ELECTRONICS COMPONENT INDUSTRY PERSPECTIVE BY: PARESH VASANI
Current global & Indian Electronic Component Industry Scenario PCB Challenges and Future
GLOBAL ELECTRONICS INDUSTRY Global Electronics Industry - US$ 1700 Billion in 2009 the largest & fastest growing manufacturing industry Global Electronics is projected to touch US$2000 Bn by 2014 and US$ 2400 Bn by 2020 Sources: Dept of IT Task Force Report 2009 3
INDIAN ELECTRONICS INDUSTRY Current Indian market US$ 45Bn; Growing by ~ 22%+ India would exceed US$ 135 Bn by 2014; US$ 400 Bn by 2020! Sources: Dept of IT Task Force Report 2009
Continue Present Production @23 Bn (2009) - about 50% of domestic demand and 1.3% of global production 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
Continue India Signatory to ITA-1 and many FTAs allowing duty free import of almost all components and ICT products Still Focus is on Finished Product Strategy (Sourcing) Sources: Dept of IT Task Force Report 2009;
Continue Recent encouraging trend in investments in hardware - Nokia, Flextronics, Jabil, Foxconn; LG, Samsung, Panasonic, Sharp, Sanyo, Denso etc Major players. but still low value addition activity Sources: Dept of IT Task Force Report 2009;
Current Trends & Potential We must grow @ 25%+ to reduce the import bill. Present average growth is 15% and at this rate gap between Demand and Production gap is widening Sources: ISA-Frost & Sullivan Report; Ministry of IT, Govt of India Annual Report 2005-06 8
Production Target Growth is above 25% to meet projected demand of US$ 135 Bn by 2014 and US$ 400 Bn by 2020. Demand Supply Gap would be a massive US$ 296 Bn if present production growth scenario persists! It could surpass India s total Oil Import! Continue Sources: ISA-Frost & Sullivan Report; Ministry of IT, Govt of India Annual Report 2005-06
INDIAN PCB INDUSTRY
GLOBAL PCB PRODUCING COUNTRIES/REGIONS North America 12% Europe 12% India 1% Others 1% China 33% Korea 10% Taiwan 12% Japan 19% Market Share (USD) FY 10 Source Indian Printed Circuit Board Association
INDIAN PCB MARKET SIZE FY 10 All figures in USD Million Total Indian PCB Market Size = USD 920 Million Source Indian Printed Circuit Board Association
Continue Imports Imports come mainly from China, Taiwan, Hong Kong, Korea and the US. The import prices are at almost at par with domestic prices with difference narrowing down to just 5-8%. The imports are largely due to huge demand-supply gap. Exports Domestic 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 singleside, double-side, and multilayer PCBs. PCB manufacturers in India mostly cater across electronics applications in India except motherboards, mobiles and highend telecom equipment.
DEMAND-SUPPLY GAP IN INDIAN PCB INDUSTRY AN OPPORTUNITY!!! Demand = USD 1700 Million Conservative Growth Rates have been considered GAP USD 950 Million With 11% CAGR Supply = USD 750 Million (Write full name) Demand = USD 920 Million GAP USD 600 Million With 15% CAGR Realistic Growth rates have been considered Supply = USD 320 Million 2009-10 2014-15 Source IPCA
Continue The market demand is expected to grow to about 45Mn Sqm by 2015 from current 17.7 Mn Sqm The increasing Demand-Supply Gap gives enough opportunity for new manufacturing plants in India
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 delivery capabilities.
Continue Inability to scale operations - access to capital, mentorship, technology partners and lack of go-to-market expertise Productivity Lack of automation Environmental friendly manufacturing - CSR Exposure to overseas market
Continue Local manufacturing without or limited FDI Integrated plant (Backward, Forward) Total Solutions short of offering core manufacturing solutions Innovation Eco System is missing Completely
CHALLENGES IN ELECTRONICS MANUFACTURING INDUSTRY Lack of component base Possibly the biggest challenge to the growth of electronics manufacturing Infrastructure bottlenecks High costs of Power, transport & logistics, Finance; poor availability of power 19
Continue Economics of scale lacking due to small manufacturing base Lagging in implementing environmental measures - RoHS, WEEE, EuP, REACH, etc. Resulting in dumping of non-standard imports E-Waste Legislation
Continue Zero import Tariff on most items ITA-1, FTA regime leaves little scope to cover disability costs Complex tax regime (GST from 1st April 2012)
DRIVERS FOR MANUFACTURING COMPETITIVENESS - GLOBALLY Talent Drives Innovation Productivity Steady Supply of highly skilled workers Labor & Material Costs R&D, Manufacturing via world class practices, Energy After sales Value Add Network of Suppliers, Customers Industry Effective Management Industry / Government Policy support Infrastructure Cost of Finance Government Reducing Labor and material costs is the key to manufacturing competitiveness
Key Challenges 1) Infrastructure Related challenge Poor quality Infrastructure High cost of power High power outage Poor connectivity of the industrial hubs with ports and markets
Continue 2) Funds & Investment Related Challenge Lack of availability of cheaper and easily accessible capital
Continue 3) Policy related Challenge Multi-tiers commercial taxation- Central, State and Local bodies Complex procedures and approval processes The Inverted duty structure
OTHER CHALLENGES Skilled labor R&D Facilities Lack of skilled labor especially outside the metros Lack of domain specific competencies. Lack of technological expertise. Lack of a strong R&D base.
Continue Availability of Raw Materials Lack of good quality raw materials Relatively higher taxation on a few of Imported raw materials.
DIRECTIONS FOR GROWTH OF INDIGENOUS MANUFACTURING Direction #1: Promote electronic Components that have shown high growth potential Direction #2: Develop & promote Electronic Hardware Technology Park & Electronic Clusters 28
Direction #3: Continue Develop & promote R&D centers across country Direction #4: Rationalize tax policies
Continue 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 Develop a Comprehensive developmental plan by setting up a Electronic components mission plan Engage in technology transfers/ joint technology partnerships
Continue Preferential Access to Indigenous products in Government, PSUs and Government executed projects Promote Indigenous production by setting up easier approval process 32