IESA FS Report Indian ESDM Market

FROST
& S U L L I VA N
INDIAN ESDM MARKET - ANALYSIS OF

OPPORTUNITY AND GROWTH PLAN
An IESA - Frost & Sullivan Report
Supported by the Department of Electronics & Information Technology,

Ministry of Communications & Information Technology
Government of India
Copyright 2014, India Electronics & Semiconductor Association
IESA - Frost & Sullivan : Indian ESDM Market
CONFIDENTIAL IESA COPYRIGHT
INDIAN ESDM MARKET - ANALYSIS OF 2014

Report released by
Shri J. Satyanarayana, IAS
Secretary
Department of Electronics & Information Technology
Government of India
Copyright 2014, India Electronics & Semiconductor Association
India Electronics & Semiconductor Association

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IESA is the premier trade body representing the Indian Electronic System Design and Manufacturing ESDM industry and has represented it since
2005. It has over 200 members - both domestic and multinational enterprises. IESA is committed towards building global awareness for the Indian
ESDM industry and supporting its growth through focused initiatives in developing the ecosystem. This is through publishing credible data,
networking events and alliances with other international associations IESA works closely with the Government as a knowledge partner on the
sector, both at the centre and at the state level.
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First print: January 2014
Published by:
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Edited by:
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Designed by:
Cocoon Creative Concepts, Bangalore
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Indian ESDM Market

ANALYSIS OF OPPORTUNITY AND GROWTH PLAN
An IESA - Frost & Sullivan Report
Assessment of challenges and identification of steps to develop ecosystem and

increase indigenous value addition for top 25 high priority electronic products
and corresponding components market
Supported by the Department of Electronics & Information Technology,

Government of India
Acknowledgements
The research report on the Indian ESDM industry will be incomplete without acknowledging the contribution of all the
individuals associated with this exercise. These individuals have been untiring in their efforts to bring in their wealth of
experience and knowledge base to add value to the exercise. The research exercise could leverage their acumen and count on
their unwavering support till the stage of its completion.
India Electronics & Semiconductor Association and Frost & Sullivan would wish to thank them wholeheartedly for their valuable
time and guidance whenever we needed them.
MESSAGE
The India ESDM industry presents a huge opportunity and is expected to
emerge as a vital contributor to the nations economy. While we continue to dominate
the high-end semiconductor design space, we are also seeing a major shift in focus
from just design to end-to-end product conception and manufacturing to truly
dominate the global ESDM industry.
The Department of Electronics and Information Technology (DeitY),
Government of India has been actively working towards reviving indigenous
manufacturing in a big way. IESA has also played a prominent role in supporting the
Government in its initiatives.
In order to realize the vision of the ESDM industry, we would need to promote
the opportunities presented by the ESDM industry to attract investments in the sector.
As the electronic products have a pervasive role in all industry verticals, it is desirable
that the industry reports on the market opportunities in key products are carried out,
which would serve as useful reference to the various stakeholders, and, thereby, help
them in taking informed decisions on their plans of investing in India.
The IESA - Frost & Sullivan Report 2014 on the Indian ESDM MarketAnalysis of Opportunity and Growth Plan is a right step in this direction. This report
includes an extensive study and analysis of the top 25 high priority electronic
products and their related components in the Indian ESDM industry. This report also
gives insightful information on resolving the current challenges and the
recommendations to move ahead.
I congratulate DeitY and IESA for putting together this important and timely
report for the benefit of all the stakeholders of the Indian ESDM industry. I am sure it
will help us in achieving our vision of taking India to global leadership in the ESDM
industry.
(KAPIL SIBAL)
Room No : 105, Sanchar Bhawan, 20 Ashoka Road, New Delhi - 110001

Phone: 91-11-23739191, 23372177 Fax: 91-11-23723330
Message
With the Indian ESDM industry is expected to touch the USD 400 billion
mark in the coming decade, the Government of India has identified the
electronics hardware manufacturing sector as a major thrust area for the
country. IESA has done a commendable job of catalysing the growth of the
domestic ESDM industry and is relentlessly working towards this objective.
Taking cognizance of the demands of the economy and the industry, the
Government of India has taken a number of steps to promote the Indian
ESDM industry.
The Department of Electronics & Information Technology (DeitY) and IESA,
as the Knowledge Partner to the Government, have brought out the report on
Indian ESDM Market Analysis of Opportunity and Growth Plan. This report
identifies the top 25 electronics product markets with large opportunities and
draws a roadmap for their growth. It also identifies the major components
used in these products and evaluates strategies to promote their ecosystem
in India.
I am sure that this credible report would be extremely valuable for decision
makers both in the government and the industry. I congratulate DeitY and
IESA for their excellent work in putting together this informative and timely
report.
(J. Satyanarayana)
New Delhi
January 02, 2014
W-11/68/2013-IPHW
January 06, 2014
Message
The Indian ESDM industry is poised for exponential growth. India, as one
of the biggest markets for electronics products, is at a crucial juncture
today. With companies from the world over vying for their share of the pie,
Indian companies today have the opportunity to dominate the global ESDM
landscape by catering to this enormous local demand. Product innovation
and manufacturing are the keys to capturing the market and establishing
market leadership.
In this regard, the IESA-Frost & Sullivan Report on Indian ESDM Market
Analysis of Opportunity and Growth Plan could not have come at a better
time. With awareness about domestic manufacturing at a new high, Indian
decision makers and the investors are looking for credible data on various
products and components that make up the ecosystem. The IESA-F&S
Report conducts an extensive study and SWOT analysis of the top 25 high
priority electronic products and their related components.
This Data is also invaluable for the industry and the investors looking to
capitalize on the opportunities available in the Indian ESDM industry. The
recommendations in the report will also help us to leapfrog the challenges
and quickly respond to market dynamics.
It is indeed heartening to note the single-minded focus that IESA brings
to promote the growth of the Indian ESDM industry through its various
initiatives.
I complement IESA in bringing out this timely report.
Yours Sincerely
New Delhi
January 06, 2014
(Dr. Ajay Kumar)
Table of Contents
Foreword 15
Preface
17
Executive Summary
19
Top 10 Products and Components Markets to Focus for

Near Term Local Value Addition Improvement
33
Mobile Handsets - Product and Ecosystem Analysis
39
Flat Panel Display TV - Product and Ecosystem Analysis
45
Notebooks - Product and Ecosystem Analysis
49
Desktops - Product and Ecosystem Analysis
53
Digital Camera - Product and Ecosystem Analysis
59
Inverters and UPS - Product and Ecosystem Analysis
65
Memory Cards and USB drives - Product and Ecosystem Analysis
71
4W EMS - Product and Ecosystem Analysis
75
LCD Monitor - Product and Ecosystem Analysis
79
Servers - Product and Ecosystem Analysis
85
Base Stations (BTS) - Product and Ecosystem Analysis
91
Power supplies - Product and Ecosystem Analysis
97
Set Top Boxes - Product and Ecosystem Analysis
101
Printers and MFDs - Product and Ecosystem Analysis
107
Router/Switches - Product and Ecosystem Analysis
113
Car Radio - Product and Ecosystem Analysis
117
CFL - Product and Ecosystem Analysis
121
Energy Meters - Product and Ecosystem Analysis
125
Digital Instrument Clusters (DICs) - Product and Ecosystem Analysis
129
Smart cards - Product and Ecosystem Analysis
135
GPON ONT - Product and Ecosystem Analysis
141
Tablets - Product and Ecosystem Analysis
145
LED Lighting - Product and Ecosystem Analysis
151
Payment Terminals - Product and Ecosystem Analysis
157
2W Ignition - Product and Ecosystem Analysis
163
Appendix 167
Foreword
The Indian electronics system design and manufacturing (ESDM) industry is at a huge inflection point.
From being predominantly consumption driven, the Indian ESDM industry has a major potential to
become a design led manufacturing industry. Concerted efforts from both the Government and the
industry are required to propel the Indian ESDM industry into one of the critical GDP contributors
in the near future.
The Indian Electronics and Semiconductor Association (IESA), a premier representative body for the
ESDM industry in India commissioned a full-fledged research in its efforts to map the current status
and future opportunities in the industry. The objective of the report was to establish the current
status of all the value chain components in the ESDM industry and identify the growth trends. This
exhaustive report developed by IESAs consulting partner, Frost & Sullivan, and released in early
2013 is the only authentic detailed report on the overall ESDM industry in India. As a next step, there
was the pertinent need to identify the high growth product markets within the overall electronics
industry and do a deep dive evaluation of the existing ecosystem for these products. This study
would help identify the appropriate initiatives needed for further developing the ecosystem for
these high priority products.
The Department of Electronics and Information Technology (DeitY) has been very active in
formulating and announcing various policy measures aimed at developing the ESDM industry in
India. To ensure the effective implementation of these policies and for directing the focus in the right
direction, this extended analysis of the top 25 high priority electronic products was commissioned
by IESA.
The report on the ecosystem SWOT analysis of the top 25 high priority products covers the following
product markets:
1.
Mobile Phones
14. Printers and MFD
2.
Flat Panel Display (FPD) TV
15. Routers and Switches
3. Notebooks
16. Car Radio
4. Desktops
17. CFL
5.
Digital Cameras
18. Energy Meters
6.
Inverters and UPS
19. Digital Instrument Clusters
7.
Memory Cards and USB Drives
20. Smart Cards
8.
4W EMS
21. PON, GPON ONT
9.
LCD Monitors
22. Tablets
10. Servers
23. LED Lighting
11. Base Stations
24. Payment Terminals
12. Power Supplies
25. 2W Ignition
13. Set Top Box
Preface
IESA is today recognized as the most credible voice of the Indian ESDM industry. As
the knowledge partner to the Government of India and the foremost trade body
representing the interests of over 200 member companies in the Indian ESDM
landscape, IESA regularly undertakes research and publication activities. The IESAFrost & Sullivan annual report on the Indian ESDM industry is one such report that
is much awaited and widely referred by decision makers in the government as well
as the industry.
The IESA- Frost & Sullivan report 2014 is the seventh publication since its inception
in 2005. This year we have conducted an extensive study and SWOT analysis on
the Top 25 high priority electronic products and their related components in the
Indian ESDM industry. As we aggressively promote indigenous manufacturing
and reduction of our dependence on imports, this report aims to uncover the
challenges associated with manufacturing these top 25 electronic products and
associated components domestically.
The findings of the report are interesting. And as always, we have proposed a range
of measures to overcome these challenges and kick-start high-value addition
manufacturing activities in a big way in India.
We sincerely hope that you will find these facts and statistics beneficial for strategic
decision making and join us in taking the right steps to further enrich the Indian
ESDM industry.
Mr. Sanjeev Keskar

Chairman
Mr. PVG Menon

President

Executive Summary
The Indian electronics system design and manufacturing (ESDM) industry is one of the fastest growing sectors in the country.
Witnessing uninterrupted growth, the ESDM industry in India is globally renowned for its consumption potential. Changing
global landscapes in electronics design and manufacturing capabilities, and cost structures have turned the attention of global
companies towards India. Companies from around the world are looking to build local capabilities in India not just to serve the
resident market but also to cater to overseas markets.
This has resulted in the development of indigenous capabilities across the ESDM value chain in India. The different segments
within the ESDM industry are at varying stages of development. Similarly, various electronics applications markets such as
telecom electronics, automotive electronics, consumer electronics and industrial electronics, are at different stages of ecosystem
development. The focus is currently on providing the necessary impetus to take advantage of the dormant capabilities across the
various electronics markets and developing the missing links so as to make the local ESDM sector globally competitive.
The Indian ESDM industry was estimated to be $68.31 billion in 2012. The impressive guidance between 2011 and 2015 for this
industry is expected to result in a Compound Annual Growth Rate (CAGR) of 9.88 percent. The corresponding size of the industry
by 2015 is anticipated to be $94.2 billion. The following chart illustrates the total ESDM industry market growth:
India ESDM Industry Forecasts (2010-2015)

100
94.20
90
84.16
Revenues ($ Billion)
80
75.61
70
60
59.01
64.61
68.31
2011
2012
50
40
30
20
10
0
2010
2013
2014
2015
Base Year: 2011 Source: IESA-Frost & Sullivan
The ESDM industry in India comprises the following four key components:
1. Electronic Products
2. Electronic Components
3. Semiconductor Design
4. Electronics Manufacturing Services (EMS)
Of the above, the first two represent products while the remaining highlight the services opportunities catering to the domestic
and export markets.
19
Developing the Ecosystem is Crucial for Bridging

the Supply Demand Gap
Much of the domestic electronics consumption in the country is served through imports. This does not bode well for the economic
health of the country in the long term. Electronics imports, which are currently the third highest, next only to crude and gold,
accounted for nearly $30 billion in 2012, and are forecasted to scale past $50 billion in just 3 years. From a detailed assessment of
the electronics market, total market (TM) was estimated to be $44.81 billion in 2012, representing a growth of 7 percent over the
previous year. The TM is expected to grow at a CAGR of 11.5 percent and reach revenues of $64.85 billion by 2015. Total domestic
market (TDM) for 2012 was estimated to be $17.07 billion, representing a growth of 11 percent over 2010. Growing a CAGR of 10.4
percent, the TDM is expected to scale to $22.66 billion by 2015.
The chart below represents the TM and TDM forecasts for the Indian electronics market.
India Electronics Product Market: TM, TDM Forecasts (2010-2015)

70
64.85
60
TM: 11.5%
57.14
TDM (overall): 10.4%
50.61
50
40
CAGR (2011 - 2015)
39.21
TDM (Low/Med
value add) : 12.3%
44.81
41.91
TDM (High value

add): 3.9%
30
20
10
4.12
15.27
3.74
15.44
3.55
17.07
3.62
10.55
11.54
11.89
13.46
14.67
2011
2012
22.68
4.35
18.33
15.57
0
2010
19.47
3.9
2013
2014
2015
Total Domestic Manufacturing (High Value Add, $ Billion)

Total Domestic Manufacturing (Low & Medium Value Add, $ Billion)
Total Market ($ Billion)
Note: Total market or TM refers to the domestic electronics consumption in India which therefore includes all locally manufactured and locally consumed
products as well as imports.
Total domestic market or TDM refers to the domestic production that caters to domestic demand. Value addition is classified into two broad categories:
1. Low/Medium Value Add: Includes negligible sourcing, minimal design activity, EMS, SKD and CKD assembly; corresponds to value addition of upto 50%
(<20% being low value add and 20%-50% being medium value add)
2. High Value Add: Includes high local sourcing, high levels of indigenous design and complete system manufacturing; corresponds to a value addition
of >50%.
Some of the key observations include:

65 percent of the current demand for electronics products is met by imports. Imports are likely to grow from $28 billion in 2011
to $42 billion in 2015 in the absence of intervention
High value added manufacturing is likely to be restricted to less than 7 percent in 2015. This represents a cumulative opportunity
loss of $200 billion between 2011 and 2015 in the absence of intervention
Increasing total domestic manufacturing to 50 per cent by 2015 will create additional direct employment for nearly 2 lakh
people
There is a very pertinent need to recognize the ESDM industry as a priority sector and provide a favourable environment for its
growth
20

