-T.S.Chandrashekar
India is a IT hub country and is world code office for software and service Industry. However the Revenue whatever we get in Software is given back to Hardware companies of Taiwan, South Korea, Japan, China, Malaysia to name few.
Countries like China have a share of more than 30% in global exports of electronics product whereas India has a share of less than 1%. Today Electronics is the largest industry in the world, but India is not a significant player in this market.
India export’s $70 billion of software and services, the import of $ 50 billion worth IT hardware makes all the success go down, without hardware manufacturing base India is going to be a dump place for other Hardware manufactures. For example, semiconductor wafer used in electronic devices acts like heart of a device is completely imported. The World Bank reports that 10% increase in computer and broadband penetration increases GDP by 1.38%.
It has been predicted that by 2020 the import cost of IT hardware will pass the fuel import may cross $200 billion. The Above Figure shows the demand and supply crunch in electronics demand and production. This alarming picture will not stop here as India’s large and growing middle class buying more digital devices, the reliance on imported semiconductors and other hardware is likely to increase. Almost 50% of IT Hardware in India is consumed by the Government in the operations as well as in various projects and programs and this is the challenge
Though Indian Government approved plans for two semiconductor manufacturing projects, requiring an investment of $10.2 billion, with IBM, Geneva-based STMicroelectronics and Israel’s Tower Semiconductor, they are still in initial stages.
The main causes for the failure of hardware industry in India are the cost of power and finance, high transaction costs and poor base of supply chain infrastructure have discouraged investments from multinationals and local industries. Karnataka Government had announced that they are starting a hardware park near Bangalore Devanahlli Airport, but the project is going slow since a decade. The alarming picture is if some countries, who are in disputes with us or if there are natural calamities like in 2011-12, when there were supply line disruptions caused by Japanese Tsunami and Thailand floods, the prices of key components increase. With this Rupee devaluation bleeds the industry.
Moreover, most of the India’s more than 1,000 small companies manufacturing electronic components have shut operations due to onslaught of cheap Chinese imports after about 217 categories of electronic components like capacitors, resistors and transformers were allowed in 2005, under an information technology agreement with the World Trade Organisation.
If Government considers hardware on par to the defense as high priority Industry and encourages more direct investment and allow Local players, things can change. Though Government has announced the Electronics Manufacturing Clusters (EMCs) and Modified Special Incentive Package Scheme (M-SIPS) to promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector, coming days will show the fruits.
(The author holds his doctorate degree on international relationships and is currently the deputy director of Korea trade promotion agency (KOTRA).He can be reached at kotrabangalore@gmail.com The views expressed in this article are those of the author and do not represent the views of Channel Times or any of the websites managed or operated by Trivone Digital Services)