ELECTRONICS

INDUSTRY

(SWOT ANALYSIS)
INTRODUCTION
Electronics is one of the fastest growing segments of the Indian
industry. Today, the electronics industry is completely de-licensed with
the exception of aerospace and defense electronics.
The electronic industry in India constitutes less than 1% of the global
market. The demand for these products however is growing rapidly and
the investments are flowing in to augment the manufacturing capacity.
The Electronics Industry in India took off around 1965 with an
orientation towards space and defense technologies. This was rigidly
controlled and initiated by the government.
This was followed by developments in consumer electronics mainly with
transistor radios, Black & White TV, Calculators and other audio
products. Color Televisions soon followed.
In 1982-a significant year in the history of television in India - the
government allowed thousands of color TV sets to be imported into the
country to coincide with the broadcast of Asian Games in New Delhi.
1985 saw the advent of Computers and Telephone exchanges, which
were succeeded by Digital Exchanges in 1988. The period between 1984
and 1990 was the golden period for electronics during which the
industry witnessed continuous and rapid growth.
From 1991 onwards, there was first an economic crises triggered by the
Gulf War which was followed by political and economic uncertainties
within the country.
Pressure on the electronics industry remained though growth and
developments have continued with digitalization in all sectors, and more
recently the trend towards convergence of technologies.
After the software boom in mid 1990s India's focus shifted to software,
while the hardware sector was treated with indifference by successive
governments.
The steep fall in custom tariffs made the hardware sector suddenly
vulnerable to international competition. In 1997 the ITA agreement was
signed at the WTO where India committed itself to total elimination of
all customs duties on IT hardware by 2005.
In the subsequent years, a number of companies turned sick and had to
be closed down. At the same time companies like Moser Baer, Samtel
Colour, Celetronix etc. have made a mark globally.

HISTORY
Among manufacturing industries, the electronics industry occupies a key
position in modern science and technology.
It plays a vital role in the fields of atomic energy, communications,
defense, education, entertainment and space technology.
Until the 1970’s the electronic industry was the most protected of all the
Indian industries. The country’s electronics policy strongly favored self-
reliance and technology and capital imports were strongly discouraged.
This resulted in the electronics industry being highly underdeveloped
till the late 1980’s. The industry was very inefficient producing outdated
and low quality models at a very high cost.

Policy reforms were initiated in the early 1990’s with the liberalization
of trade and industry sectors. With the change in the policy regimes after
liberalization, the industry experienced restructuring.
SECTORS IN ELECTRONICS INDUSTRY
 Consumer Electronics:
It consists of manufacturing of consumer durable products like
TV’s, refrigerators, air-conditioners, DVD’s, microwave ovens, digital
camera’s and many more.
 Industrial and Medical Electronics:
It is for the manufacturing of heavy electrical machines and
medical instruments and equipments. There is an increasing demand for
medical electronic products that will translate into opportunities in
biometric, blood pressure monitoring, blood analysis and other remote
technologies.
 Computer Hardware:
It is manufacturing of computer related products like input devices,
output devices, integrated circuits, mother boards, etc.
 Communication and Broadcasting:
India is an exporter of vast range of electronic components of
telecom equipments. Increase in the production of the telecom
equipments especially mobile phones due to strong and growing
domestic demand. There is an increasing demand for telecom
infrastructure equipment as well.
 Strategic Electronics:
This is also known as Defense electronics. It is the embedded
intelligence in weapon system for all tactical operations.
 Component Electronics:
This is the industry for manufacturing the smaller parts which
forms the bigger electronic products.
Government of India – Policy Initiatives:
 The government policy towards the electronics industry is also
very favorable.
 There is virtually no need of industrial licensing except for
manufacturing of electronic aerospace and defense equipment.
 The industry can be established anywhere in the country subject to
clearance from local authorities responsible for control of
environmental pollution and local zoning and land use regulation.
 100% FDI is allowed in electronics design and manufacturing
industry through the automatic route.
 All electronics products are freely importable with the exception of
some defense related items and also freely exportable with the
exception of a few items like high power microwave tube, high end
super computer, data processing security equipment.
Special tax and other incentive schemes like EOU (Export Oriented
Units), EHTP (Electronics Hardware Technology Park) are contributing
to the development of the electronics industry.