Government as an Enabler for the ESDM Sector

The Indian Government, through the Department of Electronics and Information Technology (DeitY), has instituted a number of
forward-looking policies to foster the growth of the Indian electronics ecosystem. These policies are aimed at holistic development
of the ESDM industry by offering specific incentives for the development of each element in the value chain. These forward looking
policy measures include:
National Policy on Electronics (NPE): The objective of the NPE is to create an ecosystem for a globally competitive
ESDM sector in the country by attracting investment of about USD 100 billion and generating employment for around 28 million
people at various levels. The ultimate aim of the policy is for the Indian ESDM sector to develop core competencies in strategic and
core infrastructure sectors like telecommunications, automobile, avionics, industrial, medical, solar, information and broadcasting,
railways, intelligent transport systems, etc.
National Manufacturing Policy (NMP): The government has brought out the NMP to increase the growth of the
manufacturing sector to 12 to 14 percent over the medium term and enable manufacturing to contribute at least 25 percent to
the National GDP by 2022.
Modified Special Incentive Package Scheme (MSIPS): The MSIPS aims to offset cost disabilities and attract
investments in the India ESDM sector through an INR 10,000 crore corpus. Subject to certain investment thresholds, subsidies to the
tune of 20 per cent for SEZ units and 25 per cent for non-SEZ units will be given on capital expenditure along with reimbursement
of excise/CVD.
Setting up semiconductor fabrication units: The Government of India has received the applications of two
consortia (IBM, Jaypee Group, TowerJazz; STMicroelectronics, HSMC) to establish 2 semiconductor wafer fabrication units in Gujarat
and Noida with the aim of operating at 20 nm process node within two years of initial operations and reaching a capacity of at least
40,000 WSPM of at least 300 mm size. Various incentives are being offered by the government to this effect: 25 per cent subsidy
on capital expenditure and growth capital expenditure, reimbursement of CVD and excise duty, exemption from basic customs
duties and 200 per cent deduction on R&D activities, among other incentives such as reimbursement of training costs, deduction
for income tax and various forms of viability gap funding.
Electronic Manufacturing Clusters (EMCs): The government is offering financial support for the development
of EMCs. For greenfield EMCs, assistance will be given up to 50 per cent of the project cost subject to a ceiling of INR 50 crore for
every 100 acres of land. For brownfield EMCs, assistance will be given up to 75 percent of the project cost subject to a ceiling of
INR 50 crore.
Electronics Development Fund (EDF): The EDF aims to create an ecosystem of R&D in electronics in India which
will promote IP generation and large scale manufacturing, while simultaneously fostering the growth of the ESDM ecosystem. The
focus of EDF will largely revolve around small and medium enterprises (SME) in line with the goal of promoting innovation and job
creation.
21
The chart below captures the salient features of the various government initiatives to promote the Indian ESDM sector.
Indian ESDM Industry: Snapshot of Government Policies
To attract
investment of
USD 100 billion
and generate
employment of
28 million
NPEs mission
is to promote
manufacturing
and R&D across
the value chain,
especially in
strategic
electronics
Aim to reach
20nm process
node within 2 years
of initial phase,
and reach at least
40,000 WSPM of
300 mm
25% subsidy on
capex; CVD and
excise reimbursed;
BCD exempted;
200% R&D
deduction; etc.
IBM, Jaypee,
and TowerJazz;
and STMicro
electronics and
HSMC got approval
in principle
to establish 2
semiconductor
fabs
Financial support
will be offered for
development of
EMCs to aid growth
of ESDM through
innovation and
entrepreneurship
NPEs vision is
to create
a globally
competitive ESDM
ecosystem to
meet the countrys
needs and serve
the international
market.
MSIPS makes
available a corpus
of INR 10,000
crore to attract
investment in
ESDM
20% Capex
subsidy for SEZ
units; 25% Capex
subsidy for non-SEZ
units and CVD/
excise
reimbursed
EDF is a planned
scheme of DEITY to
create ecosystem
of electronics R&D
and promote IP
generation
Focus will largely

be on SMEs in line
with the goals
of promoting
innovation and job
creation
Brownfield: 75 per
cent of project cost
subject to ceiling of
INR 50 crore
Scope of policy
includes:
nanoelectronic,
semiconductor
fab, solar, LED,
LCD, passive
components,
and EMS
Greenfield: 50
percent of project
cost subject to
ceiling of INR 50
crore for every 100
acres of land
Source: IESA-Frost & Sullivan
Identification of High Priority Product Markets

Holistic development of the ecosystem can be the panacea to all of the woes of the Indian ESDM industry. However, application of
the Pareto principle at a broad level suggests that identifying the products that accounts for nearly 80 per cent of the electronics
market revenues and provide the necessary support and incentives required to eliminate the disability costs associated with local
manufacturing/value addition in these products shall enable enormous development in the overall ecosystem. Initiatives aimed at
promoting indigenous value addition in the top 20-25 percent of products is expected to have a cascading effect on the remaining
75-80 percent of the products. In line with the Pareto principle, it is observed that the top 20 product markets accounts for 80
percent of the overall electronics TM revenues for 2012, as indicated by the chart next page.
22

Indian Electronics Market: Top 20 Products by TM Revenues (2012)
Product
Revenue
% of
Total
Product
Revenue
% of Total
Mobile Phones
38.85%
Base Stations
1.61%
FPD TV
7.91%
Power Supplies
1.28%
Notebooks
5.54%
Set Top Box
1.13%
Desktops
4.39%
Printers and MFDs
1.06%
Digital Camera
2.73%
Routers/Switches
1.05%
Inverters and UPS

Memory cards and
USB drives
4W EMS
2.65%
Car Radio
1.02%
CFL
1.00%
LCD Monitors
2.02%
0.66%
Servers
1.72%
Energy Meters
Digital Instrument
Clusters
Smart Cards
Total of Top 10
Products
70.60%
2012 Electronics Product

TM = $44.81 Billion
2.46%
2.33%
Total of Top 20
Products
0.58%
0.52%
80.52%
Mobile Phones
FPD TV
Notebooks
Desktops
Digital Camera
Inverters and UPS
Memory cards and USB drives
4W EMS
LCD Monitors
Servers
Base Stations
Power Supplies
Set Top Box
Printers and FPDs
Routers / Switches
Car Radio
CFL
Energy Meters
Digital Instrument Clusters
Smart Cards
Beyond just these top 20 products, it is also essential to identify as high priority those product markets that are currently not
amongst the top 20 in their contribution to the overall revenues, but have growth trends in excess of even these top 20, thus
indicating their potential to be significant product markets by 2015. Identifyingfive such products with significant CAGR trends and
providing them the necessary impetus for ecosystem development is also important for the growthof the ESDM industry. The chart
below highlights five such products across industry segments that have the potential, and hence, deserve the thrust.
Indian Electronics Market: Top 5 Products by with Highest CAGR (till 2015)
Industrial Electronics
Automotive Electronics
LED Lighting (CAGR = 38%)
2W Ignition (CAGR = 10%)
Telecommunications
IT/OA
PON, GPON ONT (CAGR = 120%)
Tablets (CAGR = 54%)

Payment Terminals
(CAGR = 19%)
23
SWOT Analysis of the 25 High Priority Product Markets

The characteristics of these product markets with regard to the Indian electronics ecosystem vary very widely. Hence, they need to
be evaluated thoroughly with regard to their strengths, weaknesses and growth prospects among other factors in order to gain a
thorough understanding of their unique market dynamics. This report contains detailed evaluation of the market dynamics, current
ecosystem availability, disability factors restricting local value addition and future potential for these 25 high priority products. The
chart below highlights the consolidated strengths, weaknesses, opportunities and threats for these 25 high priority products.
Consolidated SWOT Analysis of the Ecosystem for the High Priority 25 Product Markets
STRENGTHS
OPPORTUNITIES
Huge Consumption Market.
Significant Local Demand as a Influencer for Investment

Attraction
Strong Design and R&D Capability in Select Products Auto electronics, industrial etc.
Rising Manufacturing Costs in China Leading to India as

Alternate Destination
Government Schemes a Good Demand Generator - NKN,

NOFN, tablets for education sector, digitization policy,
broadband push etc.
Government Policies - MSIPS, EMC, local FABs etc Favour

Attracting Manufacturing Investments
Adequately Developed EMS Industry - to be a significant

contributor to ecosystem development.
Export Potential - huge consumption market in ME;

emerging growth markets of North Africa and Latin
America.
Enormous ResidentTalent in Semiconductor Design and

Embedded Software
Existing R&D Capabilities can be Encouraged to Develop

Made in India Products and Generate Local IP
SWOT
WEAKNESS
THREATS
Reliance on Imports for all Critical Components - Semi

battery, LCD displays, electronic components etc
Established Manufacturing Ecosystem in China poses a

Major Threat.
Convoluted Tax and Duty Structure - Imports made

Cheaper than Local Products.
Emergence of other Low Cost Manufacturing Destinations

like Vietnam.
Debilitating FTAs with Thailand, Japan.
Inadequate / Fledgling Ecosystem for Components and

Raw Materials.
Lack of Subsidies/Incentives for Support Industries makes

Local Manufacturing Costlier
Inadequate Domestic Standards andTesting Facilities.
Slow and Delayed Policy Implementation
Infrastructure Inadequacy as Demanded by Certain

Sectors - Electricity, Water, Utilities etc,
Depreciation of the Rupee as a Short Term Threat.
Inadequate Local Product Innovation and IP Creation
Component Ecosystem for the 25 High Priority Product Markets

Research indicates that the most crucial elements for the development and sustenance of a robust ecosystem include:
A healthy consumption economy with export potential
Design, development and R&D capabilities
Availability of raw materials to locally source
Infrastructure adequacy
Favourable policy environment
Availability of necessary skill sets
Local availability of components/raw materials is considered very significant for achieving high local value addition in any
product manufacturing. Moreover local supply of components ensures faster turnaround time and lesser production cost; this
is why globally, component supply/manufacturing is closely located along with product manufacturing locations. Absence of a
component ecosystem is a major disability in electronics product manufacturing. To evaluate the significance of this, the research
did a detailed assessment of the local ecosystem for the top four components in each of the 25 high priority products. The table
below provides a snapshot of the 25*4 matrix.
24

S.No
1
Mobile Phone
Memory (22%)
Display (19%)
FPD TV
Display( 50%)
ICs ( 15%)
Notebooks
Display (18%)
Processor (15%)
Component 3
Application Processor /
System on Chip (15%)
Electromechanicals (
15%)
Motherboard (12%)
Desktop
Processor (15%)
Monitor (15%)
Motherboard (12%)
HDD (10%)
Digital Camera
Lens (30%)
Image sensor (15%)
Battery (10%)
Inverter, UPS
Transformer(50%)
Heat sink(10%)
Microcontroller(5%)
Memory Cards,
Drives
Image processor (15%)

Power
Semiconductor(10%)
Flash Memory chip (80%) Microcontroller/ASIC(5%) Crystal Oscillator (5%)
USB connector (5%)
EMS 4 W
Mechanicals - Pump,
Injectors (40-50%)
Microcontroller (10%)
LCD Monitor
Display( 50%)
ICs ( 10%)
Power ( 5%)
10
Servers
Processor (25%)
15%)
Memory (25%)
Motherboard (15%)
HDD (12%)
11
BTS
IC (40%)
Power Amplifier (15%)
Power supply (12%)
Antenna (10%)
12
Power Supplies
Transformer (30-40%)
Power Semiconductor
Rectifier diodes
13
Set Top Box
IC (MPU,Memory,Tuner) PCB
14
Printers & MFDs Photosensitive Drum

Routers /
Software & OS (50%)
Switches
15
Product
Component 1
Component 2
Analogs+Sensors (20%)
Component 4
Camera
Power ( 5%)
HDD (10%)
Fusing Roller
Transformer
PCB
Plastics and
Mechanicals
Lens and scanner
Processor (10%)
Memory (10%)
Electromechanicals
PCB ( 10%)
Power ( 10%)
Transformer (10-15%)
LCD Display and
backlight (15%)
Transistor (10%)
Microcontroller (10%)
LCD (7%)
Power supplies
16
Car Radio
ICs ( 30%)
17
CFL Lamps
Capacitor (20%)
20%)
Glass tube (20%)
18
Energy Meters
System on Chip (20%)
Transformer (20%)
19
Digital
Instrument
Cluster
Stepper motor (20%)
PCB (15%)
20
Smart cards
ICs (62.5%)
21
GPON ONT
PETG/Polycarbonate
body (20%)
Optical Module (35-40%) System on Chip (15%)
22
Tablet
Display (38%)
Memory (10%)
Battery (10%)
23
LED Lights
LED (25%)
Driver (20%)
Heatsink (15%)
24
Payment
Terminals
25
2 W Ignition
Communication Module
LCD/TFT Display (16%)
(16%)
Power semiconductor
Microcontrollers (20%)
(20%)
Software OS (10%)
Power Supply (8%)
Super Capacitor (10%)
Antenna ( wire or
printed) (7.5%)
Memories (5%)
Processor (10%)
Thermal interface
material (7%)
Printers (16%)
Processor (14%)
CDI Capacitors (10%)
Transformer (10%)
The percentage in brackets in the table above indicates the contribution of each component to the overall product bill of materials
(BoM). The most common components that are within the top 4 BoM contributors across these 25 products are the following:
Power devices and semiconductors
Processor
Memory
Printed circuit board (PCB)
LCD display
Transformer
25
Semiconductors: As observed, 3 of these top 5 key components (power semiconductor, memory and processor) include
semiconductor chips and devices. Currently, the absence of a local fab implies complete reliance on imports for these components.
The FAB initiative that is expected to usher atleast 2 semiconductor fabs in India in the foreseeable feature shall help in making
these core chips available locally. Given the numerous applications that require processing capability, creating an India-specific
processor design, and fabricating them in local chips shall ensure a significant contribution to the local value addition.
Semiconductor Ecosystem Assessment

CHALLENGES
Global hub for VLSI and board
design
Strong third party design
service providers
Huge domestic electronics
consumption market
Very limited IP creation
Fund for Fabless Promotion
Restricted number of Fabless

companies
Encourage ATMP investments

under MSIPS
Inadequate ATMP facilities
Expedite the setting up of 2

Approved Fabs
Absence of Fab
Incentivize local sourcing of Semi
Presence of R&D and design

centres of the top 23 global
semi majors
Local Fabs to fabricate chips in

high demand
STRENGTHS
RECOMMENDATIONS
Printed Circuit Board (PCB): India has a good number of PCB manufacturers in the country. However the local capability
is restricted to producing single, dual and multi layered PCBs of upto 8-12 layers. The PCBs needed in most of the 25 high priority
products, especially in telecom, consumer and automotive applications, require complex multi-layered PCBs that are not available
locally, thus necessitating imports. Building on the existing capability, special initiatives need to be targeted to encourage
indigenous design and manufacturing of multi-layered PCBs of upto 64+ layers. This will ensure local sourcing of PCBs for product
manufacturers, thus contributing to higher value addition; this shall also meet the requirements of the local EMS players who
source PCBs in bulk.
PCB Ecosystem Assessment
CHALLENGES
PCB manufacturing capability
exists locally
Strengths in single, dual layers
Capability to do multiple
layers too for less complex
applications
Export market exists
Inability to compete with

