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● Global demand to reach USD 94.2 Billion by 2015.
● Large demand generated due to government schemes like the National Knowledge Network (NKN), National Optical Fibre Network (NOFN), tablets for the Education sector, a digitisation policy and various other broadband schemes.
● Adequately developed Electronic Manufacturing Services (EMS) industry is set to be a significant contributor to the entire industry’s development.
● India has the third largest pool of scientists and technicians in the world.
● Skilled manpower available in abundance in Semiconductor Design and Embedded Software.
● Strong design and R&D capabilities in auto electronics and industrial electronics.
● The Indian ESDM industry was estimated to be worth USD 68.31 Billion in 2012 and is anticipated to be worth USD 94.2 Billion by 2015 with a CAGR of 9.88% between 2011-15.
● The sector comprises Electronic Products, Electronic Components, Semiconductor Design and Electronics Manufacturing Services (EMS).
● Top 10 electronic products by total revenue: mobile phones, flat panel display TVs, notebooks, desktops, digital cameras, inverters / UPS, memory cards/USB drives, EMS/LCD monitors and servers.
GOVERNMENT POLICIES :
● Modified Special Incentive Package Scheme (MSIPS) (USD 13.4 Billion investment proposals till March 2014).
● Electronics Manufacturing Clusters Scheme (EMC).
● Skill Development Scheme.
● Huge consumption in the Middle East and in emerging markets such as North Africa and Latin America.
● Existing R&D capabilities can be encouraged to develop ‘Made in India’ products and generate local IP.
INFORMATION TECHNOLOGY INVESTMENT REGIONS (ITIR) :
● Karnataka (42.5 sq. km, near Bengaluru, a USD 17.6 Billion investment).
● Telangana (202 sq. km, near Hyderabad, USD 36.4 Billion investment).
● Electronics Manufacturing Clusters (EMC) are being established across the country by GMR (near Bangalore), Telangana Government Corporation (near Hyderabad), Electronics Components Industries Association (near Delhi), MP State Electronics Development Corporation (Bhopal and Jabalpur); Kerala Industrial Infrastructural Development Corporation (near Kochi).
● Semiconductor Wafer Fabrication (FAB) manufacturing facilities being set up in India in Uttar Pradesh and Gujarat with a total investment of USD 10.5 Billion.
● Venture funds with a strong focus on electronics planned includes the Electronics Development Fund, Walden India Fund, KITVEN Fund and the SIDBI Fund.
● Electronic Sector Skills Council and Telecom Sector Skills Council have been set up for establishing an effective and efficient ecosystem for developing and imparting outcome-oriented skills for the ESDM sector. A total of 90,000 people are to be supported under the Skill Development Scheme in 6 different states.
● 100% FDI is allowed under the automatic route in the Electronics Systems Design & Manufacturing sector and is subject to all applicable regulations and laws.
● In case of electronics items for defence, FDI up to 49% is allowed under the government approval route, whereas anything above 49% is allowed through the approval of the cabinet committee on security.
NATIONAL POLICY ON ELECTRONICS (NPE) :
● NPE’s vision is to create a globally competitive electronics design and manufacturing industry to meet the country’s needs and serve the international market.
● The objective is to build an ecosystem for a globally competitive ESDM sector in the country by attracting investment of about USD 100 Billion and generating employment for 28 Million people at various levels.
● The ultimate aim of the policy is to develop core competencies in strategic and core infrastructure sectors like telecommunications, automobile, avionics, industrial, medical, solar, information and broadcasting, railways, intelligent transport systems, etc.
● A number of state governments have also defined policies in electronics.
● Other important policies include the National Telecom Policy and the National Manufacturing Policy.
PROVISIONS OF THE 2O14-2O15 UNION BUDGET :
● Basic customs duty on LCD and LED TV panels below 19 inches is being reduced from 10% to NIL.
● Basic customs duty is being exempted on specified parts of LCD and LED panels for TVs.
