$300 Bn Electronic Manufacturing Sector by 2026!
Will India's plan succeed?
The Indian Electronic Sector is one of the fastest-growing sectors in the world. It contributes around 2.7% of the country's Gross Domestic Product and the sector is valued at $118 Bn. The Indian Electronics Sector generates employment for 16.5 million people.
The Indian Government is extensively pushing capital and framing policies to boost the growth of the Indian Electronics Sector. The growth of the Indian Electronics Sector is crucial for India's economy and it is supported by-
India is one of the largest consumers of electronic products in the Asia-Pacific region. It is the third-largest home to start-up companies and a research & development hub.
The Indian Government policies like the Production Linked Incentive Scheme ( PLI), Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and Modified Electronics Manufacturing Clusters Scheme ( EMC 2.0) have given a boost to the electronic manufacturing industry.
The Indian Government has set a target to get Rs 18,000 crore ($2.4 Bn) in investments in the electronics manufacturing segment by 2021-2022. The Indian market is also witnessing an increasing flow of investments from international companies such as Intel and C4V (a lithium-ion cell manufacturer in the USA).
Rapid Urbanisation and Income Growth
Rapid Urbanisation coupled with Income Growth is fuelling the demand for electronic gadgets such as mobile phones, tablets, and household appliances. The per capita income and private consumption have doubled from FY 2012 to FY 2021. India is emerging as one of the largest markets for electronics products in the world.
Current State of the Indian Electronic Manufacturing Sector
Indian Electronic Manufacturing has grown from $37.1 Bn in 2015-2016 to $67.3 Bn in 2020-2021. The Indian Electronic Manufacturing Sector is anticipated to reach $300 Bn by 2025-2026.
India is planning to increase exports from $10 Bn in FY21 to $120 Bn by 2025-2026.
Production of Mobile phones is slated to increase from $30 Mn in FY21 to $126 Mn in FY26.
Government Policies for Indian Electronic Manufacturing Sector
Government policies have shown remarkable progress in the sector. The production of electronics has increased from $29 Bn in 2014 to $70 Bn in 2019.
The policies implemented by the Indian Government are-
Production Linked Incentive Scheme( PLI)
Purpose- To boost domestic manufacturing and attract large investments in the electronics value chain.
Target Segments- Specified Electronic Components.
Tenure of Scheme- 4 years
Allocated Capital- Rs 40,951 crore for 5 years
2. Scheme for Promotion of Manufacturing Electronic Components and Semiconductors( SPECS)
Purpose- To promote the manufacturing ecosystem for electronic components and semiconductor manufacturing.
Target Segments- Electronic Components, semiconductors, specialized sub-assemblies.
Tenure of Scheme- 8 years
Capital Allocated- Rs 3,285 crore
3. Modified Electronics Manufacturing Clusters Scheme( EMC 2.0)
Purpose- To strengthen the infrastructure base for the electronic industry and deepen the electronic value chain in India.
Target Segments- Infrastructure
Tenure of Scheme- 8 years
Capital Allocated- Rs 3,762 Crore
Recent Investments in Indian Electronic Manufacturing Sector
The investments are-
Centre approved an Electronic Manufacturing Cluster at Ranjangaon, Pune to attract Rs 2000 crore investments and generate 5000 job opportunities.
Rajesh Exports will manufacture AMOLED displays in Telangana. The company will invest Rs 24,000 crore to set up the manufacturing hub.
Voltas( air conditioner manufacturer) will invest around Rs 500 crore to set up a compressor manufacturing unit in partnership with an international partner.
PG Electroplast will invest Rs 300 crore to manufacture air conditioner components.
Optiemus Electronics Limited (Indian Contract Manufacturer) has formed a partnership with Wistron(an iPhone maker in India) to manufacture mobile phones, laptops, IoT, and IT hardware devices.
Dixon Technologies, Info power Technologies, VVDN, and Bhagwati Products( Micromax) have committed more than Rs 200 crore to expand IT hardware manufacturing capacity under PLI.
Applied Materials( USA company) will set up a plant in India to manufacture complex equipment ( semiconductors).