Chinese imports on cost
Chinese exporters get 17%
export incentive
High import tariff on PCB

imports. Nil duty on raw material
imports.
Working capital challenges
Interest subsidies/low interest

loans for PCB manufacturers
Excise and customs duty

procedural issues
Quicker, easier reimbursement of

CENVAT
Export subsidies
STRENGTHS
RECOMMENDATIONS
26

LCD Displays: In the case of LCD displays, India possesses local design and manufacturing capabilities for some of the end
use products. However, the cost of production of panels and its technology-intensive nature have kept India void of an LCD
display assembling/manufacturing unit hitherto. Other challenges include the existing duty structure which makes importing a
cheaper option for displays. Given the high volume demand anticipated in the various products that consume displays, it becomes
pertinent to grow the ecosystem for LCD displays locally.
LCD Display Ecosystem Assessment
CHALLENGES
Huge consumption demand
Ecosystem doesnt prevail
End use product

manufacturing through OEMS
and EMS exists
Inverted duty structure
Favourable incentives for panel

manufacturing available under
MSIPS
Debilitating FTAs with

Thailand, Japan etc
Infrastructural challenges
Relocation of a brownfield Gen 5

fab
Preferential excise duty for panel
manufacturing; tax rebates.
Hike in import duty of finished
display imports
Fund to encourage local
technology development
STRENGTHS
RECOMMENDATIONS
Transformers: Transformers belong to the larger family of wound components. This is a market that is dominated by small
scale indigenous manufacturers as it requires limited infrastructure and inexpensive labour. Consumer and industrial electronics
segments drive the demand for transformers and, owing to cost advantage, transformers are predominantly imported from China,
Taiwan and South Korea. Reliance on import for raw materials, specifically copper, is a major handicap for Indian transformer
manufacturers in achieving faster turnaround time as well as lower production costs.
Transformer Ecosystem Assessment
CHALLENGES
End use product
manufacturing through OEMS
and EMS exists
Local design know how and
manufacturing technology
skills exists
STRENGTHS
Local landed cost of

production high: makes
imports cheaper
Preferential excise duty for

transformer manufacturing: tax
rebates.
Reliance on imports for

copper
Subsidies on logistic costs of

copper import to reduce product
landed cost
Delayed turn around time due

to copper import time
Special interest loans for working

capital for SME
RECOMMENDATIONS
27
Product Specific Recommendations

Each of the 25 high priority product markets has varying levels of developed and underdeveloped ecosystems and while there
are some common initiatives that are required for eliminating the disabilities associated with local value addition across the 25
products, there are certain specific steps that need to be taken product-wise to enable holistic development of an ecosystem
that services the local market and holds export potential as well. Here we summarize some of these key measures that shall help
provide the necessary impetus to these high priority product markets.
Mobile phones
Offering incentives to develop India as a hub for mobile phones batteries
Developing policies to address the disability costs associated with local manufacturing through
- exemption of CVD on imported capital equipment and excise duty on capital equipment sourced locally;
- levying of a tax equivalent to CST on imported mobile phones;
- basic customs duty and CVD exemption from on all imported capital equipment for manufactureof mobile phone parts and
components.
Developing India-specific certifications to ensure quality of products. This would also act as a non-tariff barrier that would
incentivize local manufacturing.
Flat panel TV
Encouraging domestic assembly, including low value add activities,to boost local sourcing and generate employment in the
long run.
Setting up a center for excellence for LCD and LED displaysto encourage indigenous development
Providing incentives under the MSIPs scheme to bring FPD panel assembly activity into India.
Notebooks, Desktops, Servers

Simplification of the reimbursement process for claiming tax credit on input duty paid
Incentivizing manufacturing of motherboard and LCD displays for laptops / desktops by exempting their individual components
from basic customs duty and excise duty, or offering preferential excise duty.
Digital Cameras
Need for Duty restructuring - The CENVAT for digital cameras is around 16% and an excise cess of 2% against an import duty of
10% makes it more expensive to assemble or manufacture locally.
The component ecosystem and technology leadership for this segment being non-existent in India, focus can be on developing
batteries for digital cameras rather than the product itself.
Inverters and UPS

Encouraging local manufacturing by lowering excise duty and making the process of reimbursement of tax credit easier and
quicker.
Making appropriate R&D investment to gain expertise in the design and manufacturing of UPS with high power rating. The
planned EDF corpus of DeitY could be an appropriate way of implementing this measure.
Providing energy star ratings under the aegis of Bureau of Energy Efficiency (BEE) shall help in fostering growth of solar powered
UPS as well as power efficient UPS and inverters. The higher rated UPS/inverters would have more sophisticated electronics and
semiconductors, thus boding well for the semiconductor market as well.
Memory Cards and USB Drives

Considering the low margins and the magnitude of investment required to set up a flash manufacturing facility, it seems logical
to divert the available resources towards other areas that would offer greater and faster returns on investment.
28

Automotive sub systems (CDI, Digital Instrument Clusters, 4W EMS, Car Radio)
Setting up of an automotive EMC possibly near Chennai or in the NCR to completely indigenize the manufacturing of 2W ignition
units.
Incentivizing the manufacturing of PCBs and LCD displays by offering preferential excise duties or greater rates of CENVAT credit.
Leveraging the MSIPS and EMC policies to set up an automotive EMC near the Bangalore-Chennai area to indigenize the
manufacturing of instrument clusters.
Attracting investment through the MSIPS policy, preferential excise duties or greater rates of CENVAT to provide impetus for
manufacturemicrocontrollers in the country; the setting up of the two semiconductor fabs in the country would prove to be a
great enabler in this regard.
Setting up a center of excellence for car infotainment needs within an auto electronics EMC to encourage indigenous design
through frugal innovation.
Setting up of auto electronics cluster under EMC either in Chennai or Pune with facilities such as incubation center to promote
innovation research, testing laboratories and all other essential infrastructure.
LCD Monitor
Encouraging LCD manufacturing by offering preferential excise duty rates and facilitating easier reimbursement of tax credit.
Investing in R&D for new display technologies to hedge against any investment made in TFT LCD display fabrication.
Encouraging local sourcing of electromechanical components, SMPS transformers and the plastic enclosures used in the
assembly of LCD monitors by offering tax credits for vendors who source these components locally.
Encouraging competencies in the manufacture of LCD displays, especially for tablet and laptop applications. This would require
investment in generation 5 fabs, which are mostly being used for these end user applications. Also, generation 5 fabs are
growing at only 3 percent a year while higher generation fabs are clocking almost 26 percent annual growth. This could mean
that relocationof a generation 5 fab to a brownfield location could be done at an affordable level of investment.
Base stations (BTS)

Incentivizing indigenous IP with preference in government procurement.
Exploring India-specific standardsfrom a security standpoint.
Decreasing the in-land freight costs from 17 percent to about 4 percent through subsidies to reduce costs for indigenous
manufacturing and encourage local value addition.
Encouraging domestic manufacturers to build their capabilities to design and develop power supplies and antennae used in the
BTS.
Power supplies
The component duty currently ranges between 12.36 to 16.85 percent which is considered high for the industry especially since
the Indian market is a price sensitive market. Offering subsidies for manufacturers who manufacture in bulk volumes.
Ensuring continual availability of copper through the year at subsidized prices to reduce the overall cost of the components.
Setting up regional level testing labs for testing imported goods.
Set top boxes

Indigenous manufacturers need pay a sales tax in addition to local VAT (~12.5 percent) that makes locally manufactured products
more expensive than imported STBs. Issuance of Form C to alleviate the payment of sales tax in addition to local VAT.
Increasing the import duty for STBs would help create a level playing field between global suppliers and indigenous
manufacturers; it has been observed that the hike in the same during 2012-13 budget was not sufficient for this purpose.
Export subsidies to create mini clusters for remote manufacturing of the various components that go into a set top box including
RCA cables, remote control and passive components.
Optimizing the tax structure being levied on the DTH industry and cable operators to alleviate the operational challenges being
faced by them.
Offering special low interest loans would help sustain growth and increase the amount of domestic value addition.
29
Printers and MFDs

Offering tax credits on R&D activity in high-end laser printing and MFDs. The government could also facilitate the formation of
joint ventures between indigenous players and global OEMs to take advantage of latent manufacturing capabilities; there could
be export opportunities to the Middle East, Sri Lanka, and Africa due to Indias geographical location.
Incentivizing local value addition for components such as transformers, PCBs and cabling, that are currently being manufactured
in India, by offering preferential excise duties and greater CENVAT credit for suppliers.
Routers/switches
Creation of funds for local technology know-how development and incentivizing local IP generation
Focusingon promoting local manufacturing of components such as complex PCBs for routers by either offering preferential
excise duty rates for the manufacturing of complex PCB designs or offering greater rates of CENVAT.
Prioritizing /inviting investment in PCBs manufacturing under the MSIPS scheme and offer associated benefits to those investors.
CFL
Reducing VAT for CFL manufacturing to zero per cent across all states
Developing ISI certifications to standardise manufacturing of CFLs in the country.
Energy meters
Development of standards for manufacturing of smart meters, create a R&D fund for innovations in smart meters, and also create
opportunities for manufacturing of key individual components such as communication modules and transceivers.
Incentivizing export duty and establishing India as an export hub by encouraging product modifications suiting international
requirements
Setting up an R&D fund for smart meters to encourage SME manufacturers to invest in innovation
Incentivize manufacturing of communication modules and transceivers
Global marketing support for cash-strapped SME suppliers
Smart cards
Incentivizing software development and customization services
Creation of indigenous standards that are application specific with the aim to ensure higher security in the smart cards consumed
in the country.
Setting up of subsidized testing facilities for EMV compliance
The Indian ecosystem has enormous skillset availability in the software and integration part of smart cards which could be
incentivized through offering appropriate R&D deductions.
Encouraging local sourcing of plastic (PETG) by offering preferential excise rates when raw materials are locally sourced.
GPON ONT
Creating supportive policies like reduced excise duties to encourage domestic manufacturing.
Tablets
Repealing the levy of SAD individual electronic components or individual components of LCD monitors and motherboards.
Incentivizing the manufacture of motherboard and LCD monitors by exempting their individual components from basic customs
duty and excise duty, or offering preferential excise duty.
Simplifying the reimbursement process for claiming tax credit on input duty paid
Creating a centre of excellence for tablets to consolidate the different design efforts in the private and public sectorsto develop
world-class commercial Made in India tablets.
LED Lighting
Restrictive tax structure with a high VAT of 14.5 percent obstructs LED lighting penetration. Reduction in the VAT and a uniform
VAT structure across all states will increase penetration.
Mandating BIS technical specifications to standardize manufacturing processes and products. Imported LED lamps should also
be tested rigorously to prevent dumping of goods in the local market.
30

Payment terminals
Funds allocation for providing domain training in the payment industry for people in the manufacturing sector of POS and
payment enabling products.
Offering funds to enable the Indian IT entrepreneurs to develop the EMV Kernel targeting various emerging platforms including
Android
Setting up of Accredited Labs for EMV Certification and PCI-PTS test facilities and provide easy, cost effective and productamortizable testing access to device manufacturers.
Current excise is 14 percent while customs duty is 12 percent. Reduction in sales, VAT and excise duty to attract more manufacturers
to consider local manufacturing.
Encouraging the usage of no frills debit cards with no surcharge; Tax rebate to merchants if at least 50 per cent of their transactions
in value terms are through cards.
Introduction of standards for products available in the market to increase customer confidence and allow manufacturers to build
scale simultaneously.
The chart below illustrates some common recommendations beyond the specific observations product-wise listed above for
ecosystem development of the high priority products.
Funding for R&D and

Indigenous Technology
Development Centres
of Excellence
Offering Tiered CENVAT

credit based on value
addition trends
Developing and
Mandating Indigenous
Standards for
all Products and
Components
Creation of non tariff

Import Barriers
Reduction in Excise
Duties; Increase in
Abatement rate
Common
Recommendations
Provision of subsidies /
Low interest loans to
SME Manufacturers
Conclusions
The top 25 high priority products are significant contributors to the overall electronics consumption in India. Providing a favourable
environment for developing the ecosystem for these in the country can contribute to high value adding local manufacturing of
these products. Continuing domestic consumption, changing global supply chain dynamics and the slew of policy measures to
support indigenous manufacturing are positively influencing local electronics design and manufacturing; and the time now is
most opportune. Ensuring hassle-free implementation of the new initiatives and taking corrective measures on restrictive policies
shall go a long way in building confidence in the Indian business environment among global companies and usher manufacturing
investments into the country. Having identified the 25 high priority products and also studied the ecosystem SWOT for each
of these, the next steps entail addressing the challenges for ecosystem development for these 25 products, which implies
addressing the issues for 80 percent of the electronics market in India. Developing the ecosystem for local design, development
and manufacturing for 80 percent of the electronics market locally will suffice to make India a prominent leader in the $1.8 trillion
global electronics market.
31
The chart below captures the key messages from the research on the ecosystem SWOT of the high priority 25 products:
Key Messages: 25 High Priority Products Ecosystem SWOT
Top 25 high priority products account for 82% of overall electronics consumption in India.
The top 5 alone account for 60% of the overall electronics consumption.
69% of local consumption of the top 25 priority products currently met through imports.
Local production to cater to the same 31% local demand in 2015 too in the absence of intervention.
Inadequate components/raw materials ecosystem, convoluted tax and duty structure, debilitating FTAs, inadequate
domestic product standards, lack of local IP, procedural hurdles in availing policy benefits are the challenges
to the ecosystem development for the priority products.
Power electronics/supply, Processor, LCD Display, Memory and PCB feature among the top 4 components
contributing to the product BoM across majority of the top 25 high priority products. Initiatives are needed
to build ecosystem for these components locally.
Effective and speedy policy implementations, incentivizing component ecosystem, restructuring tax/duty structures,
imposing non tariff trade barriers, developing indigenous standards are some of the measures identified to promote
ecosystem development for the high priority 25 products.
Strategic Recommendations
Aim to meet 50 percent of demand for 25 high priority products by local high value added manufacturing by 2018
Address >20 percent of the disability cost in producing the high priority products locally by normalizing duty structure and cost of
working capital
Provide subsidies / low interest loans to address working capital issues for SME manufacturers.
Focus on Energy meters, 2W EMS, LED lighting, payment terminals, inverters/UPS, CFL and smart cards for the short term. Existing
moderate value addition, high demand potential,and existing indigenous IP/design capability make them viable targets.
Focus on developing key components rather than the product itself for the following products - Mobile phones (battery/adaptor), FPD
TV (LCD panels), laptops (battery) and digital camera (battery) products where feasibility to develop a key component is more viable
and recommended than the product itself.
Focus on developing ecosystem for key components PCB, Memory, Processor, LCD Displays, Power Devices and Transformers.
Provide a single window system for quick clearance of applications under the MSIPS and EMC policies.
Skill Development Council to focus on developing skill sets needed in the ecosystem for the 25 high priority products.
32

Top 10 Products and Components Markets to Focus

for Near Term Local Value Addition Improvement
This report provides a comprehensive ecosystem assessment of the top 25 electronic products that account for 82 percent of the
overall electronic products consumption and provides directions on steps needed to create viable ecosystems for these priority
products. The report also evaluates critical components that make up the bill of materials (BoM) of the high priority products
and provides similar prescriptive recommendations on the measures to create and build local ecosystems for these contributing
components. Research indicates according immediate priority and attention to a limited set of 10 products and components
including Energy Meters, Inverters & UPS, Smart Phones, LED Lighting, Smart Cards, Payment Terminals, 2W EMS, PCB, LCD Displays
and Transformers leveraging upon their existing ecosystem strengths shall result in marked increase in indigenous electronics
manufacturing in the next 2 years itself. Current limitations to high value addition and steps needed to improve the local ecosystem
for these 10 products/components are illustrated below.
ENERGY METERS
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
0.3
0.35
2015
0.3
0.35
Top 4 Components (BoM Contribution