● Basic customs duty on colour picture tubes for manufacture of cathode ray TVs is being reduced from 10% to NIL.
● Special additional duty on all imports/components used in the manufacture of personal computers is being exempted.
● Education cess and secondary and higher education cess is being levied on imported electronic products.
● Full exemption from SAD is being provided on specified inputs i.e. PVC sheets and ribbon used in the manufacture of smart cards.
● Basic customs duty is being reduced from 7.5% to nil on e-book readers.
● Either of the following two deductions can be availed:
1. Investment allowance (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 to 31.03.2015 provided the aggregate amount of investment in new P&M during the said period exceeds INR 1 Billion.
2. In order to provide a further fillip to companies engaged in the manufacture of an article or thing, the said benefit of an additional deduction of 15% of cost of new P&M, exceeding INR 250 Million which is acquired and installed during any previous year, until 31.3.2017.
● Under the existing provisions of Section 35 AD of the Act, investment- linked tax incentive is available by way of allowing deduction of the whole of any expenditure of a capital nature (other than expenditure on land, goodwill and financial investments) incurred wholly and exclusively for purposes of the “specified business” during the previous year in which such expenditure is incurred.
● In order to promote investment in new sectors few more businesses have been added under the above section.
● Setting up and operating a semiconductor wafer fabrication manufacturing unit, if such a unit is notified by the board in accordance with the prescribed guidelines.
● The above business shall begin operations on or after 01.04.2014.
● It has also been decided to provide for a lock-in period of 8 years for use of assets in respect whereof a deduction under Section 35 AD has been claimed.
MODIFIED SIPS :
● Capital subsidy up to 20-25% for 10 years on capex.
● Reimbursement of CVD/excise for capital equipment in non-SEZ units.
● Reimbursement of central taxes and duties for 10 years in select high tech units like fabs and ATMPs.
● Available for the entire value chain of identified electronics products.
● Incentives available for 10 years from the date of approval.
PREFERENTIAL MARKET ACCESS :
● Preference to domestically manufactured electronics goods in government procurement.
● Extent of government procurement from domestic manufacturers will not be less than 30% of the total procurement.
ELECTRONIC MANUFACTURING CLUSTERS :
● Subsidy of 50-75% – up to USD 10 Million per 100 acres of land.
● Applicable to both greenfield and brownfield projects.
AREAS BASED INCENTIVES :
● Incentives for units in SEZ/NIMZ as specified in respective acts or the setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
● National Scheme for Supporting MSMEs in the ESDM sector.
● For compliance of electronic goods with Indian Standards, both testing and certification are required for exports.
● Development of Electronic Manufacturing Clusters by MSMEs.
STATE INCENTIVES :
● Apart from the above incentives, India offers additional incentives for industrial projects, while some states offer separate policies for this sector.
● Setting up of Electronics Manufacturing Clusters.
● Semiconductor Wafer Fabrication (FAB).
● Electronic Components.
● Semiconductor Design.
● Electronics Manufacturing Services (EMS).
● Telecom products.
● Industrial/ Consumer electronics.
● EXPECTED ELECTRONIC MARKET IN INDIA BY 2O2O :
Telecom Equipment (USD 34 Billion).
Laptops, Desktops, Tablets (USD 34 Billion).
LED (USD 35 Billion).
Consumer Electronics (USD 29 Billion).
Set Top Boxes (USD 10 Billion).
Automotive Electronics (USD 10 Billion).
Medical Electronics (USD 8.5 Billion).
● Samsung (South Korea)
● IBM (USA)
● LG (South Korea)
● Tower Semiconductor Limited (Israel)
● Dell (USA)
● GE (USA)
● Jabil (USA)
● Motorola (USA)
● Lenovo (China)
● Flextronics (USA)
● Nokia (Finland)
● Lite-On (Taiwan)
● Foxconn (Taiwan)
● Bosch (Germany)