Representative image of a person in an electronics store.
Credit: iStock Photo
Bengaluru: India is eyeing a $500 billion electronics production by 2030, to which end the government has offered its support with production-linked incentives, yet the heavy dependence on imports, crippling import tariffs and low investment can play spoilsport in this endeavour, according to a report by technology and analytics platform Rubix Data Sciences out on Tuesday.
High-value components like semiconductors, Printed Circuit Board Assemblies (PCBAs), and chipsets, contribute significantly to the country’s trade imbalance. Electronics imports from China alone exceeded $12 billion in FY24. Even high-complexity components like silicon chips are still largely imported, accounting for 64 per cent of the demand in the automotive electronics sector alone.
To add to this, high import tariffs are a major headwind for growth. India’s average electronics tariff rate of 7.5 per cent places the country at a 5 per cent to 6 per cent cost disadvantage in assembly and a 4 per cent to 5 per cent disadvantage in component manufacturing compared to competitors like Vietnam and Malaysia. This contributes to a 10-14 per cent cost disability in assembly and 14 per cent to 18 per cent in component manufacturing.
Even India’s investment in research and development (R&D) has remained very miniscule - only 0.64 per cent of India’s GDP as compared to 2.41 per cent in China and 5.71 per cent in Israel. This limits innovation in critical sectors such as semiconductors and Internet of Things (IoT) devices.
Presently, government initiatives like the Production Linked Incentive (PLI) scheme have managed to attract investments of over $17 billion across key sectors including mobile phones, semiconductors, and consumer electronics.
India’s semiconductor market is also projected to reach $109 billion by 2030, spurred by increased investments and projects by domestic companies like Tata Electronics which aim to localise production and reduce the reliance on imports, the report added.
India’s mobile phone exports grew by over 40 per cent in the financial year 2024 (FY24) to $15.6 billion. Domestic value addition in mobile manufacturing increased from 6 per cent in 2017 to 16 per cent in 2023, with an expectation to touch 50 per cent by 2030.