SoC
Transformer
LCD Display
Super Cap
Strengths
High consumption demand
Product design capability
Anti tamper technology
design IP
Opportunities
Government policies like
R-APDRP
Focus on energy
conservation
India as export hub
Smart meters
Weakness
Import for critical
components
Complex tendering system at
utilities departments
Threats
Companies that use reference
designs and launch cheap
products
STRATEGIC
RECOMMENDATIONS
1. A regional level single point testing laboratory to conduct all tests for the local and imported meters.
2. Incentivizing the export duty can boost exports
3. With an expected shift towards smart meters, preparing for the future by investing in R&D especially in development
of relays by leveraging R&D tax credits
4. Notification of Preference Market Access
5. Notification of safety standards by Department of Electronics and IT
6. Product Specifications also need to be defined to prod indigenous manufacturing
33
INVERTERS, UPS
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
1.11
0.95
2015
1.56
1.37

Transformer
Power Semi
Heat Sink
Microcontroller
Strengths
Robust domestic demand
Manufacturing ecosystem
exists
Expertise and supporting
industries strength
Opportunities
Surging demand for banking,
education sector
Policies such as MSIPS
Export potential
Weakness
Lack of subsidies for SMEs
Lack of design expertise for
high power rating UPS
Lack of scale
Threats
Established ecosystem in
China
Infrastructure inadequacy
STRATEGIC
RECOMMENDATIONS
1. Excise duty should be lowered to 6 per cent at least; reimbursement of tax credit should be made easier
2. Design and manufacturing of UPS of higher rating (> 10KVA) encouraged by allocating R&D funds from EDF corpus
3. Formalize practicum programs between industry and engineering institutions to promote grassroots level interest
in design and technical activities
4. Developing port and logistics infrastructure to facilitate copper imports, leading to shorter lead times
5. Export incentives should be given for the export of inverters; extension of the zero duty EPCG is beneficial in this
regard
SMART PHONES
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
17.41
3.84
2015
23.67
4.09

Memory
Display
Application
Processor / SoC
Camera
STRATEGIC
RECOMMENDATIONS
Strengths
Replacement Demand and
Rural Demand
Local chip design strengths
Application develeopment
strengths
EMS capabilities
Opportunities
Impending 4G roll out
Gaining prominence of
local OEMs
India as export hub
Weakness
Reliance on import for chip,
display and PCB
Negligent product design
capabilities
Limited skill set
Debilitating tax structure
Threats
China
Emergence of other low cost
manufacturing destinations
1. Imposing trade and non-trade barriers to bar low cost/unbranded imports

2. Imposing mandatory certifications that necessitate local manufacturing
3. Incentives / fund for fabless companies to generate mobile SoC / processor IP
4. Creation of cluster under EMC with incubation cnter for Smart phone design
5. Provision of low interest loans to Indian companies to address working capital issues and encourage product
development
6. Bring under FPS scheme and encouraging exports
34

LED LIGHTING
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
0.17
0.04
2015
0.44
0.20

LED
Driver Circuit
Heat Sink
Thermal interface
STRATEGIC
RECOMMENDATIONS
Strengths
High consumption demand
Product design and R&D
capability
Local EMS capability in LED
light manufacturing
Opportunities
Increasing adoption in Govt,
commercial and industrial
sectors
Companies positioning India
as export hub for ME
Weakness
Lack of testing facilities
High Initial cost
Absence of national technical
standards Lack of incentives
to attract major firms
Threats
China
Preference for trading over
manufacturing
Debilitating duty structure
1. Reduction and a uniform VAT structure across all states will increase penetration.
2. Exemption for capital goods for LED light manufacturers
3. More testing facilities to be established spread across the three regions in the country. Setting up of design houses
both for product and components.
4. Increase product awareness.
5. DEITY to mandate technical specifications . Government support to mandate new/ secondary roads to be replaced
with LED fittings.
6. Setting up of a brownfield cluster under EMC at Hyderabad with infrastructure including Test Lab, Tool room etc
7. Setting up fund for LED driver and controls R&D and innovation.
8. Provision of low interest loans for LED lighting SME manufacturers for working capital
9. Setting up LED fab to have complete backward integration
10. Mandating LED Lighting usage in Street lighting, railways etc by Government
SMART CARDS
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
0.21
0.13
2015
0.52
0.57

Chip
PETG
Software OS
Antenna
Strengths
Robust demand from Govt
and Banking
S/W, on card and off card
technology capabilities
R&D focus
Opportunities
Anticipated high demand
from Govt projects
Escalating manufacturing
costs in China
PMA for smart cards
Weakness
Reliance on import for chip
No local IP
Expertise in security and
anti-theft technologies
Threats
Inability to penetrate IP
strengths of US and France
companies
STRATEGIC
RECOMMENDATIONS
1. Leveraging export subsidies and considering product manufacturing under the EPCG scheme will benefit
manufacturers in importing machinery at subsidized prices and exporting huge volumes.
2. Inverted duty structure needs to be amended
3. More India specific application oriented standards need to be evolved, like SCOSTA
4. Setting up of a fund for R&D in smart cards and providing the same for SMEs
5. Make Use of contactless cards mandatory in banks
35
PAYMENT TERMINAL
OPPORTUNITY SIZE
TM ($ B)
TDM ($ B)
2012
0.11
0.0058
2015
0.22
0.011

Communication module
LCD/TFT
Processor
Printers
STRATEGIC
RECOMMENDATIONS
Strengths
Growing consumption
demand
Presence of local design
houses
Huge retail market favouring
uptake
Availability of raw materials
like sheet metal, plastics
Opportunities
Increasing transactions using
PoS; Emerging e-tail
Significant rise in debit/credit
cards usage, micro ATMs
Financial inclusion programs
Weakness
Reliance on import for critical
components
High certification costs and
lack of testing labs
Penetration levels still low
Threats
Capital intense nature high
costs for EMV and PCI-PTS
certifications
Established manufacturing
ecosystem in China
1. Funds allocation for providing domain training in the payment Industry for people in the manufacturing sector of
POS and payment enabling products.
2. Funds to enable the Indian IT entrepreneurs to develop the EMV Kernel targeting various emerging platforms
including Android.
3. Setting up of Accredited Labs for EMV Certification and PCI-PTS test facilities and provide easy, cost effective and
product amortizable testing access to device manufacturers.
4. Current excise is 14% while customs duty is 12%. Reduction in sales, VAT and excise duty would attract more
manufacturers to consider local manufacturing.
5. Encouragement for the usage of no frills debit cards with no surcharge and creating awareness about usage of the
same is pertinent. Tax rebate to merchants if at least 50 per cent of his transactions in value terms are through cards
needs to be mooted.
EMS 2W
OPPORTUNITY SIZE
TM ($ M)
TDM ($ M)
2012
210.4
210.4
2015
308.1
308.1

Microcontroller
Power Semi
CDI Capacito
Transformer
STRATEGIC
RECOMMENDATIONS
Strengths
Mature product market
Established ecosystem
Design IP held in India
Excellent R&D, testing ,
manufacturing processes
Skillset availability
Opportunities
Untapped rural market for
2 wheelers
ECU replacement for CDI
Weakness
Reliance on import for chip,
display and PCB
Exports currently low
Market getting
commoditized
Threats
Emission norms making
current products obsolete
High utility costs in
manufacturing units
impacting production
1. Export-friendly policies and support structure to boost the Exports (a) To utilize Extension of Interest Subvention
Scheme (b) An additional interest subvention of 2% for those exporters who repay on a timely basis (c) Exports be
brought back under priority sector lending and a separate cap be put on exports, within 40% norms
2. Extension of Focus Product Scheme to drive exports
3. Setting up of incubation center for automotive electronics within a cluster under EMC scheme at Chennai or Pune.
4. Reliance on imports for most of the critical components chips, displays and PCBs - to be checked by developing
domestic semiconductor ecosystem and upgrading the PCB making capabilities
5. An ECU for 2W (ECUs only used in 4W presently) is being conceptualized may make CDIs redundant in 4-5 years
time - thus to provide product development support in the form of R&D exemptions for domestic companies along
with providing preferential excise duty, greater CENVAT rate
36

Steps to promote indigenous ecosystem for

the key components include:
Printed Circuit Board (PCB)
Imposing high import tariff; Nil duty on raw materials imports
Interest subsidies / low interest loans; Quicker reimbursement of CENVAT
Provision of export subsidies
Elimination of inverted duty structure
Imposing anti dump duty / safeguard duty
Transformers
Incentivising component imports by providing tax rebates for local manufacturers.
Setting up of local design houses and leveraging R&D tax credit will attract global OEMs
to invest in local manufacturing of components.
Streamlining continual availability of copper through the year at subsidized prices.
Preferential excise duties of 2 %; facilitate quicker reimbursement of tax credits
Offering greater CENVAT credit for local sourcing
Developing infrastructure to facilitate copper imports, leading to shorter lead times
Promote establishment of manufacturing clusters using EMC and MSIPS policies; solicit
investment from VCs too
LCD Display
Relocation of a brownfield Gen 5 fab
Offering of preferential excise duties or offering greater rates of CENVAT
credit
Hike in import duty of finished panel imports
Fund to encourage local display technology development
Steps to Promote Electronics Manufacturing Services (EMS)

Ecosystem
India has been home to all the major EMS companies including Flextronics, Foxconn, Elcoteq, Jabil Circuits, and Sanmina as well
as numerous home-grown EMS companies. EMS companies have hitherto been offering hardware solutions only. In recent times
there is seen a marked shift towards total solutions provision by acquiring capabilities to offer design and software services also
as part of their portfolio. Indias EMS market which was worth $3.01 billion in 2011 is expected to grow at a CAGR of 27.8 percent
till 2015. The market is expected to reach revenues of $8.02 billion by 2015. It is interesting to note that Services account for ~10
percent of the overall EMS market revenues.
The fostering of the EMS industry is crucial for Indias local electronics manufacturing to reach appreciable levels. The EMS industry
currently faces challenges of inadequate supply chain, logistic connectivity and lack of Government support. Initiatives taken to
alleviate these, will pave way for an energized EMS industry in the country.
In the ensuing years, India is expected to gain some of the EMS opportunities lost by China to other low cost destinations.
Indias EMS industry focus is expected to be on creating a solid ecosystem and supply chain for electronics manufacturing.
Mandating all EMS activity under defence contracts to be mandatorily carried out in India under the Defence Offset Scheme is
seen as a need.
Recent trends indicate that an increasing number of engineering and design activities are also being outsourced to EMS
companies and they are becoming ODMs (Original Design Manufacturers). They also provide final system integration and
logistical support.
The advent of policy initiatives such as the development of EMC is expected to propel OEMs usage of EMS services in the
coming years. However, reduction in eligibility threshold to Rs 10 crores (present capex is Rs 100 crs) for availing benefits under
M-SIPs is very pertinent to enable increased investments in this space.
37
Common Conclusions for the Near Term Focus Products/Components

Indian electronics industry has over the years grown in stature for its inherent strengths in fundamental R&D and consumption. The
missing link to the industry triangle is manufacturing. Indias electronics manufacturing has remained in obscurity due to multiple
reasons including scale impediments, infrastructural inadequacy, absence of large scale manufacturing ecosystems, proactive IP
orientation as well as debilitating tax and duty regimes. Recent policy initiatives to offset these disabilities clearly indicate the
identification of electronics manufacturing as a priority sector. Electronics manufacturing gains significance in that it can help
bridge a rapidly burgeoning trade imbalance while also create enormous employment opportunities for the skilled, semi-skilled
and unskilled labourers. From a strategic lens, it thus becomes prudent to evaluate Indian electronics manufacturing deficiencies
and develop capabilities that address the shortcomings as also strategize the short, medium and long term development plan for
promoting local electronics manufacturing ecosystem.
Key drivers for making India a globally attractive electronics manufacturing destination include competent costs, talent abundance,
quality focus, world-class infrastructure and business friendly environment. Of these, efforts have already been taken to improve
the countrys infrastructure apart from moderate initiatives in quality enhancement and skill set development that needs continued
acceleration. It becomes pertinent for newer policy measures to address/offer:
Subsidies and/or tax and duty restructuring to alleviate the cost differential arising from higher logistics cost and higher
transformation cost
Inclusion of Focus Product Scheme for select priority products in efforts to promote exports and extension of the scheme to all
EHTPs/SEZs
Encouragement for R&D and IP generation through fund allocation and setting up of incubation centres within the EMC scheme
clusters with sector focus
Setting up of Incubation Centres for Industry Verticals; priority products like Smart Energy Meters, Inverters & UPS, CFL, LED
Lighting and Energy Efficient products to be the areas of focus for these centres
Provision of viability gap funding (VGF) for the priority products and components to be explored and implemented.
Resolution of working capital issue through provision of low interest/special loans; Encouragement to financial institutions to
offer the same by declaring electronics as a priority sector
Simplification of processes involved in availing policy benefits as well as processes involved in setting up and functioning of
businesses creation of business friendly socio-political environment
38

Mobile Handsets - Product and Ecosystem Analysis

SUMMARY
Product Local Manufacturing/Assembly/Design
Only Assembly
Local Manufacturing/Assembly Volumes and Growth
136.35 million (2012); CAGR (20122015) 3.7%
Local Value Addition
Low No Sourcing; Only Box Assembly
Top 4 Components
Memory, Display, Application Processor/SoC, Camera
Component Ecosystem
Negligible; Predominantly Imports
Product Importance for Ecosystem Promotion; Why
High; Huge Local Market; High Growth Potential; Export

Opportunity
a. Focus on product IP and design
b. Top 4 Components do not have much potential for
indigenization (global capacities, lack of local infrastructure
etc)
Steps to Promote Ecosystem
c. Impose trade and non trade barriers on imports

d. Impose certifications mandating local manufacturing
e. Develop ecosystems for peripherals, battery, electro
mechanical connectors, plastics etc
Market and Opportunity

Driven by replacement sales, proliferation of smart phones and multi SIM mobiles, and a rapidly growing rural mobile subscription
base, the sales of mobile phones in India is continuing its buoyant journey. Mobile phone shipment volumes in the country are
anticipated to grow from 198 million units in 2012 to 269 million units by 2015 growing at a CAGR of 10.9 per cent. Despite the
high consumption volumes, local manufacturing has been hitherto restricted. Further Nokias global manufacturing consolidation
strategy is expected to contain their local production volumes in the future. However, the increasing investments in local
manufacturing by competitors like Samsung and the proposed investments by other indigenous manufacturers are expected to
maintain flat growth in the local production volumes. Indigenous manufacturing volumes of mobile phones were estimated to be
136 million units in 2012 and are poised to scale to 152 million units by 2015 growing at a CAGR of 37 per cent.
Mobile Handsets Market: TM, TDM Forecasts (2010-2015)

25
23.67
CAGR (2011 - 2015)
21.19
20
15
19.41
17.41
16.35
15.28
TM: 9.7%
TDM (overall): 2.3%
TDM (Low/Med
value add) : 2.3%
TDM (High value
add): NA
10
HVA-TDM : TM
4.23
4.5
0
2010
2011
3.88
3.84
2012
2013
3.88
4.09
2014
2011
0%
2013
0%
2015
0%
2015
Total Domestic Manufacturing (High Value Add, $ Million)