Burly Home Appliances is planning to set up an air cooler manufacturing plant in Telangana.
Blue Star will invest Rs 250 crore in Andhra Pradesh to set up an air cooler manufacturing unit.
Effect of booming Electronic Manufacturing Hub on Indian Economy and Stock Markets.
The booming electronic manufacturing hub will support India's $5 Tn economy dream. It will empower India at various levels such as job creation, economic development, and innovation & development.
Robust electronic manufacturing will generate jobs, increase incomes, balance export, and import differences and push GDP growth rates. Vietnam and India have almost the same rankings in the World Bank's Ease of Doing Business Index. Vietnam has a rank of 63 while India has a rank of 70 but Vietnam has moved ahead of India.
Vietnam has a GDP of $260 Bn and an export turnover of $260 Billion in 2019. Out of $260 Bn, $51.2 Bn comes from the export of mobile phones and components.
Vietnam's focus on internal reforms, infrastructure creation, and human skills development has paid off. The reforms translated into increased foreign investment, job creation, and an increased share of the industrial sector in GDP.
Like Vietnam, India must focus on developing a favourable manufacturing environment. The Indian Government must push import duties on electronic devices to protect indigenous manufacturers from tough competition. Local products can be made more cost-competitive if the government bears the raw material import charges from small enterprises during the beginning years. Government can offer incentives to attract foreign sub-assembly/components manufacturers.
A robust domestic capability in electronic manufacturing can decrease India's import bills and decrease pressure on foreign exchange reserves.
The electronic manufacturing sector has high strategic importance in sectors like defence, aerospace, cyber security, and data storage. A self-reliant electronic manufacturing sector can decrease India's dependence on neighbouring countries and build the country's electronic ecosystem.
Financial Performance of Electronic Manufacturing Companies
1. Voltas Limited
Voltas Limited manufactures washing machines, dishwashers, air coolers, air purifiers, and refrigerators.
Voltas has a market capitalization of Rs 28,499 crore and a revenue of Rs 8,997 crore. The stock prices rose from Rs 80( in June 2013) to Rs 1015 (( in August 2022). The share has an earning yield of 2.92% and a dividend yield of 0.6%.
HDFC Securities suggested buying Voltas with a target price of Rs 950. Voltas has a strong position in the project business in both domestic and international markets.
2. Blue Star
Blue Star manufactures air conditioners, water purifiers, air purifiers, and air coolers.
Blue Star has a market capitalization of Rs 11,711 crore and revenue of Rs 6,964 crore. The stock has an earning yield of 3.16%. Blue Star stock prices rose from Rs 21( September 2003) to Rs 1002( May 2022).
HDFC Securities suggested to Accumulate the stocks
3. Symphony Limited
Symphony Limited manufactures household, commercial and industrial air coolers.
Symphony Limited has a market capitalization of Rs 5,763 crore and a revenue of Rs 1192 crore. The stock prices rose from Rs 128 ( September 2011) to Rs 919 ( August 2022).
There is no recent broker recommendation for the company
4. Orient Electric Limited
Orient Electric manufactures LED bulbs, BLDC fans, coolers, and modern kitchen appliances.
Orient Electric Limited has a market capitalization of Rs 5714 crore and a revenue of Rs 2648 crore. The stock has an earning yield of 3.74% and a dividend yield of 0.74%. The stock prices rose from Rs 122 ( July 2018) to Rs 259 ( August 2022).
There is no recent broker recommendation for the company
5. Dixon Technology
Dixon Technologies is a leading manufacturing space in India. The company provides a focused solution in consumer durables, home appliances, lighting, mobile phones, and security devices.
Dixon Technology Limited has a market capitalization of Rs 26,900 crore and a revenue of Rs 12,748 crore. The stock prices rose from Rs 643( February 2018) to Rs 4,561 ( October 2022).
ICICI Direct recommends buying Dixon Technologies with a target price of Rs 4730.
Conducive government policies and rising disposable income are favouring the rise of the electronic manufacturing sector in India. The sector is going to experience exponential growth in the upcoming years.