatingcommonsourcingfromglobalsupplierstoreduceMSMEstransactioncostsandothersourcingcosts.
Referringtosolarproductmanufacturing,hesaidthattheMSIPSwillberevisedtoincludesolarproducts.Currently,thefocusisonPVcells,substrataetc.

Noting that many defence offset opportunities are underutilised by MSMEs, Dr Kumar said an InterMinisterial Committee looks into the concerns of domestic manufacturers
procurements.HeaddedthatR&DcostswillalsobecoveredunderMSIPS.
MrDeepakSharma,JointDirector,DepartmentofInformationTechnology,MinistryofInformationTechnology&Communications,GovernmentofIndia,alsoparticipated

ClickhereforPresentationonElectronicsIndia

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