Total Domestic Manufacturing (Low & Medium Value Add, $ Million)
Total Market ($ Million)
39
Mobile Handsets: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)
TDM Volumes for Local TDM Volumes for Exports

Sales (Million units)
(Million units)
2010
165.93
49.91
92.69
2011
182.00
54.60
101.40
2012
197.74
47.72
88.63
2013
216.17
48.15
89.41
2014
240.92
50.43
93.66
2015
269.46
53.26
98.91
Industry SWOT
The mobile phone value chain comprises various component and subsystem suppliers, technology licensors and application
developers and the downstream service providers and retailers. The advent of smart phones has catapulted the value of the core
chips including the processor and memory. It has also brought to prominence the value of the software in a mobile phone. It is
interesting to note that in most current mobile phones, the value of manufacturing of mobile components is equal to the value of
manufacturing of the mobile phone itself.
The mobile phone value chain is depicted in the figure below.
Component and
Sub-system Suppliers
System
Integrators
Downstream
Baseband
RF transceiver
Core Chips
Application
processor
Power
Management
Display
Memory
Battery
Camera
Peripherals
Connectivity
Electro
Mechanicals
Operating
System
Mobile
Phones
N/W
Operators
Consumers
Retailers
Software
Applications
R&D, design, technology licensors
40

India is flooded with competition from foreign suppliers and indigenous players. Besides the top 4 to 5 players who control almost
70 per cent of the market in India, there are numerous indigenous players with varying capabilities. Most of these indigenous
suppliers currently utilize the services of contract manufacturers in China and do limited design activity in-house. Market leaders
such as Samsung and Nokia do only the last level low value adding assembly locally. Activities such as PCB assembly, mounting
the casing are handled locally, while the board with the key components mounted is imported into the country. Thus there is
negligent local sourcing resulting in extremely low local value addition.
The table below captures the capability in India across the mobile phone value chain.
Category
Product
Local Supply
Core Chips
Only Sales
Offices; Total
Imports
Battery
Imports; Local
Supply
Display
Only Sales
Offices, Total
Imports
Components
and Sub
systems
Company Names
Level of
Local Value
Add
Remarks
No
Qualcomm,
Mediatek, Nvidia,
NA
Though design capability

exists there is no local
realization of IP
Yes
Adit Infotech,
Maxotel, Celltalk,
JPW, AR Industries
etc
Medium
Numerous SMEs design and

manufacture batteries; design
value addition is limited. Local
supply accounts for 12-15% of
demand; predominantly in the
after market.
Local
Local IP
Manufacturing Capability
No
Yes
No
No
Samsung, AUO,
Chimei Innolux, LG
, Sony, Numerous
Chinese suppliers
NA
Peripherals
Partial
(Adaptors
manufactured
locally)
Yes
Yes
Salcomp, UKB, JPW,

Celltalk, Maxotel,
SSR Group,
High
Electro
Mechanicals
Yes
Yes
Yes
Perlos
High
Software
Yes
Yes
Yes
OEM
Yes
Yes, only Low

Value Add
Assembly
Yes
Nokia, Samsung, LG
Low
EMS
Yes
Yes, only Low

Value Add
Assembly
Yes
Flextronics,
Foxconn
Low
Mobile
Phones
Numerous SMEs design and

manufacture batteries; design
value addition is limited. Local
supply accounts for 15% of
demand; predominantly in the
after market.
Fragmented supply base;
Numerous small players;
difficult to gauge market
supply volumes.
High
Analysing the mobile phone value chain in India, it is observed that the presence of a sustained and growing demand for mobile
phones is a key strength for the industry apart from an established EMS ecosystem for mobile phone manufacturing. However
the current limitation is that the EMS vendors are engaged only in box level assembly. Critical challenges include inadequacy
of feeding industries as most components / raw materials are currently imported. The import of chipsets and display,the most
crucial components, presents a huge void in the ecosystem and contributes significantly to the disability costs for mobile phone
manufacturing.
Rising costs of manufacturing in China is seen as an opportunity for some of the indigenous manufacturers who are currently
outsourcing their design and manufacturing to China to instead invest in local facilities. The possibility of Chinese mobile phone
manufacturers themselves looking at investing in Indian manufacturing facilities is yet another huge opportunity for the ecosystem
to develop. Policy initiatives such as MSIPS are expected to boost manufacturing investments while the prevailing tax structure is
seen as debilitating and needing immediate corrective measures.
41
STRENGTHS
OPPORTUNITIES
Impending 4G roll outs to drive sales of handsets
Replacement sales driving demand for higher priced

smart phones
Gaining prominence of local OEMs such as Micromax,

Karbon etc and their gaining ground in the Smartphone
segment.
Chip design single chip solutions for handsets have

been completely developed in India
Mobile application development numerous application
developers
Well developed EMS industry capabilities for mobile
phone manufacturing
India as a export hub for servicing ME, North Africa and

Europe countries.
New policies such as MSIPS incentivizing local
manufacturing investments.
SWOT
WEAKNESS
THREATS
Reliance on imports for most of the critical components

chips, displays and PCBs
Well established manufacturing ecosystem in

neighbouring China.
Excise duty hike in mobiles priced over Rs. 2000

constrains local manufacturing of these in-demand
handsets
Emergence of other low cost manufacturing destinations

like Vietnam.
Limited or negligent product design activities locally;

Limited IP generation
Infrastructure inadequacy sufficient power, water and

other utilities uninterrupted availability
Limited availability of necessary skill sets
Component SWOT
The component ecosystem for mobile phones is extremely diverse in line with the wide range of prices of mobile phones. While
components such as display, battery, memory and core chips are common for price point mobiles, the cost and capacity of these
components vary depending on the features and applications supported by the mobile phones. The top 4 components that
contribute to majority of the mobile phone bill of materials (BoM) irrespective of the phone type or price are:
1. Memory
2. Display
3. Application Processor / System on Chip (SoC)
4. Camera
2 of the top 4 components for mobile handsets are semiconductor devices. The absence of fabrication facilities in India forces
reliance on imports of these components. However, there is design acitivity that happens locally in the SoC and processor space
as the key suppliers of these chipsets have huge captive design centers in the country. Even complete design tape outs have been
generated for some of these chips from the local design centers.
The second most expensive component is displays;this is yet another component that doesnt have a supporting ecosystem
locally. Globally the displays market is dominated by a handful of Korean and Taiwanese companies. Technology competitiveness
acts as a high entry barrier which has ensured that globally the competition remains niche. The constantly evolving touch reflexes
and the demand trend for high resolution in mobile phones make it difficult to build new capability in India. Further more the local
demand volumes for such devices do not justify such an investment.
Camera is the fourth component for which there is currently negligible ecosystem in India from the design as well as the
manufacturing perspective. Optics are the most crucial element of mobile camera design and this expertise is not well recognized
in India, leading to the heavy reliance on imports.
Of all the components of the Mobile BoM, it is thus the electromechanicals, peripherals, battery and software that have higher
probability of increased local value addition; however, the contribution of these to the mobile BoM is tertiary in nature.
42

Product
Major Suppliers
Local Supply
/ Imports
Local Manufacturing/
Design/Assembly
Local
Capacities
Challenges to Local
Manufacturing
Memory
Toshiba, Samsung,
Hynix, Micron
Imports
NA
NA
Excess global capacities;

Absence of fab currently;
Very dynamic technology
Imports
NA
NA
Even for local assembling,

the display is imported as
a panel and assembled.
Globally a very niche
market dominated by
handful of players. Entry
barriers high.
Qualcomm,
Samsung, Mediatek,
Nvidia, Allwinner
Imports
Negligible a few
suppliers have
design centres in
India
NA
Absence of fab currently
Toshiba,
STMicroelectornics,
Omnivision, Sharp
Imports
NA
NA
Absence of local know-how

and optics expertise
Display
Samsung, AUO,
Chimei Innolux, LG
, Sony, Numerous
Chinese suppliers
Application
Processor
Camera
Strategic Conclusions
General
For local manufacturing to become cost competitive compared to destinations like China, it is essential for the Government to offer
fiscal sops that help in equalizing the disability costs associated with local manufacturing. These, amongst others, include:
Differential duty regimes for locally manufactured and imported handsets
Levying a tax equivalent to CST on imported mobile phones
Trade barrier to imports; Countries such as China and Brazil have been able to successfully grow their local mobile phone
industry through similar practices. Since mobile phones are not part of the ITA list, trade barriers can be imposed to grow local
manufacturing
IP development
There are numerous captive and third party design houses contributing to chip design for mobile devices. However, none of
the IP is realized locally as all the patenting is done overseas. Through support for fabless companies, encouragement needs
to be provided for IP generators to develop mobile SoCs and mobile processor designs whose IPs are realized in India. This will
contribute to incremental value addition and revenue generation opportunities through licensing.
Component ecosystem
All imported capital equipment for manufacturing of mobile phone parts and components should be completely exemptedfrom
CVD. Likewise capital equipment sourced locally should be exempt from excise duty. This would encourage the manufacturing of
mobile phones parts and would promote the growth of the component ecosystem.
Product manufacturing
Despite numerous indigenous brands claiming to do their own design and development, in reality, most of these brands source
designs from Taiwan/China and develop their products. This does not contribute to actual value addition. Hence, the sops and
incentives offered need to be linked to value addition generation so as to ensure total ecosystem growth.China has been able
to bring in foreign investment and attract all leading mobile phone manufacturers to set up facilities in China by mandating
standards and certifications such as the CCC (compulsory China certification mark) for all the mobile phones that are sold in China.
Similar non-tariff barriers can be imposed in India which favour or necessitate local manufacturing.
43
Current Limitation
a. Lack of import barriers
Tax Structure
Value Addition
b. Lack of favourable duty structure

for capital equipment import
a. Promotion alike to pure play
manufacturers and traders
b. Absence of local IP realization
Component
Ecosystem
44
a. Reliance on imports
Solution to Promote Ecosystem

Trade and non trade barriers
Imposing mandatory certifications that necessitate local
manufacturing
Incentives to be targeted at manufacturers contributing to
value addition and not those who source designs and assemble
overseas.
Incentives, financial support to fabless companies to generate
mobile SoC/process IP
Chips and Display core components absence of capability
limits any ecosystem development plans for these.
Focus can be to grow the peripherals, battery, electromechanicals and plastics ecosystems

Flat Panel Display TV Product and Ecosystem Analysis

SUMMARY
Only Box Assembly
Local Manufacturing/Assembly Volumes

and Growth
1.93 million units (2012); CAGR (20122015) 56.6%
Very low
Top 4 Components
Display, ICs, Electro-mechanicals, Power Components
Component Ecosystem
Not Available
High; Huge Local Market; High Growth Potential; Export Opportunity

a. Restructuring of Tax and Duty Structure
b. Redressal of SAD and Abatement rate issues
c. Interest linked subsidies for value added manufacturing

d. Definition of Indigenous Standards for Local FPD TVs

Digitization of broadcast, reduced replacement cycles and increased affordability is driving growth in the Indian Flat Panel Display
(FPD) TV market. The advent of Internet-Ready and Smart TVs has altered the characteristics and dynamics of the TV market.The
FPD TV market comprises LCD, LED, Plasma, 3D, and Smart TVs.Of the different types, LCD TVs have achieved greater proliferation
in the Indian market. The increasing affordability of LCD TVs coupled with their better performance, smaller size, and wider options
has resulted in their replacing CRT TVs. Growth is expected to be driven by enhanced purchasing power, digital broadcast (DTH,
IPTV, STB cable) transition as well as consumer awareness of FPD TVs. Indias growing upper middle class that has already moved
from CRT to LCD TVs is now driving the shift towards LED TVs. The huge rural populace on the other hand, is projected to be the
greatest source of LCD TV demand till 2015.
Research estimates that the FPDTV market in India was valued at US $3.55 billion in 2012 and is likely to grow at a compound
annual growth rate of 23.7 per cent by 2015.The total market (TM) for FPD TV in India in 2012 was 6.48 million units and the total
domestic manufacturing (TDM) volumes was 1.93 million units for the same year.
Flat Panel Display TV Market: TM, TDM Forecasts (2010-2015)

7.00
6.40
6.00
TDM (Low/Med
value add) : 54.9%
3.55
3.00
4.62
4.00
1.00
TM: 23.7%
5.50
5.00
2.00
CAGR (2011 - 2015)
2.74
1.75
0
0.67
0.39
2010
2011
3.30
1.59
1.06
2012
HVA-TDM : TM
2.36
2013
2014
TDM (High value

add): NA
2011
0%
2013
0%
2015
0%
2015

45
FPD TV: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)
TDM Volumes for Local Sales (Million units)
2010
2.90
0.65
2011
4.80
1.17
2012
6.48
1.93
2013
8.98
3.09
2014
11.50
4.94
2015
14.38
7.41
Industry SWOT
Domestic assembly is a low value-add activity as LCD panels are imported and only final leg assembly is performed here. The
import-heavy nature of the FPD TV market has resulted in it being vulnerable to volatile currency conditions. For FPDTVs, 2012 was
a turbulent period when increasing raw material costs and depreciation of the rupee added pressure to the prevailing conditions.
This trend has continued much into 2013 as the rupee has reached never-before lows of INR 64 against the US $. This has resulted
in increase in prices of FPD TVs by 5 to 15 per cent from different manufacturers.
Import duty on LCD panels was eliminated in the 2012-13 Budget, which led to anticipation of increased domestic assembly.
However, Indias Free Trade Agreements (FTAs) with countries such as Thailand are proving to be a restricting factor, as some key
manufacturers have built up capacity for FPD TV manufacturing in these locations and the FTA allows them free access to the
Indian market.
The value chain for FPD TV market is depicted in the chart below.
Component and
Driver IC
Downstream
Manufacturing / Assembly
Core Chips
BLUE
Glass Substrate
Polarizer
Core
Components
General
Trade
OEMs
Consumers
Modern
Trade
Color Filter
Chemicals
PCB, Passives
Other
Components
Liquid Crystal
46

All major suppliers of FPD TV globally,such as Samsung, LG, Sony, Sharp etc., have local presence and are the dominant players in
the Indian market too. Indigenous brands such as Videocon, Onida, etc., also offer their FPD TVs in the Indian market. Samsung and
LG are involved in low level last mile assembly activity in India apart from a few indigenous brands such as Intex. The rest import
them as finished products. Even the assembling activity in the country is very low value add and is just box assembly.
The table below depicts the capabilities across the FPD TV value chain in India.
Category
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company Names
Level of Local
Value Add
Remarks
Display
No
No
No
LG, Samsung, Sharp,

NEC Display
NA
Imported as
part of finished product
No
Himax Technologies,
Orise Technology,
Sitronix Technology,
Raydium
Semiconductor
NA
Imported as
part of finished product
ICs
Components
and Sub systems
No
No
Electro
mechanicals
No
Yes
No
Medium
Power components
No
Yes
No
Medium
OEM
No
No
No
LG, Samsung, Sony
NA
Indigenous
players
Yes
Yes, only Low

