Monday, February 22, 2010

Indian electronics and semiconductor industries: Time to answer tough questions and find solutions

Another year and yet another union budget is close at hand! I’ve been receiving mails left, right and center from enthusiastic friends in the PR community who are trying to push their clients’ expectations on the budget.

Hold it for a moment! The IT sector alone does not make up India! Neither does semiconductor or VLSI or embedded! So, I am wondering — will all of those recommendations even get a look in? Solar PV probably would probably figure somewhere in the budget as it now has its own ministry — the MNRE. I’ll be very surprised, if solar PV is missing in this year’s budget.

Right, let me focus a bit on semiconductors and electronics. The rest will all fall in place if these two sectors are really paid greater attention.

The Indian semiconductor policy was announced back in 2007. Barring investments in solar PV, it has really not seen much movement. We did start a ‘national movement for fabs’ back in 2007-08, but all that seems to have fizzled out for now. As for solar PV, the National Solar Mission (NSM) was formally launched by the Prime Minister, Dr. Manmohan Singh, last month. This month, the Karnataka State Government has announced its own semiconductor policy at the recently held ISA Vision Summit 2010. So, we already have some notable policies in place.

Now, the Indian electronics industry seems to be looking at a $350-$400 billion opportunity by 2020 as far as the electronics consumption is concerned. As per available statistics, the current consumption stands at about $40-$45 billion. I am told, we have not made a very good use of the existing opportunity in the sense that only 3 percent of this $40 billion consumption of electronics goods is actually produced in India. How are we ever going to hit the so-called huge opportunity in front of us if we don’t start now? And most importantly, where exactly do we start from?

Policies are supposed to play the role of guiding lights. In the end, it is up to the industry to deliver, of course, with government support. It is for the industry to come up with roadmaps as to how it will reach a specific target during the time period marked in such policies. The real onus will be upon the industry — and how its ‘actual effectiveness’ is perceived, based on its local success — in the global markets, to attract newer investments.

Not for a moment should anyone confuse IT/ITeS with electronics manufacturing and semiconductors. IT/ITeS has its own success story! Nor for that matter should anyone feel that since we are strong in design services, we will have an easy path ahead.

IT/ITeS, and also satellite TV and telecom, have largely grown on their own strengths. Most importantly, all of them started back in the 1990s. Of course, the industry associations and regulations have had their roles to play. But, make no mistake. It will be a very different story as far as local electronics manufacturing, components and semiconductors are concerned.

Thoughts on the budget
Here are some thoughts on what the union budget should try to answer, if it will.

What steps will be taken to promote domestic electronics manufacturing in the country? What steps will be taken to boost the growth of electronic components in India? Time and again, I’ve noticed that electronic components are not even on anyone’s wish list! How can you even think of developing an ecosystem that fosters electronics manufacturing in the absence of a strong components ecosystem?

Next, what steps will be taken to develop the local markets? Rather, who’s responsibility should it be to develop the local markets — for local manufacturers? Are the local manufacturers ready enough to take on the global giants? How will they be protected? If not, what steps would likely be taken to make them self sufficient and globally competitive? How much money is India actually going to spend on semiconductor and electronics R&D? More importantly, will that R&D be on really cutting edge technologies?

Now, I really want to play some part in making certain things happen! That’s one of the many reasons why I was very pleased to meet Dongbu recently. I even went ahead and requested an X-Fab associate to find out whether this company would be keen on visiting and exploring the Indian market.

I am glad that the UKTI has made some efforts to connect UK based firms with those in India. However, these are early days, and much more needs to happen. I am trying to connect some companies here as well. It excited me even more to see Indian start-ups at Technovation 2010, and later, the industry experts encouraging engineering students to consider entrepreneurship as a career.

An acquaintance mentioned to me some time ago that we don’t even have enough and well, trustworthy third-party statistics on the various segments! Much as I’d like to provide such statistics, I am merely an individual with limitations who can only do a very little bit, as I am neither an association, nor part of any media outlet. Nevertheless, I still try to do whatever little I can manage!

Coming back to the budget, this is the right time to answer tough questions and find meaningful, long term solutions.

One would be keen to know how the local market and manufacturing segments will get developed over the years. Or what kinds of efforts will be made to revive the electronic components industry. What kinds of high-tech R&D efforts will be made in the semiconductor and electronics domains, etc.?

Once such tough questions have been properly addressed, all sops, incentives and other tax breaks — of any kind — will look brilliant to the world, and attract the necessary investments.

I really would like to see the Indian electronics manufacturing and semiconductor industries, along with electronics components, to take off! I hope I made some sense!

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