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Industry Trends

The India Market Overview

India has over the years established itself as one of the world’s fastest growing economies and has become a key player in numerous trade verticals globally.

As per a recent report by Goldman Sachs, the Indian economy will grow at about 8.8% until 2020; with this growth rate, India would become the second biggest economy in the world by 2050, next only to China. Similarly, a recent report by Gartner says that electronic equipment production in India is bound to reach $32 bn by 2011, compared to $14 bn in 2006. This signifies a CAGR of 18%. Gartner also says that semiconductor consumption in India will more than double, from $2.8 bn in 2006 to $7.2 bn in 2011.

One of the key reasons for this growth process has been the key interest shown by various international companies both in the consumer as well the manufacturing industry of electronics. This has resulted in India becoming the fastest growing market worldwide for the wide spectrum of products and services in electronics industry.

Indian economy growing at an average rate of 8.8%

2nd fastest growing economy in the world and 3rd largest economy in terms of the purchasing power parity

Top 10 fabless companies and 23 of the top 25 semiconductor companies have India operations

Government has played a supporting role in enabling the industry to realize the potential

Electronics Industry is one of the fastest growing in India, main drivers:

–	Information technology, Consumer electronics, Telecom

8 out of Top 10 EMS companies have already set up shop in India

Contract manufacturing business expected to nearly triple in revenue over the next 5 years

India is amongst 6 countries that launched satellites and among the 3 countries in the world to build Supercomputers

100 of fortune 500 are now present in India compared to 33 in China

India adds 9 million new telephone subscribers every month

India's telecom infrastructure between Chennai, Mumbai & Singapore, provides the largest bandwidth capacity in the world with well over 8.5 Terabites (8.5 Tbs) per second

Electronics and ICT Production in USD Billion

(Source: IPCA, India presentation at ECWC, 2008)

S.no	Item	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07
1	Consumer Electronics	3.18	3.45	3.80	4.20	4.50	5.00
2	Industrial Electronics	1.16	1.39	1.53	2.10	2.20	2.60
3	Computers & Peripherals	0.89	1.07	1.70	2.20	2.70	3.20
4	Commn & Broadcast equp	1.13	1.20	1.34	1.20	1.75	2.38
5	Strategic Electronics	0.45	0.63	0.69	0.75	0.80	1.13
6	Components	1.43	1.65	1.90	2.20	2.20	2.20
7	EMS Industry	-	-	-	0.3	0.5	0.9
Sub Total		8.24	9.39	10.96	12.95	14.65	17.41
8	Software & Exports	9.13	11.53	14.56	20.05	26.03	35.50
9	Domestic Software	2.72	3.35	4.06	5.44	7.40	9.45
Grand Total		20.09	24.27	29.58	38.44	48.08	62.36

Commenting on the electronics industry, the Secretary General of ELCINA Electronic Industries Association of India, Rajoo Goel says "India is a developed country as far as intellectual capital is concerned. The growing Indian market for electronic products is over US$38 bn and is growing at about 25 - 30% annually! At this rate it is projected to exceed US$ 65 bn by 2010 and US$160 Bn by 2015.

This growth has attracted global players to India and leaders like Solectron, Flextronics, Jabil, Nokia, Elcoteq and many more have made large investments to access the Indian market. A majority of India Inc believe that the slowdown in Indian market is a temporary phenomenon and have expressed confidence in the robustness of the country’s economy. More EMS companies will move to India and by 2010 electronics contract manufacturers will handle about 30% of India's electronics manufacturing. On a projected manufacturing base of US$ 35 to 40 Billion by 2010, this means that EMS could account for an output of over US$10 Billion."

Similarly, more liberalized telecom and manufacturing policies are driving growth in other areas, which, in turn, are leading to more investments in manufacturing. Commenting on the Indian economy and the communications industry, N K Goyal, President CMAI (Communications and Manufacturing Association on India) says, "The slowdown is immaterial and the growth in the communications sector is still huge. With India achieving the highest monthly telecom growth in the world, and becoming the second largest telecom market, tremendous interest has been generated in a large number of players in the telecom manufacturing space. India now offers a big market with an industry-friendly environment. Every month, India adds 9 million new subscribers and more, which is higher than China. The Telecommunication Market in India is climbing the ladder of success quite rapidly by introducing newer and innovative sectors which are absolutely technology based as well. The government of India has confirmed the phenomenal success of the telecom industry that will be achieved by it in the years to come. We are sure the excitement will continue."

According to industry sources, in the last 2.5 years, India has seen commitments of over $17 bn investments in the IT and telecom sector. This is a serious affirmation to India's manufacturing prowess. MAIT (Manufacturers’ Association for Information Technology) Executive Director, Vinnie Mehta commenting on the IT industry says “while the recent economic upheaval across the globe has put many a business and countries into a tight spot, fortunately for us the economic fundamentals of India continue to remain strong and India will continue to offer growth opportunities due to its large domestic market and its inherent strengths of an innovation-friendly culture, a steady stream of talent, advanced technology infrastructure, a robust legal regime, well balanced government support and an open business environment that are all vital to fuel the growth of the IT Industry in India.”

Indian electronics equipment manufacturing is expected to grow at 5.5 times the growth rate of global electronics equipment production during 2010 and 2015. The perception of India as the next contract manufacturing destination is rapidly increasing the growth of electronics manufacturing. India's progression toward an open market-driven economy is facilitating the decision for many EMS providers to set up manufacturing plants in the country. India's wealth in technical expertise and substantial domestic demand are priming India to be a primary choice of destination within Asia.

In recent years the electronic industry is growing at a brisk pace. It is currently worth $10 Billion but according to estimates, has the potential to reach $ 40 billion by 2010. The largest segment is the consumer electronics segment. While is largest export segment is of components.

The trend for EMS companies to concentrate on volume manufacturing in low-cost countries is still going strong. India has rapidly become more prominent as an important manufacturing country alongside China.

Department of Information Technology, Ministry of Communications & Information technology, Government of India

Electronics and Information Technology is the fastest growing segment of Indian industry both in terms of production and exports. Today, the electronics industry is completely de licensed with the exception of aerospace and defense electronics, and along with the liberalization in foreign investment and export-import policies of the entire economy, this sector is attracting considerable interest not only as a vast market but also as potential production base by international companies.

[Source, http://mit.gov.in/default.aspx?id=78]

Electronic Industries Association of India, ELCINA

[Source, http://www.elcina.com/industry.asp]

INDIA : The perfect mix of Business and Opportunity:

India has over the years established itself as one of the world's fastest growing economies and has become a key player in numerous trade verticals globally. The electronics industry in India has been evolving with the changing world scenario and has grown exponentially to become a US$500 bn business.

The increased investments by global EMS players in anticipation of the tremendous potential of the electronics production industry has further accelerated the market size from an estimated US$ 24 - 25 billion at present to US$ 150 billion by 2015 at a CAGR of 22 - 23% per annum. This growth is a result of a number of drivers which have emerged globally as well as in India.

E & Y has projected that India can target a share of 1% in North America, 2% in Western Europe, 1% in Asia and 5% in the rest of the world of the Electronics Manufacturing Services market. Thus, India can target 2.2% of the world-wide electronics EMS market of US$ 497 billion by 2010 which works out a potential of US$ 11 billion.