Value Add
Assembly
No
Videocon, Onida
Low
FPD TV
Through
design capability exists
there is no
local relation
of IP
Through
design capability exists
there is no
local relation
of IP
No local manufacturing
value addition
Low manufacturing value
addition
FPD TV manufacturing is very technology intense and dynamic. Apart from continuous advancements in panel component
technologies, the FPD panel manufacturers themselves are moving towards 8.5 and 10 generation fabs. The sophistication in
infrastructure and the supply channels required for FPD TV manufacturing require decades of development. It is improper to
expect such ecosystem development in India within a few years to bring in FPD TV manufacturing.
The SWOT chart below captures the analysis for the FPD TV market.
STRENGTHS
OPPORTUNITIES
LCD Panel manufacturing opportunity to build atleast

this capability
All major global suppliers have local presence (sales) and

few in assembly
Increasing consumer awareness on FPD technology
driving sales
Encouragement for MNCs such as Sony, Sharp to bring

in atleast last leg assembling activities to India
SWOT
WEAKNESS
THREATS
Totally absent ecosystem
Inverted duty structure that favours finished product

imports
No local supply of any component except may be some

tertiary or non critical components
FTAs with countries like Thailand
47
Component SWOT
The core top 4 components within the FPD TV BoM are:
1. Display
2. ICs
3. Electromechanicals
4.
Power components
These 4 components together constitute roughly 80 to 85 per cent of the BoM of FPD TVs, with displays and ICs accounting for
nearly two-thirds of the total BoM by themselves. There is totally nil indigenous capability of these 2 critical components in India.
Korea, Taiwan and Japan dominate the global market for capacity and supply of the core components for FPD TVs. The proposed
and on-going expansion plans of the key suppliers of these components indicate the lack of requirement to set up manufacturing
facilities in new destinations like India.
General
Despite the high domestic volumes and the opportunities for exports, the possibility of ushering FPD TV manufacturing into India
is a distant dream.
The focus can rather be on encouraging more domestic assembly, even if it is a low value add activity, as it can potentially result
in local sourcing and employment generation in the long run. One element within the FPD TV value chain that can be promoted
for indigenous activity is the panel assembly. Incentives under the MSIPs scheme are favourable to bring in FPD panel assembly
activity into India and this needs to be encouraged for the contribution it can make to local value addition. There are several
disability costs today that make imports of panels more attractive and these needs to be addressed through corrective tax and
duty reforms.
Current Limitation

a. Reduction of excise duty
Tax Structure
a. Imports cost effective compared to

indigenous assembly for panels and TVs
b. Lowering of indirect taxes which currently account for

22% of transaction value
c. SAD to be eliminated
d. CENVAT credit to be made available to manufacturers
48
Value Addition
& Component
Ecosystem
a. No activity at all
Financial and
other Incentives
a. Lack of low interest loans / financing for

FPD TV or Panel manufacturers
a. Promotion of indigenous capability for LCD Panels

under MSIPs
a. Provision of interest linked subsidies
b. Abatement rate to be increased from the current 30%
to 45% to decrease the pressure on manufacturers

Notebooks - Product and Ecosystem Analysis

SUMMARY
No; finished product imports
N/A
Low No Sourcing
Top 4 Components
Processor, Display, Battery, Memory
Component Ecosystem
Negligible; predominantly finished product imports
Medium; Huge local market; Robust growth Potential;

Possible export opportunity
a. Reimbursement of tax credit to be made easier for

encouraging investment in manufacturing
b. Motherboard and LCD display to be offered preferential
basic duty and excise duty rates

The market for notebooks/laptops was estimated to be worth US$ 2.48 billion in 2012, and projected to grow at about 9.4 per
cent during the period 20112015. A rapidly growing substitution trend favouring notebooks over desktops has been observed
in recent years. This effect has been further precipitated by the advent of tablets that have taken on the mantle of portable
computing device of choice from laptops. The laptop market is also expected to be driven by the needs of the IT industry, SMBs,
and by government procurement particularly in the short term. In fact, government procurement of laptops has been a key driver
of this market recently. The tenders floated by the Uttar Pradesh and Tamil Nadu governments cumulatively contributed almost
1.5 million units to the market.
Though tablets have begun to eat into the market share of laptops, their USP is the easy access to and consumption of online
content; they lack the computing power of laptops. This is expected to sustain demand for laptops as personal users and corporate
users move away from using desktops and move towards using laptops. Since all laptops sold in the Indian market are imported
as finished goods, their prices are very prone to fluctuations in currency value. The recent depreciation in the value of the Indian
Rupee has led to laptop vendors mulling price hikes in order to cover their increased expenses. Lenovo, Dell, HP and Acer account
for almost two-thirds of the laptop market. Indigenous player HCL also has a small but significant presence in the market.
Laptops Market: TM, TDM Forecasts (2010-2015)

3282
35000
CAGR (2011 - 2015)
3000
2973
2713
2500
2480
2287
2107
TM: 9.4%
TDM (overall): NA
TDM (Low/Med
value add) : NA
2000
TDM (High value

add): NA
1500
HVA-TDM : TM
1000
500
0
2010
2011
2012
0
2013
0
2014
2011
0%
2013
0%
2015
0%
2015

49
Laptops: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
3.63
0.00
0.00
2011
4.07
0.00
0.00
2012
4.56
0.00
0.00
2013
5.15
0.00
0.00
2014
5.83
0.00
0.00
2015
6.65
0.00
0.00
Industry SWOT
The laptops sold in the Indian market are all imported as finished products into the country. Since the laptop is a closed-box
product, even low value added assembly at the market destination doesnt make business sense. Hence, laptops are imported
pre-configured into the country. However, the absence of a supporting ecosystem for electronics manufacturing and the fact that
volumes are not growing fast enough have been strong enough reasons for companies to not invest in manufacturing facilities in
the country.
The laptops value chain is depicted in the figure below.
Component and
Keyboard /
Touchpad
Downstream
Assemblers
Input / Output
LCD screen;
speakers
Enterprises
Motherboard;
Memory; Processor
CPU
Hard disk / Casing
Laptops
Consumers
Video card; Sound

card; Network card
Government
Operating System
Software
Applications
Despite the strength in design capabilities, there is no local realization of IP. However, Indian design skills are quite valued and
there is considerable value added in the design activity that happens out of India. Intel, NVIDIA, AMD and Microsoft, among others,
execute a large amount of their R&D activity in India. The design aspect of the value chain is definitely a huge strength for the
Indian electronics ecosystem. However, it lacks an institutionalized process to make that strength work for the country in terms of
realizing local IP, etc.
50

The table below captures the capability in India across the laptops value chain.
Category
Components and
Sub systems
Laptops
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Processor
Only Sales
Offices; Total
Imports
No
No
Intel, AMD
NA

exists there is no local realization of IP
Display
Imports
No
No
Samsung
NA
Motherboard
Imports /
Local Supply
Yes
No
Pegatron,
ECS, Gigabyte, MSI,
Foxconn
NA
HDD
Imports
No
No
Seagate,
Thoshiba
NA
Software
Yes
NA
No
Dell, Intel,
Microsoft
Med
OEM
Yes
No
No
HP, Dell,
Lenovo, Acer,
HCL
NA
EMS
No
No
No
Both captive design centres and design through

service model
NA
The Indian laptop market exhibits great local demand, which will also be well sustained in the medium term. However, since the
market is import heavy, it is subject to the vagaries of currency fluctuation which creates business uncertainties for laptop vendors
and price uncertainties for consumers. Government procurement of laptops will drive the market in the short term, while any
increase in the computing power of tablets or the emergence of a disruptive form factor in the portable space could eat into the
market for laptops fairly quickly.
The SWOT chart below captures the analysis for the laptops market.
STRENGTHS
OPPORTUNITIES
Huge consumption demand for laptops
Decline in desktop sales leading to demand for laptops,

for computing power
Well developed design skills
Escalating manufacturing and labour costs in China

could drive investment to India
Government procurement and decline of desktops

to drive market for the short term
New policy aspects such as EMC could encourage local

assembly investments
Indian user segments are becoming more computer

savvy - education, etc.
Well developed EMS industry - capabilities for
mobile phone manufacturing
SWOT
WEAKNESS
THREATS
Absence of supporting industries to support assembly

of laptops locally
Well established manufacturing ecosystem in China and

East Asia

and for assembly
Rate of technological change could see laptops being

phased out in favour of tablets or other disruptive form
factors
Import heavy market pushes Indian market behind on
global product launch timelines
Import heavy market could worsen Indias import bill if

left unchecked
Market subject to currency fluctuation
51
Component SWOT
The biggest contribution to the BoM in terms of dollar value in a laptop is accounted for by the display and the processor, which
account for 15 per cent each. Next comes the motherbaord and the HDD, which alongwith the display and processor,could account
for almost two-thirds of the total BoM of a laptop. In short, the top 4 components that contribute to majority of the laptop bill of
materials (BoM) are:
1. Display
2. Processor
3. Motherboard
4. HDD
Since laptops are imported in finished product form for the most part, none of these components are locally sourced.
General
The reimbursement process for claiming tax credit on input duty paid should be made easier and faster so that companies do not
have to contend with uncertainties of receiving reimbursement. This would encourage companies to invest in manufacturing with
confidence and peace of mind. The reimbursement process could be moved to an online portal for greater convenience.
IP development
A large amount of design activity is carried out at the established IT firms such as HCL and Infosys and the captive design centres
of Intel and AMD, but there is no local IP held in the country. Encouraging the growth of fabless design companies and software
development firms through start-up capital seeding and, possibly through the mooted EDF corpus, could lead to the generation of
indigenous IP in the short to medium term. The application of regional language software could provide opportunities considering
the expected penetration of computing and connectivity in semi-urban and rural areas; the idea of setting up central government
grants for such software development activity at the NITs should be considered.
Component ecosystem
The manufacturing of motherboards and LCD displays for laptops should be incentivized by exempting their individual components
from basic customs duty and excise duty, or offering preferential excise duty. Likewise, sheet metal fabrication and plastic moulding
are fairly mature technologies in India; hence, the manufacturing of laptop enclosures could also be incentivized too.
The challenges that are inherent to the assembly of laptops is that all of the supporting industries need to be present in close
proximity so that the finished product can be assembled optimally and shipped to market destinations in its finished form.
Unlike desktops, it doesnt make sense for laptops to be shipped in knocked-down unit fashion and then assembled at market
destinations. Considering that the Indian laptop market is import heavy and a fairly sizeable one too, it causes considerable stress
on the countrys import bill. Hence, it would be wise to look elsewhere in the electronics ecosystem to address this issue; tablets,
for example. However, if a decision to invest in the manufacturing of laptops is indeed taken, then the electronics ecosystem
for laptops should be incentivized in a holistic manner to foster the growth of all the supporting industries that are needed to
manufacture/assemble laptops in one location.
Current Limitation
Tax Structure
Value Addition
52
Convoluted process of claiming tax credit
Lack of feeding activities

Reimbursement process should be made easier
to encourage investment in manufacturing and
ensure peace of mind for manufacturers
Manufacturing of motherboard and LCD displays
should be offered preferential basic duty and
excise duty rates; also enclosures

Desktops - Product and Ecosystem Analysis

SUMMARY
Only assembly
6.4 million (2012); CAGR (20122015) 4.0%
Low Negligible sourcing; only box assembly
Top 4 Components
Processor, Monitor, Motherboard, Hard Disk Drive
Component Ecosystem
Negligible; predominantly imports
High; Sizeable local market; Sustained demand potential; Export

opportunity
a Optimize tax structure and reimbursement process
b. Rationalize customs and excise duties
c. Incentivize manufacturing for motherboards, LCD displays,
cabinets and enclosures
d. Utilize EMC and MSIPS schemes to promote cluster
development for manufacturing of components

The Indian desktop market was estimated to have been worth about $1.97 billion in 2012, and to grow at approximately 0.4 per
cent in the period 20112015. The increasing adoption of laptops, due to the relative decrease in prices in recent years and the
ability to harness computing power on-the-go, has led to predictions that desktops will cease to be relevant in this era of mobile
computing. However, the disruptive influence of tablets upon the consumption of online contentand to a smaller extent, the
creation of contentis due to impact the market for laptops.
India has got one of the lowest penetration of computers in the world (less than 15 per cent); while the A class cities already possess
high penetration rates of computers in households, B and C class cities lag behind in this regard. The rising usage of online bill
payments, registration for government schemes and ID, and consumption of online content is bound to increase penetration of
desktop computers in these cities. This penetration could further increase with increase in efficiency of broadband services and
rollout of 4G services.
Desktops Market: TM, TDM Forecasts (2010-2015)

2500
CAGR (2011 - 2015)
2000
1943 0
1973 0
1968
1978
1993
2008 0
TDM (Low/Med
value add) : 0.4%
1500
1000
TM: 0.4%
TDM (overall): 0.4%
TDM (High value

add): NA
1973
1943
1968
1978
1993
2008
HVA-TDM : TM
500
2011
0%
2013
0%
2015
0%
0
2010
2011
2012
2013
2014
2015

53
Desktops: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
5.95
5.95
0.00
2011
6.20
6.20
0.00
2012
6.41
6.41
0.00
2013
6.66
6.66
0.00
2014
6.92
6.92
0.00
2015
7.20
7.20
0.00
Industry SWOT
Assembly of desktops is a widespread activity in India, and more than 60 per cent of the desktops sold in country are locally
assembled. Companies like Dell, HCL, and Wipro assemble almost all of their desktops within the country. Acer and HP also assemble
the majority of their desktops locally. Since desktops have to transported by sea, transportation of disassembled modules and
assembly of final goods at the destination is preferable to importing final goods as finished products.
There is no indigenous IP held with regard to desktops. However, since desktops are designed based on open architecture, assembly
at destination is made easier which also shortens the time-to-market. Also, some organizations, such as banks, have rigorous
purchasing processes that might require pre-shipment inspection and pre-delivery testing which is made easier if assembly
happens locally. Local value addition is limited to the assembly, testing, and packaging of desktops though, and in some instances,
local sourcing of certain components. However, in the last few years, local sourcing of components is reported to be on the wane
because of a convoluted duty structure that increases business complexity for manufacturers importing individual components for
assembly; for example, import for finished mother boards attracts only CVD while import of individual components for motherboard
manufacturing attracts CVD and an SAD of 4 per cent that will be refunded after raising a reimbursement claim for the same. This
increases upfront costs for manufacturers apart from the uncertainty over the reimbursements. This is particularly relevant during
times of currency depreciation when costs can increase drastically for such imports. Such factors discourage entities from making
significant investments in manufacturing facilities considering the relatively thin margins that this industry operates on.
India possesses considerable competency in design; substantial design activity is carried out in IT firms such as Infosys, Wipro
and HCL. These design activities range from basic motherboard design to high-end server design. However, most of their work
is executed for MNCs and there is possibly no local IP held. CPU testing is also carried out fairly extensively in India, as is final
configuration, testing, and delivery to customers. With respect to design alone, even though design development of desktop
happens in parts and on different teams, the contribution of Indian talent could possibly be pegged at 15 per cent of overall
design. The reputation of Indian design talent is considerable but the country lacks an institutionalized process to metamorphose
it into tangible IP that could contribute to the economy. The overall value addition in terms of dollar value is about $ 6 (inclusive of
margin), though the amount of activity in terms of resources used is fairly high.
54

Component and
Keyboard /
Touchpad
Downstream
Assemblers
Input / Output
Monitors;
Speakers
Motherboard;
Memory; Processor
Enterprises
CPU
Desktops
Hard disk / Casing

