The world is witnessing an integration of electronics, communication and computer in the form of information technology leading to a revolution in the entire services & manufacturing sectors. Thus we have before us immense opportunities & technological challenges which need to be dealt with a clear vision taking advantages of our strengths.

In IT enabled Service Industry alone, India has shown a growth at over 660% from $50 million in 1999 to around $2.5 billion in 2002. According to McKinsey by 2008, this sector will be worth $21-24 billion, employing over one million young Indians.Similarly, the cellular subscriber base in the country has grown at 100% increasing to 14.9 million as of May 2003. The figure is continuing to increase at the rate of one million a month.

The Indian electronics industry grew rapidly in the 1980s at an average rate of 30% per annum, with the consumer electronics industry being the driving force. However, growth slowed in 1991 onwards at 7 - 8% and remained subdued in the subsequent years. Productions in Consumer Electronics, Components and Software have grown substantially. The massive projected demand for hardware to back up the growth of software is absolutely mind-boggling. With the growth in software, computer hardware and other sectors have also grown significantly.

Source: ELCINA ELECTRONICS DIRECTORY 2000

In 1999 - 2000, electronic export has grown at 45%, from Rs. 127,400 million in 1998 - 99 to Rs. 184,000 million. While the export of software has grown substantially at a rate of 55% at a value of Rs. 170000 millions from Rs. 109400 millions in 98-99.

Source: ELCINA ELECTRONICS DIRECTORY, 1999-200

The consumer electronics sector is coming back in to limelight again due to a series of positive factors. Firstly, the demand scenario for domestic sector has improved on the back of aggressive financing schemes by large banks and finance companies.

Over and above that a good trend in the economy, especially in the agriculture sector is releasing higher purchasing power in the hands of the people. The rising middle class and the modern lifestyle is also causing an increase in the purchase of various consumer electronics items.

In fast growing consumer electronics segment, Television manufacturing has led the growth and still accounts for about 45% of the sector's output.

During the year 1999 - 2000, the production of consumer electronics is estimated at Rs. 112,000 million with a substantial growth of 22% over 1998 - 99.

Following graph presents the trends in these consumer electronics items during the years of 1997, 1998, and 1999.

About 10 years ago, there were as many as 400 brands in the Indian TV industry. Now, this is down to 10. Thus, there has been a fierce consolidation. The major TV brands in India at present are : Samsung, Soni, Onida, Videocon, BPL, Akai, Sansui, Thomson, Phillips and Salora. The most recent and interesting aspect is that consumer electronic items exports are opening up now. India is a country where just 70 lakhs TV sets are made in a year, with no real exports.

However, countries like Turkey and Mexico are producing more than one crore TV sets in a year. The developed world is changing over to the flat and LCD technology in television now and the conventional television industry is likely to get shifted to countries like India.

This means huge exports prospects, which were perhaps never thought of in this sector. In anticipation to such developments, the stocks in the sector have rallied in recent times.

The most notable change in the nineties is the prominence of private sector companies and multinationals in the field of telecommunications (manufacturing and service sector) which were reserved for public / Government sector and later thrown open to the private sector. To enhance the telecom infrastructure, DOT has placed an annual demand of over 3 million lines. From now onwards, the annual addition of fixed telephone lines could exceed 4 million annually. Value added services like cellular mobile communication and data communication will also spur demand resulting in massive demand for telecom hardware. Cellular subscriber base is to cross 2 million very soon with further downward pressure on prices. Growth of IT enabled services will compel the expansion of existing telecom infrastructure both for wireless and fixed network communication. Thus, business opportunities for telecom hardware manufacturers appear to be quite promising.

India has a strong domestic market, which consumes most of the production, leaving less scope for exports. The major markets are for consumer electronics followed by telecommunication, components, etc.

Global IT industry is reported to be valued at more than US$ 650 billion. Convergence of consumer electronics, telecommunications and information technology is expected to create one of the largest industries in the world.

The present level of computer penetration is 1 per 1000 persons. The same has been projected to be 10 per 1000 persons by the year 2001-02. It is expected that the IT hardware market will grow at a CAGR of around 40%. PC sales are likely to touch a figure of 3 million numbers and PC availability per capita is thus expected to improve by the year 2001.

Areas of focus and leadership in IT are likely to be as follows:

• Design
• Networking
• System integration/ applications
• Manufacturing
• High Performance Computing and Communication (HPCC)

The opportunities in this segment are not considered as it is highly dominated by unorganised players and the industry is highly fragmented.

Electronic component production has increased from Rs. 19,000 million in 1990-91 to Rs. 36,000 million in 1995-96 and Rs. 42,000 million during 1996-97. TVs, audio products are major source of component demand because they consume large quantity of electronic components of all types. The reasons of components industry showing a downtrend are as follows:

1. Entry of multinational telecom companies.
   
   
2. Longer gestation period and very rapid increase in demand of components especially from the consumer and telecommunication sectors have caused increase in imports of the components
   
   
3. LSI/VLSI (Very Large Scale Integrated circuits), SMDs (Surface Mounted Devices) etc., which constitute major input for computer hardware and higher end telecom sector are not having manufacturing base worth its name in India. Fast changes intechnology for the manufacture of these critical components has hitherto deterred the private sector from entering this area. This has further increased country’s dependence on imports of these components.
   
   
4. Success of commercially viable manufacturing units can be realised only if the products are marketed worldwide as the Indian market in many cases is still too small and requires large variety of components in small volumes. International marketing tie-ups were not realized while encouraging technology imports in this sector.

