• UGI USER
  • May 23, 2024
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INDIA’S ELECTRONIC MANUFACTURING SERVICE INDUSTRY IS HUMMING — NOW TO STICK TO THE FLIGHT PATH

Relevance: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment; Technology missions

Why in the news?

  • Manufacturers must consider nearshoring to reduce supply chain disruptions.
  • Schemes target reducing cheap imports, boosting exports, and job creation.
    • Significant funds are allocated for large-scale electronics manufacturing.
  • India’s competitiveness relies on reforms, de-bureaucratisation, contract enforcement, dispute resolution, last-mile facilitation, sectoral ecosystems, and governance stability.

Recent Developments in India’s Electronics Manufacturing Services (EMS) Industry

  • Google Pixel 8 production: 1 lakh units to be made in India by Padget Electronics; 25-30% for export.
  • Apple doubled iPhone exports from India: $580 million to $1.1 billion in one year.
  • Tata Sons’ $14 billion semiconductor investment: Chip fabrication facility at Dholera in Gujarat and OSAT (outsourced semiconductor assembly and test) facility at Morigaon in Assam in collaboration with PSMC Taiwan.

Evolution and Technological Advances in EMS

  • Origin: Began in the early ’80s with OEMs engaging smaller manufacturers.
  • Growth: Leveraged scale and expertise for multi-OEM manufacturing, material procurement, and cost reduction.
  • Surface-mount technology (SMT): Components mounted directly on printed circuit boards, along with wave/bulk soldering, accelerated industry growth.
  • Emerging technologies:
    • IoT: Enabled smart component and device production.
    • AI and ML: Enhanced efficiencies in maintenance, defect detection, and supply chain optimisation.
    • Robotics: Improved precision in component placement and soldering.
    • Blockchain: Increased supply chain trust and reduced counterfeiting.
    • 3D Printing: Used for rapid prototyping and custom components.
    • Advanced Materials: Graphene and polymers enable lightweight, breakthrough designs with improved performance.

Global Manufacturing Shifts

  • China’s Dominance: From 2015-19, China accounted for 16% of global manufactured goods exports.
  • Shift in Strategy: US efforts to minimize dependence on China led to trade tensions.
  • Supply Chain Risk Mitigation: COVID-19 disruptions prompted the ‘China Plus One’ strategy.
  • Alternative Locations: MNCs seek countries with skills and political stability; Vietnam benefited from low-wage labor, proximity to China, favorable taxation, and FTAs.
  • India’s Competitiveness: Dependent on reforms, de-bureaucratisation, contract enforcement, effective dispute resolution, last-mile facilitation, sectoral ecosystem building, and governance stability.

Growth and Government Initiatives

  • Electronics Manufacturing Growth: Grew at a CAGR of 20.1% in FY23, expected to reach $300 billion by 2026.
  • Government Schemes:
    • 2020: Modified Electronics Manufacturing Clusters, PLI for large-scale electronics manufacture.
    • 2021: PLI for hardware.
    • 2023: PLI 2.0 for IT hardware.
  • Objectives: Curb cheap imports, boost exports, create jobs; highest disbursal for large-scale electronics manufacture.
  • New Focus: Tracking consumption of personal use appliances and items (e.g., PlayStation consoles, AirPods, Bluetooth devices).

Industry Challenges and Strategies

  • Competitive Global Market: Vying for large contracts globally.
  • Technological Advancements: Requires significant investments and skilling.
  • Environmental Regulations: Must comply with stringent material and waste disposal standards.
  • Rising Wages: Need to manage increasing labor costs.
  • Strategic Decisions:
    • Geographical Operations: Decide where to operate.
    • Nearshoring: Bring production closer to markets to reduce supply chain disruptions.
    • Industry Verticals: Focus on sectors like EVs, telecom, industrial, healthcare, durables, or wearables.
    • Sustainability: Use green energy sources, eco-friendly materials, and processes.
    • Workplace Diversity: Promote diversity and inclusivity.
  • Winning Strategy: Counter commoditization with a solution- and design-led approach, built on compliance and automation.

Solutions and Future Outlook

  • Strategic Geographical Operations: Evaluate markets for stability, growth potential, and regulatory support. Example: Setting up manufacturing facilities in India to benefit from government incentives and emerging market opportunities.
  • Nearshoring Strategies: Establish production facilities closer to target markets to mitigate supply chain disruptions. Example: Moving manufacturing operations from China to Southeast Asian countries like Vietnam or Thailand to serve regional markets more efficiently.
  • Diversification Across Industry Verticals: Identify sectors with high demand and growth potential, diversifying product offerings accordingly. Example: Expanding into the healthcare sector by producing medical devices and equipment alongside consumer electronics.
  • Adoption of Sustainable Practices: Implement green energy sources, eco-friendly materials, and efficient waste management systems. Example: Investing in renewable energy solutions for manufacturing processes, reducing carbon footprint.
  • Workforce Development and Inclusivity: Invest in training programs to upskill employees and promote diversity in the workplace. Example: Partnering with local educational institutions to offer specialized training courses in electronics manufacturing.
  • Innovation and Automation: Embrace automation technologies to improve efficiency and reduce costs while fostering a culture of innovation. Example: Implementing robotics and AI-driven systems for assembly line optimization and quality control.
  • Strategic Partnerships and Alliances: Form collaborations with technology providers, research institutions, and other industry players to leverage expertise and resources. Example: Partnering with universities for research on advanced materials and manufacturing techniques.

Associate articles

https://universalinstitutions.com/government-reaffirms-quality-standards-for-laptop-mobile-electronics-imports/

Source: https://m.economictimes.com/opinion/et-commentary/indias-electronic-manufacturing-service-industry-is-humming-now-to-stick-to-the-flight-path/amp_articleshow/110341566.cms

Mains question

Discuss the challenges and strategic imperatives for the Electronics Manufacturing Services (EMS) industry in the context of global competition, technological advancements, and sustainability goals. (250 words)