Semiconductor Policy 2007

 Government will bear 20 per cent of the capital expenditure during
the first 10 years for units located inside SEZs and 25 per cent for
those outside it.
 Windows open till March 2010.
 For semiconductor manufacturing (wafer fabs) plants, the policy
proposes a minimum investment of $ 625 Million and $ 220
Million for ecosystem units including ATMP
 There is a ceiling of 3 Fab units and 10 ecosystem units for
incentives under the policy
  Key benefit is the grant of the SEZ status.
 Overwhelming response to the Government’s policy – 17
proposals received envisaging investment of $ 35 billion with 15
proposals received relate to solar photo-voltaic manufacturing
 Government of India has given in-principle approval to 12
proposals
 Great opportunity to leverage the policy incentives for ATMP
operations.

SEZ incentives: Government of India

 No license required for import.

 Exemption from customs duty on import of capital goods, raw
materials, consumables, spares etc.
 Exemption from Central Excise duty on procurement of capital
goods, raw materials, consumable spares etc. from the domestic
market.
 Supplies from DTA to SEZ units treated as deemed exports.
 Reimbursement of Central Sales Tax paid on domestic purchases.
For profits arising out of direct exports (physical exports to outside
India): 100% income tax exemption for a block of five years,50% tax
exemptions for five years and up to 50% of the Profits ploughed back for
next 5 years under section 10-A of Income tax Act
SWOT ANALYSIS:

STRENGTHS

 Increased use of electronics in all spheres of life… daily activities,

offices, entertainment, security systems, lifestyle products.

 Strong and growing domestic demand

 Availability of talented work force

 Specially for design and engineering services

 with good communication skills

 Rising labour costs in western countries gives India a cost

advantage.

 Presence of global majors in India.

WEAKNESS

 An inadequate infrastructure struggling to keep pace with growth.

 Small scale industries not developed enough.

 Unstable political environment.

E.g. Microsoft moving out of Hyderabad due to the

Telangna issue

 An underdeveloped component supply base.

  A bureaucratic mindset inherited from our socialist past, things
move slowly and a lot of corruption exists.

OPPORTUNITIES

 Huge opportunities lie within telecom, automotives, and solar

energy, industrial & consumer electronics sectors.

 Better health-care & medical electronics products required as

Medical Tourism is booming in India.

 Low cost design needs of the rural market and providing end-to-
end designs for these markets.

E.g. Solar lamps in rural areas.

 Of the total production, only 10-15% exported, remaining

production consumed within India. Therefore, there is scope to
increase exports.

THREATS

 Reduced attractiveness due to developing status:

E.g. Hyundai is planning to shift i20 production to Europe due to

lack of port infrastructure (2-3 months time lag).
  Increased competition from China as it accounts for 8% of total
electronics production of the world.

 Threat of increased protectionist measures by importing countries.

 Existence of grey markets.

 Eg. EBay has led to video game grey market.

List of PSUs.

 BEL
 Bharat heavy electrical ltd (BHEL)
 BSNL
 HMT
 Central electronics ltd.
 Goa shipyard ltd
 HAL

List of MNCs
 Sony India
 Phillips India
 Texas Instruments
 Dell
 Honeywell
 LG India
  Samsung
 Toshiba
 National Panasonic

Private Indian companies

 Godrej electronics
 3M
 Aar-em electronics
 Videocon
 Titan
 Voltas
 BPL

Chip designing companies:

 Analog devices (India) Pvt ltd, Blr
 Bitmapper, Pune
 Cisco systems(India) Pvt ltd, Blr
 CMOS chips, Blr
 GE India design centre, Hyd
 HCL technologies, Noida
 IBM global services India Pvt ltd.
CASE STUDY

Importance of India as a global market (for LG)

 LG electronics India is a subsidiary of its parent company LG

electronics of South Korea.
 Focus is on creating its image as a ‘brand that causes happiness
and enriches life’.
 $5m will be spent this year just to communicate its new identity.
 Indian mkt is the no.1 priority of the parent company
 Recent additions like 3D TVs, jazz lcd TVs, & chocolate mobiles.
 6% of overall global revenue comes from Indian mkt, planning to
double it by 2015
 Biggest mkts- US, Korea, Brazil followed by India.
 Planning to be 2nd biggest mkt in next 5 years.
 Last yr revenue- 13500 cr
 It had decided to make India as its export hub because of the
following reasons:

 Labour mkt is rich with talent

 Scores of qualified engineers
 Most imp- a base of English speaking population
 Has set up learning, design and R&D centers in Noida
headquarters.
 Plans to invest 400 cr in R&D and 700 cr in marketing.