Electronic Components needing investments are Display Devices, Passive Components, Active Devices, special types of PCBs, Piezo electric devices, Magnetic media, Electro-mechanical components, etc.

Microelectronics covers Discrete Semiconductor Devices as well as Integrated Circuits ranging from Small-scale Integrated (SSI) to Very Large Scale Integrated (VLSI) circuits and beyond. The microelectronics technology is very significant and crucial in the development of the IT based society. For that reason, it has been called the "crude oil" of the 21st century.

The domestic production of electronic equipment is expected to grow from Rs. 177,000 million in the year 1996-97 to Rs. 660,700 million in the year 2001-2002. The semiconductor content of Indian equipment is envisaged to grow from 9 % to 15 % in the year 2001-02.

Semiconductor/ microelectronics is a highly capital intensive sector. The investment to turnover ratio in this sector varies from 1:1 in case of IC industry to 1:2-4 in case of discrete semiconductor devices. The gestation period is about 2 years.

The Ministry of Information Technology (MIT) projects a whopping US $ 160 billion requirement of hardware equipment and another additional US $ 60 billion demand for components by 2008. This hardware base is seen as necessary to support the software sector which is projected to reach a size of US $ 87 billion after including software products, E-business, IT services, IT enabled services and an amount of $ 50 billion earned from exports. Against the total hardware requirement indicated above, the production of hardware projected to touch $ 30 billion in 2008, is nearly five times the current production of around $ 6.5 billion. The investment needed to meet the 2008 production target of US $ 30 billion works out to $ 16 billion for equipments and $ 3 billion for components.

With 1999-2000 production at $ 6.5 billion plus, the Indian hardware industry presents a mixed trend. Growth rates since 1995-96 (measured in nominal rupee value), had been fluctuating every alternate year hovering around an average of 12%. As consumer electronics spearheaded by the colour TV segment pulls up growth, computer hardware and telecom continues to be a drag on growth rates. Better export performance and growing business opportunities in consumer electronics trigger the component sector growth.

Exports have recovered as the steep decline in computer hardware was partially arrested in 1999-2000. Consumer electronics, which registered only a modest export growth, is expected to take off in a big way in the coming years. The best export performance comes from the component sector accounting for a share of over 45% in total hardware exports of 1999-2000.

With annual PC sales expected to touch 4 million by 2002, global majors are once again exploring the possibility of manufacturing and this time it could be a reality. Boom in mobile communications, particularly with growing cellular phone subscribers, is yet another encouraging trend which is likely to incite international players to reconsider their earlier decision to postpone manufacturing in India. The widespread growth of IT enabled services shall also catalyse manufacturing activities. The dire need of the moment is the inflow of large-scale investment and with the whole world now looking at India as the emerging IT superpower; investment into hardware manufacturing cannot be postponed any more.

While investing in Electronics industry one should keep global market in mind and not only the local market, because considering the volumes of India alone, the particular company will not become price competitive. The imports will be cheaper if economies of scale are not achieved. Hence, the manufacturer will have to target global market and will have to develop strong marketing network to attract export market.

It should be remembered that Electronics Industry is a "foot - loose" industry. It is thus natural that the opportunities for investments in this sector are thus equally good for all the States in the country as long as the concerned State can provide adequate skilled manpower and reasonable infrastructure facilities. Fortunately, the State of Gujarat is geared well on these two crucial needs. Gujarat is therefore expected to offer good investment opportunities in the booming Electronics Sector. Initiative from the Government and the availability of requisite manpower, infrastructure and entrepreneurial mindset are likely to augur well for attracting investment in this field to Gujarat.

It may be remembered that an electronic zone was set up few years back with high hopes in Gandhinagar, which could not come upto the expectation due to various reasons. It was probably ahead of time when it was difficult to get and retain skilled manpower. The market was also not developed, as India was not recognized by the developed countries for its quality as it is today due to its proven supremacy in software industry.

In a recent development, foundation stone of Infocity has been laid at Gandhinagar. The project is expected to give a boost to Electronic Industries in general and to Information Technology related activities in particular.

There is some scope for the consumer electronics products like radio receivers, audio cassette tape recorders / players, CD players, TVs, Video players, electronic clocks and watches. However, these products require higher economies of scale in order to be internationally competitive. At the same time, giant consumer electronic multi-national companies already dominate the market. Hence, these projects are not considered in this study.

Following products have been identified as products having potential for development in the State based on the feedback received from the experts contacted during the field survey.

• Advanced Discrete Semi - conductor devices
• Large / Very Large Scale Integrated (LSI / VLSI) Circuits
• Passive components like capacitors, etc.
• Special Types of Printed Circuit Boards (Multi Layer or Pre-assembled)
• Display devices
• Piezo electric devices
• Magnetic media like tapes, CD ROMs, etc.
• Electro mechanical devices like relays, etc.
• Electronic toys / games
• Personal health care products like electronic blood pressure meter, Thermometers, blood glucose meter, etc.
  
  
  • E - Security Systems
  • 1.8 metre Rooftop / window mounted dishes for receiving the DTH telecast
  • Photovoltaic cells

Even at the cost of repetition, it may be mentioned here that our industry will have to be of international class (both in terms of quantity as well as quality) since it will have to target not only the domestic market but also the global market. Unless the huge market is tapped, the economies of scale will not be achieved and the industry will not be price competitive against its foreign counterpart. In case of some of the products listed above, it would be essential to enter into technical and marketing tie-up with some of the renowned manufacturers of these products from Japan or USA to adequately cover the risks in fast changes in technology.

>>Central Government Ministry :

• Department of Electronics

>>Export Promotion Council-(INDIA):