CPU
Video card; Sound
card; Network card
CPU
CD Drive; Printer;
Modem
Consumers
Government
Operating System
Software
Applications
The MNCs currently import units in L6 configuration which doesnt contain the CPU, memory and hard disk; the balance comprises
of power supply, motherboard, etc. and arrives in pre-fabricated from outside India. The final configuration of desktops happens
in India. However, indigenous companies HCL and Wipro perform grounds up assembly of desktops, with either local sourcing or
the import of individual components depending on availability and business ease. Entities present in the unorganized market in
India also perform grounds up assembly; they account for about 60 per cent of the consumer market. The enterprise business for
desktops is completely handled by the organized sector, i.e., large MNCs and indigenous companies.
55
Table below captures the capability in India across the desktop value chain.
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Processor
Imports
No
No
Intel, AMD
NA
Though design capability exists

there is no presence of local IP
Monitor
Imports/
Local Supply
Yes
No
TPV, LG,
Samsung
Low
Motherboard
Imports/
Local Supply
Yes
No
Pegatron, ECS,
Gigabyte, MSI,
Foxconn
Low
Hard disk
Imports
No
No
Seagate,
Toshiba
NA
OEM
Yes
Yes, only Low

Value Add
Assembly
No
Dell, HP, HCL,

Wipro, Acer
Low
Integrators
Yes
Yes, only Low

Value Add
Assembly
No
NA
Low
Category
Components
and Sub
systems
Desktops
Local motherboard assembly used

to be operational; shut down now
Unorganized sector that operates

in the B2C space
Currently, local manufacturing is not competitive globally due to a number of disability factors. In the light of latent manufacturing
strength for certain products, inclusion of those products under ITA-1 has constrained the growth of local manufacturing due to
the availability of imported goods. Also, domestic volumes are not growing fast enough for entities to invest in manufacturing
on a large scale. MNCs invested in assembly facilities early on as they needed to be closer to their market; this also indicates their
confidence in the manufacturing capability present in the country. However, the absence of a business environment in which local
manufacturing can thrive has led to the suppression of local manufacturing capabilities.
The SWOT chart below captures the analysis for the desktop market.
STRENGTHS
OPPORTUNITIES
Consistent demand expected, especially in B and C

class cities
Active role of government in fostering electronics

manufacturing
Manpower skills available, both vocational and

skilled
Rising manufacturing and labour costs in China driving

manufacturers towards alternative destinations
Government schemes and policies expected to

foster growth
India as a export hub for servicing Middle East and

African countries
Better quality and increased penetration of

connectivity
Rising entrepreneurial spirit among recent grads
SWOT
WEAKNESS
THREATS
Negative influence of INR depreciation
Well established manufacturing ecosystems in China and

East Asia
Convoluted duty structure causes complexity in business

execution
Limited or nil IP generation; lack of incentives for
indigenous design activities
Lack of wholesome supporting ecosystem for complete
manufacturing
56
Rate of technology change introduces unpredictability in

investment decisions
Emergence of disruptive models/form factors of
computing devices
Infrastructure inadequacy of power, clean water, and
other utilities

Component SWOT
The biggest contribution to the BoM in terms of dollar value in a dektop is accounted for by the monitor which costs US$80
approximately (excluding software costs). Next comes the processor which costs anywhere between US$60 and 110, followed by
the hard disk and the motherboard that both cost in the range of US$40. On the motherboard, the semiconductor components
and the PCB are most critical. Considering a BoM of US$40 for the motherboard, it can be estimated that the chipset costs about
US$12, the PCB costs about US$6.5, and that the overall semiconductor cost is about US$20 including the peripheral chips.
In short, the top 4 components that contribute to majority of the desktop bill of materials (BoM) are:
1. Processor
2. Monitor
3. Motherboard
4. Hard disk
The motherboard is being manufactured in India, and indigenous players in particular source about 20 to 25 per cent of their
requirements locally. Monitors are being made by LG and Samsung; HCL also manufactures monitors locally. Of course, processors
for desktops are sourced from either Intel or AMD. The top suppliers for hard disks are Seagate and Toshiba. However, the situation
with regard to hard disk is slightly on the balance currently due the shift in technology and enterprise business models, i.e., the
shift towards cloud computing and centralized servers, and the movement in technology towards solid state drives. Hence, entities
are presently thinking twice before investing in manufacturing facilities for mechanical hard drives and there are also questions
about consumer adoption of mechanical hard drives in the future, given the advantages of using solid state drives.
With regard to value addition, the major activities that happen are either soldering or testing of components and the financial
value of these activities is quite less. Over all, the manufacturing value added is about 10 per cent, including margins.
General
The levying of SAD should be repealed at the very least on individual components of LCD monitors and motherboards. Also,
the reimbursement process should be made easier and faster so that companies do not have to contend with uncertainties of
receiving reimbursement. The reimbursement process should be moved to an online portal and there should be no restrictions
on the number of times reimbursements can be claimed. Also, reimbursements should be directly transferred to merchants bank
accounts. The increased liquidity and trust factor arising from these measures could help companies transact more or make greater
investments. The present rate of abatement should also be raised from 25 per cent to reflect the rise in costs of doing business.
SAD could be levied on finished product imports of motherboard and LCD monitors, for which a nascent manufacturing ecosystem
exists in India.
IP development
development firms through start-up capital seeding and possibly through the mooted EDF corpus could lead to the generation of
Component ecosystem
The manufacturing of motherboards and LCD monitors should be incentivized by exempting their individual components from
basic customs duty and excise duty, or offering preferential excise duty. Decrease in tax revenues could be offset a little through
smaller hikes in sales tax or through offering greater rates of CENVAT credit on excise duties.The Indian manufacturing ecosystem
possesses competencies in the manufacturing of these products, which incidentally also are the top two BoM contributors
to desktops in terms of dollar value. These products also have applications in almost every electronics product. Once local
manufacturing of these products is encouraged by exempting them from/ granting them preferential excise duties, it is very
possible that investment will flow in and spur organic growth of the value chain. Likewise, sheet metal fabrication and plastic
moulding are fairly mature technologies in India; hence, the manufacturing of cabinets and enclosures for use in desktops could
also be incentivized through preferential excise duties and exemption from additional duties.
57
The assembling of desktops is already being carried out both by global OEMs and by indigenous players like HCL and Wipro. India
has held back from discussing the ITA II due to the fact that the government recognizes the need for encouraging the growth
of the nascent manufacturing capabilities in the country. If India were not to sign the ITA II, it could potentially push companies
into investing in high-value added manufacturing in the country. Coupled with the wholesome basket of policy initiative being
enacted by the government, this could also lead to the flourishing of downstream activities and lead to the establishment of a
thriving product ecosystem.
Current Limitation
Tax Structure
Value Addition
Component Ecosystem
58
a. Inverted duty structure

b. Low rate of abatement
a. Lack of supporting industries

b. Absence of product design/IP generation
b. Demand volumes

a. Simplify reimbursement of SAD
b. Increase rate of abatement to reflect rising costs
of doing business
a. Incentivize manufacturing of PCBs, monitors,
cabinets, and enclosures for desktops by giving
preferential excise rates
b. Utilize MSIPS and Electronics Manufacturing
Clusters scheme effectively to promote
manufacturing clusters for these components
a. Increase CENVAT credit for locally sourced
components/raw material
b. Increase basic duty for imports and reduce sales
tax for finished goods

Digital Camera - Product and Ecosystem Analysis

SUMMARY
Product Local Manufacturing/
Assembly/Design
Nil; finished product imports
Local Manufacturing/Assembly
Volumes and Growth
Nil
Nil- No Sourcing; No Assembly
Top 4 Components
Lens, Image processor, Image sensor, Battery circuit
Component Ecosystem
Negligible; Only Imports
Product Importance for Ecosystem

Promotion; Why
Medium; Huge Local Market; High Growth Potential

a. Top 4 Components do not have much potential for indigenization (global
capacities, lack of local infrastructure etc)
b. Renew FTA for finished good imports

c. Encourage passive components manufacturing locally to encourage assembly
level activity

Increase in creation and sharing of digital content, increase in spending power and reduction in average selling prices is driving the
digital camera market. Digital camera shipment volumes in the country are anticipated to grow from 4.2 million units in 2012 to 7.5
million units by 2015 growing at a CAGR of 21.3 per cent. Despite the high consumption volumes, there is no local manufacturing
or assembly activitySony used to operate a plant in Haryana ten years ago that was shut down due to issues with the supply of
raw material. Though, the digital camera market in India is still very attractive, the growth of smartphones is now affecting the
market in India. Growing competition over the past few years has led vendors to launch feature-rich cameras at affordable price
points. The competitive landscape for the digital camera players has undergone a major shift with reduction in prices. Prices of
digital cameras in India have dropped extensively, especially in P&S segment, and a further 20 to 30 per cent price reduction is
expected to be seen over the coming years. This will further bring tremendous opportunities for players to increase their market
share in the Indian digital camera market.
59
Digital Camera Market: TM, TDM Forecasts (2010-2015)

1.8
1.8
TM: 18.9%
1.4
1.4
TDM (overall): NA
TDM (Low/Med
value add) : NA
1.2
1.2
1.0
0.8
CAGR (2011 - 2015)
1.6
1.6
TDM (High value

add): NA
0.9
0.66
0.6
HVA-TDM : TM
0.4
2011
0%
2013
0%
2015
0%
0.2
0
2010
2011
2012
0
2013
2014
2015

Digital Camera: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
2.10
NA
NA
2011
3.00
NA
NA
2012
4.20
NA
NA
2013
5.00
NA
NA
2014
6.25
NA
NA
2015
7.50
NA
NA
60

Industry SWOT
The digital camera value chain comprises of various component and subsystem suppliers, assemblers and the downstream
retailers and consumers. The lens technology and manufacturing process is the most crucial element in the manufacture of a
digital camera. Japan holds the highest number of patents in this regard and hence presents a formidable barrier to exploring that
segment in terms of design or manufacturing. The coating technology on the lens involves a high level precision and currently
India does not have the skill set availability to implement this process. Also the quality and availability of raw material varies from
country to country and currently India does not possess the right quality-availability mix required to manufacture the components
of a camera. The digital camera value chain is depicted in the figure below.
Component and
Assemblers
Downstream
Image Sensor
Motor Driver
Image Processor
Memory
Digital Camera OEM
Capacitor
Consumers
Digital Camera EMS
Battery pack
Lens
Audio interface
Peripherals
LCD controller
61
There are no manufacturers of digital cameras in the country and India is flooded with competition from foreign manufacturers.
Besides the top 3 players who control almost 95 per cent of the market in India, there are other foreign players with varying
capabilities. All of them import the digital camera as a finished product resulting in no local value addition. From an Indian
ecosystem standpoint, with regard to components, all the core chips, LCD display, battery pack, sensors, lens etc., are imported
while only a limited amount of local capability exists for the peripherals and LCD drivers.
The table below captures the capability in India across the digital camera value chain.
Category
Components
and Sub
systems
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company Names
Level of
Local Value
Add
Remarks
Image sensor
Imports
No
No
Samsung, Canon,
Toshiba, AOF
NA
Lack of high quality raw

materials
Memory
Imports
No
No
AOF, Canon, Foba,

etc
NA
Battery Pack
Imports
No
No
Electra, AOF, Foba
NA
Lens
Imports
No
No
AOF, Canon,
Tamron, Olympus
NA
Image Processor
Imports
No
No
Canon, Sony,
Toshiba
NA
NA
LCD Controller,
Capacitor,
peripherals
Imports
No
No
AOF, Unorganized
players
OEM
Yes
No
No
Canon, Nikon, Sony
NA
EMS
No
No
No
NA
NA
Japan holds the highest

number of patents; no
design capability
Local manufacturing
capability exists, but no
OEM prefers to do any
kind of assembly activity
locally
Digital
Camera
62

Analysing the digital camera value chain in India, it is observed that the presence of sustained and growing demand for digital
camera is a key strength for the industry. The absence of supporting industries is a critical challenge for the country; most electronic
components are imported too. This inhibits the business case for local manufacturing of digital cameras. The Indian electronics
ecosystem can potentially execute low level assembly for digital cameras; however, the duty structure for individual components
is high and prohibits OEMs to consider investment in local manufacturing. The SWOT chart below captures the analysis for the
digital camera market.
STRENGTHS
OPPORTUNITIES
Paradigm shift towards Digital world. Increasing

adoption of digital cameras.
Shift in trend from Point and shoot camera to DSLRs

especially from the younger population
Manufacturing and labour costs in China driving

manufacturers to invest in facilities in India
Component design components like resistors,

capacitors, battery circuits can be designed in India
Skillset availability for component and product design

Europe countries
Well developed EMS industry to carry out assembly

activity

manufacturing investments
SWOT
WEAKNESS
THREATS
Reliance on imports for the entire product no product

assembly or component imports
Smartphones hurting Digital camera sales
FTA imports through Thailand and Japan posing a huge

hindrance for local manufacturing
No IP generation
Limited availability of necessary skill sets
Well established manufacturing ecosystem in countries

like China, Japan, Korea etc.
Well explored technology - Japan holds the highest
patents for lens technology, no new development
possible
Component SWOT
The component ecosystem for digital camera is extremely diverse in line with the wide range of prices of digital cameras. While
components such as lens, image sensors, battery pack, processors, memory, etc., are common for all types of cameras, the cost and
capacity of these components vary depending on the features and applications supported by the camera. The top 4 components
that contribute to majority of the Digital camera bill of materials (BoM) irrespective of the type or price are:
1. Lens
2. Image processor
3. Image sensor
4. Battery
Currently most of the digital cameras are imported as finished goods. The top players possess established manufacturing
infrastructure in countries like China, Japan, and Korea. OEMs such as Canon possess manufacturing competencies across all
stages of the value chain. Other players outsource parts of their manufacturing to contract manufacturers in China and other Asian
countries.
63
General recommendations
The CENVAT for digital cameras is around 16% and an excise cess of 2% against an import duty of 10% makes it more expensive to
assemble or manufacture locally. Over and above, the current situation in India is such that the FTA with Thailand and Japan makes
it easy for most OEMs to import them as finished goods,thus making it inutile to develop an ecosystem for the same.
IP Development - Design
The biggest challenge in terms of component manufacturing is the lack in design and skillset availability to develop lens and
coating technology. From a design perspective, a well laid ecosystem in neighbouring countries restricts Indias chances of building
indigenous capability, especially when the volumes do not warrant the need for local design.
Component ecosystem - Raw material

Inadequacy of raw materials in India does not support manufacturing of the digital cameras or its BoM components in the country.
In spite of our strengths in plastic, sheet metal and peripherals manufacturing, the risk associated with importing the lens and
battery pack is very high and hence manufacturers prefer to import finished goods rather than investing in local manufacturing
especially when there is no favourable taxation policy.
Unless there is a renewal with the FTA, not much can be done with the product market. Developing an entire ecosystem for digital
camera manufacturing is not very viable with Japan holding most patents for lens technology, the highest BoM component of a
camera. Also, the tax limitations of excise duty higher than import duty make the situation difficult for product manufacturing.
Hence it is best suited to divert the available resources towards other areas that would offer greater and faster returns on investment.
Current Limitation
Tax
Structure
a. The situation has gone overboard. Unless there is a

renewal of the FTA policy, not much can be done with
respect to the product market.
Value
Addition
a. Lack of Feeding Industries

b. Absence of Product Design/IP Generation
c. Lack of Semiconductor fabs
a. With respect to Design and R&D, India did not invest

in any segment of the value chain. Too late to invest in
feeding industries.
b. Demand Volumes
c. Lack of high quality raw materials
a. Although, India has it sown strengths in packaging, sheet

metal and plastic manufacturing, importing the lens or
battery pack is highly risk associated
a. Invert duty structure

b. Lack of regulations to develop skillset and
design capability in specific to lens and
coating technology
a. Currently Japan holds the highest number of patents in

lens technology which prohibits India from exploring
such an option, thereby throwing off a policy initiative for
labour reforms or skillset development
Component
Ecosystem
Policy
Initiatives
64
a. Cenvat of 16% and an Excise cess of 2%

against an import duty of 10%
b. FTA with Thailand and Japan through
which most OEMs import the product as
a finished good

