Application Segments With High Potential for Electronics Manufacturing and Exports

Author: Sagarina Rai

Indian Electronics Manufacturing Market - An Overview
To the Indian Electronics Manufacturing Services (EMS) market, a nation known for its high electronics consumption presents a huge opportunity. EMS is expected to emerge as a vital contributor to the nation's economy.  Expecting the electronics consumption to reach $400 billion by 2020, the government has trained its focus on electronics manufacturing and laid down various initiatives to drive the domestic electronics manufacturing ecosystem to new heights. With a market size of $3.79 billion in 2012, the Indian EMS market is expected to reach a size of $5.39 billion in 2015. The major contribution to the market comes from segments, such as telecom, industrial and consumer goods; the other segments that add to the revenue are healthcare, information technology and office automation (IT/OA), aerospace and defense and automotive.

Indian Automotive Electronics Market Analysis
The Indian automotive industry has made a name for itself as the hub of small car manufacturing destination in the world. India stands second in two-wheeler (2W) manufacturing and fourth in commercial vehicle manufacturing in the world. With a total of 18.3 million vehicles produced in 2011 and 2.0 million exports, India is the sixth largest automobile manufacturing economy in the world, housing 15 manufacturers of passenger vehicles (PV), 9 manufacturers of commercial vehicles (CV) and 16 manufacturers producing 2W.

The Indian 2W industry has shown a strong growth over the last year having grown by 13% in 2011 and is expected to grow at a volume CAGR of 12% by 2015. The passenger vehicle industry is expected to grow at a volume CAGR of 10.8% by 2015 and become the world's fourth largest passenger vehicle market.

Automotive Electronics - Opportunity Analysis
The value of electronics used in an automobile depends on:

• The type of the vehicle: two wheelers (2W), three wheelers (3W), passenger cars, commercial vehicles, electric vehicles, etc.
• The segment the vehicle caters to: entry-level, midsize, premier or luxury vehicle
• Level of automation in the vehicle: manual, power-steering, etc.

Indian-made entry-level cars and 2W have limited electronic content, such as engine monitoring, dashboard display, and few other basic switching controls, which is amply compensated by the high volume 2W and car sales. Premier or luxury vehicles are largely imported as are the high quality electronics used in them.
On an average, the value of electronics that goes into a midsize car manufactured in the country stands at $2,313.19, which is 13.04% of the total value of the car. This value is expected to become higher due to the implementation of stricter emission norms and safety features, such as ECU for 2W and air bags in all passenger cars. Exhibit 1.1 presents the key market drivers and restraints for the automotive electronics market.

Exhibit1.1
Automotive Electronics Market: Market Drivers and Restraints, India, 2014-2018
The total market refers to the demand and supply of automotive electronics in India; this includes both imports and exports. Domestic manufacturing refers to indigenously manufactured electronics, including exports.
The revenues from the total AEM market and domestic AE manufacturing segment were estimated to be $2.87B and $1.54B, respectively, in 2011. The total AEM market and domestic AE manufacturing segment are expected to grow to $4.23B and $2.65B, respectively, by 2015. Indigenous capability augmentation in product segments such as 2W ignition, instrument clusters, 4W engine management systems (EMS), car radios, power windows, flashers, regulators, etc., help sustain the growth in domestic manufacturing revenue.
Exhibit 1.2 depicts the revenue forecast from 2010 to 2015 for the total AEM market and the domestic AEM segment.

Exhibit1.2
Automotive Electronics Market: Revenue Forecast of Total Market and Domestic AE Manufacturing Segment, India, 2010-2015

Ecosystem
India's automotive market has a well-developed ecosystem. From design, development, IP creation, manufacturing, components sourcing, etc., India has developed strengths in all aspects of the automotive industry. High manufacturing and assembly activity in the Indian automotive market continues to set new benchmarks. The following automotive products have been considered top priority, based on the following scope:

• High revenue generation
• High domestic manufacturing
• High value addition - raw material sourcing, R&D capability, IP creation in India

Future Outlook for Automotive Electronics Market in India

• Owing to the huge untapped rural market, the demand for automotive electronic is like to rise, presenting a large domestic market.
• India is an emerging small car manufacturing hub with great R&D capabilities.
• Introduction of new technologies, inclusion of more electronics switches, lighting, shift from CDI to ECU in 2W, analog to digital controls and growth of EMS and ABS are the new additions which will spur the consumption of automotive electronics.
• Increasing uncertainty in fuel pricing is expected to boost the demand for electric vehicles during the forecast period, thereby leading to greater consumption of automotive electronics.
• The Indian Government's initiative in mandating Bharat Stage IV norms and fuel efficiency labelling for all vehicle categories has encouraged manufacturers to discontinue or modify their older engines to suit new norms, thereby, creating fresh avenues for automotive ignition electronics market.
• With 100% Foreign Direct Investment permissible in the automotive sector, there is increasing investment in both 2W and 4W segments, be it the setting up of new plants or R&D centers, etc.; this increases the demand for auto electronic components.