Inverters and UPS - Product and Ecosystem Analysis

SUMMARY
Manufacturing; components imported depending on business

requirements
8.16 million (2012); CAGR (20122015) 12.4%
Inverters: High; UPS: Medium
Top 4 Components
Transformer, Power devices/Mosfet, Heat sink, Microcontroller
Component Ecosystem
Strong presence; unable to compete with price of Chinese-made

components
High; Huge local market; Available manufacturing and design

competency; Export opportunity
a. Government should reduce excise and simplify tax claim procedure
b. Government should exempt import duty on components and

aid indigenous players in innovating
c. Incentivize R&D activity in higher power UPS through utilizing
EDF corpus

The inverter and UPS market in India was estimated to be worth US$ 1,189 million in 2012 and grow at about 9.7 per cent during
the period 20102015. The manufacturing ecosystem for these products is quite mature while technological requirements of UPS
manufacturing are greater than the manufacturing and design capabilities present in India currently. Some of the major players
in the inverters market are Luminous, Sukam, and Microtek; in the UPS market, the major players are APC, Eaton, and Emerson.
Steady demand from the home and SOHO segments is expected to buttress the growth of the inverter market. The unorganized
segment has a large share of the inverter market, though its share has been declining lately due to enhanced consumer awareness.
Unorganized players source their products in knocked-down units from East Asia, which do not compare favourably with locally
produced products in their quality and reliability. However, their input costs have increased on account of levying of duties on the
import of lead and lead products. Also, organized players have strengthened their distribution networks, thus posing a formidable
challenge to the unorganized players. Due to frequent power failures, inverters, specifically sub-5 kVA inverters, are increasingly
being used in applications like emergency lighting, elevator backup systems and other non-critical systems. The demand for
inverters is seasonal, peaking during the summer due to frequent power outages. This situation, especially in the southern states,
has contributed to the sharp rise in demand. The enforcement of pollution control norms is likely to support the substitution of
generator sets with inverters of similar capacity. The market is also witnessing the entry of consumer durables players.
65
Inverters and UPS Market: TM, TDM Forecasts (2010-2015)

1600
1565
1400
1200
1000
CAGR (2011 - 2015)
1415
1289
1189
1112
1124
0
TM: 8.9%
TDM (overall): 9.7%
TDM (Low/Med
value add) : 9.7%
TDM (High value

add): NA
800
600
949
970
1033
1127
1242
1372
HVA-TDM : TM
400
2011
0%
200
2013
0%
2015
0%
0
2010
2011
2012
2013
2014
2015

Inverters and UPS: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
7.72
7.19
0.00
2011
7.92
7.34
0.00
2012
8.67
8.16
0.00
2013
9.63
9.12
0.00
2014
10.81
10.27
0.00
2015
12.20
11.58
0.00
66

Industry SWOT
The domestic manufacturing of inverters possesses medium value addition; all the electronics components are mostly imported.
Various companies present in the Indian industry leverage their local competencies and global supply to serve the domestic
market. India is more or less self-sufficient in the manufacturing of inverters. The most valuable component inside of an inverter is
the transformer and India possesses considerable capabilities for their manufacture. Such capabilities could enable the country act
as an export hub to countries such as Philippines, Vietnam, Sri Lanka etc.
With regard to UPS, some companies possess local competencies and choose to take advantage of it after considering their global
supply chain options as well. Lower power UPS (5 to 10 KVA) are mostly imported from China, and in some cases from Europe. Some
manufacturing of lower power UPS happens domestically as well. Higher power UPS are imported invariably from Europe or their
home bases. These mostly arrive in the finished product form, or in some cases may arrive in knocked-down units too wherein they
are assembled locally. The more critical technological requirements of higher power UPS require companies to source from their
home bases and R&D facilities.
Component and
Assemblers
Transformer
Power devices /
MOSFET
Heat sink
Microcontroller
Capacitors
Resistors
Downstream
Consumers
Inverters / UPS
Cooling system
Inductors
Enterprises
PCB
Power module
Power connectors
67
The table below captures the capability in India across the inverters and UPS value chain.
Category
Components
and Sub
systems
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Transformer
Yes
Yes
Power devices/
Mosfet
Partial
Heat sink
Level of Local
Value Add
Remarks
No
High
Though design capability exists there

is no local realization of IP
No
No
NA
Partial
Yes
No
NA
Microcontroller
Partial
No
No
NA
Other active
and passive
components
Yes
Yes
No
High
Enclosures
Yes
Yes
No
High

MNCs
Yes
Yes, low to
medium value
addition
No
Low to
Medium
Depending on technology
requirements, make or import decision
is made
Indigenous
players
Yes
Medium value
addition
Partial
High
Components are imported, assembly

happens locally
Inverters/UPS
Company
Names

India doesnt possess end-to-end capabilities of designing UPS with higher power ratings. With regard to manufacturing, robust
design expertise is an imperative for higher power UPS; the product lifecycle is high (approximately 4 years), the investment
needed is huge, as is the risk of implementation. Also, it is not economical to set up manufacturing of higher power UPS due to the
relatively small market size.
68

The SWOT chart below captures the analysis for the inverters and UPS market.
STRENGTHS
OPPORTUNITIES
Robust domestic demand for inverters and UPS

could encourage local manufacturing
Comprehensive manufacturing ecosystem and

expertise for inverters
India as a export hub for servicing ME and North Africa
Fairly developed manufacturing competencies for

UPS

Availability of supporting industries
Further strengthening supporting industries would

entrench manufacturing competency
Rude health of corporate sector buttressing growth

of UPS market
SWOT
WEAKNESS
THREATS
Reliance on imports for products requiring greater

technical expertise
Well established manufacturing ecosystem in China
Lack of subsidies to encourage supporting industries;

tax benefits, etc.
Lack of design expertise for UPS of higher power ratings

like Vietnam.
Lack of scale makes it difficult to compete with Chinese

products on price
Component SWOT
Many companies in the Indian electronics ecosystem import transformers and heat sinks from overseas though they are
manufactured in India since indigenous players are unable to compete with the cost of importedproducts. The same trend is
observed in PCB supply too. All semiconductor components are imported from East Asia.
The top 4 components that contribute to majority of the inverter/UPS bill of materials (BoM) irrespective of the phone type or price
are:
1. Transformer
2. Power semiconductors
3. Heat sink
4. Microcontroller
69
General
Information technology is a prime driver of the inverter and UPS market. Opportunities for UPS will open wherever there is a need
for unlimited power at constant frequencythis indicates that all critical applications in the corporate sector will need UPS to
fulfil their purpose. Also, usage of UPS is directly related to productivity which can act as a driver across industries. It would be of
great benefit to the economy of the country if we possessed holistic manufacturing competency of such a product. Hence, local
manufacturing should be encouraged by lowering excise duty and making the process of reimbursement of tax credit easier and
quicker to promote business confidence.
IP development
The government should seek to gain expertise in the design and manufacturing of UPS of high power rating (> 10 KVA) by investing
appropriately in R&Dthe EDF corpus could be an appropriate way of implementing this measure, especially considering the
need for higher capacity UPS for cloud servers and large scale enterprise operations. Alternatively, the government could formalize
practicum programs between industry and engineering institutions, which could lead to innovative design solutions and IP
generationthis could also help develop interest in core design activities among students.
Component ecosystem
The country does possess competencies in the manufacturing of PCB transformers. However, Indian manufacturers find it difficult
to compete with cheaper Chinese products. Indigenous manufacturers also do not possess enough scale to compete with the
Chinese who are able to price their products lower due to their economies of scale. The government could aid local players in
this regard by offering preferential excise duties and facilitating quicker reimbursement of tax credits. Also, the manufacturing of
transformers involves the import of copper, which affects lead time. Developing port and logistics infrastructure could go a long
way in decreasing the lead times of manufacturers and making indigenous products more attractive in the marketplace for OEMs.
The steady demand from the PC market and frequent power outages will continue to drive the market for home UPS and inverters.
Also, niche areas like cloud computing require reliable power supply to fulfil their performance guarantees and hence requite
quality UPS of higher power ratings. Export incentives should be given for the export of inverters since the country possesses a
holistic product ecosystem, and export opportunities are available in destinations like Sri Lanka, Philippines, Africa, etc. To this
effect, the extension of the zero duty EPCG benefit to all sectors could be a huge boost in this regard as it would aid manufacturers
in capacity expansion.
Current Limitation
Tax Structure
Component
Ecosystem
Value addition
70
a. No preferential excise duty rates

b. Convoluted tax exemption claim procedure
a. Lack of impetus to increase value addition
a. Lack of expertise in UPS of higher power

ratings

Government should set preferential excise duty
rates and also simplify the procedure for
claiming tax exemption.
Considering the rude health of the inverter
component ecosystem, even import duties
on these components could be reduced to
zero to have them compete against Chinese
products, to help them innovate on cost while
maintaining quality
Government should incentivize R&D activities in
this area through using the EDF corpus, so that
the ecosystem can add competencies across
the value chain for higher power UPS

Memory Cards and USB drives Product and Ecosystem Analysis

SUMMARY
Imported as finished products
Local Manufacturing/Assembly Volumes and

Growth
Nil
Nil
Top 4 Components
Flash memory chip, Microcontroller, Crystal oscillator, USB connector
Component Ecosystem
None; all imports in form of finished product
Product Importance for Ecosystem Promotion;

Why
Low to medium; Huge local market; High growth potential; Critical role
played in end user applications
a. Focus on eliminating grey market through levying CVD and
eliminating dumping, ensuring reliability of products in the market
b. Deliberate thoroughly on pros and cons of establishing flash

memory manufacturing facilities while assessing other investment
opportunities in the electronics ecosystem

The proliferation of digital content has created a surge in demand for storage devices. The flash memory market (memory cards
and USB drives) was estimated to have been worth US$ 1.1 billion in 2012 and is expected to grow at about 11.7 per cent over
the period 20112015. The magnitude of data being generated by imaging platforms and computing applications both in the
enterprise and consumer segment has grown manifold. These factors continually emphasize the need for reliable storage media
which should also be easily accessible and portable. The growth of social media and the sharing of content on social media websites
have also greatly influenced the demand for memory cards used in mobile phones and digital cameras. In a fairly short period of
time, the Indian market has been become fairly mature in the usage of flash memory. The most popular configurations are 4 GB, 8
GB, and 32 GB memory cards that are utilized in smartphones and digital cameras. Despite recent hikes in prices of flash memory,
the market is expected to grow driven by the robust smartphone and tablet market and increasing demand for consumer storage
in Tier 2 and Tier 3 cities. USB 3.0 drives are estimated to be increasingly adopted in consumer storage by early adopters, while USB
2.0 drive might still find takers among the value conscious purchasing segment untilprices drop.
Memory cards and USB drives Market: TM, TDM Forecasts (2010-2015)
1.6
1.59
1.4
TM: 11.7%
1.40
1.2
TDM (overall): NA%
1.24
1
0.8
CAGR (2011 - 2015)
1.10
1.02
0.93
TDM (Low/Med
value add) : NA%
TDM (High value
add): NA
0.6
HVA-TDM : TM
0.4
2011
0%
0.2
2013
0%
2015
0%
2010
2011
2012
0
2013
0
2014
2015

71
Memory cards and USB drives: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
48.20
0.00
0.00
2011
55.70
0.00
0.00
2012
63.07
0.00
0.00
2013
74.64
0.00
0.00
2014
88.60
0.00
0.00
2015
106.09
0.00
0.00
Industry SWOT
The Indian electronics ecosystem possesses no competencies with regard to the manufacturing of flash memory. Fabrication
of memory chips and the assembly of flash memory cards is a highly complex and intricate process that requires considerable
investment. Almost all of the global flash memory suppliers are based in East Asia and the US, countries that possess mature
semiconductor fabrication capabilities: Samsung, Toshiba, Micron Technology and Hynix, among others are prominent makers
of flash memory. Since assembly of flash memory cards and drives is an intricate process and the finished products are not bulky
as well, all of the flash memory cards and drives consumed in the Indian market are imported as finished products. An additional
challenge to setting up flash memory fabrication facilities in India is that the business model revolves around low margins and
high volumes. Considering the excess global capacity of flash memory fabrication, it does not present an attractive business case
for investment in the Indian electronics ecosystem. However, manufacturers are investing capital in upgrading their equipment
to implement smaller process nodes at the global level. Costs and power required per chip can then be reduced and memory
densities can be increased. It is expected that 32+ GB configurations will comprise about 60 per cent of flash memory shipments,
beginning 2014.
The value chain of memory cards and USB drives is depicted in the figure below.
Component and
USB connector plug
Flash memory chip
Microcontroller
Crystal oscillator
LEDs
Write protection
switch
Secondary
memory chip
Drive casing
Assemblers
Memory cards
/ USB drives
Downstream
Consumer
Electronics
Personal
data storage
72

Recently, the government has opened a process of anti-dumping investigation with regard to imports of USB flash drives
manufactured in China, Chinese Taipei and South Korea. The notification states that there is prima facie evidence to show that
the normal value of USB flash drives being manufactured in these countries is significantly higher than the export price to India,
indicating presence of a dumping margin. If proven, the government could impose CVD on USB flash drives which would go a long
way in eliminating the grey market.
Table below captures the capability in India across the flash memory value chain.
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Flash memory
chip
No
No
No
Samsung,
Toshiba, Hynix
NA
Imported as part of finished product
Microcontroller
No
No
No
NA
No
No
No
NA
No
No
No
NA
LEDs
No
No
No
NA
Casing
No
No
No
NA
OEM
No
No
No
Category
Components
and Sub
systems
Crystal
oscillator
USB connector
plug
Memory cards
/ USB drives
Cree, Nichia
Sandisk,
Kingston,
Transcend
NA
Piracy has long been a bugbear of the flash memory market. Imposing CVD on flash memory products would counteract the effect
of the grey market. It is expected that the resulting increase in prices would not affect the demand for branded products due to the
guarantee of reliable data storage and performance.
The SWOT chart below captures the analysis for the flash memory market.
STRENGTHS
OPPORTUNITIES
Significant demand for flash memory, and its

associated advantages
Increasing usage of mobile phones, digital cameras, and

tablets
Potential for greater growth in future due to rising

usage of consumer electronics and IT
Newer product launches that incorporate date storage

through flash memory
Established manufacturing facilities and

technological improvements towards greater
memory densities
Observed trend of e-learning can be enabled by usage of

portable flash memory
Usage of backup media made easier through flash
memory
SWOT
WEAKNESS
THREATS
Price competition constantly eats into margins which

are already low
Well established manufacturing ecosystem in East Asia

acts against local investment.
Effect of grey market erodes demand for more expensive

branded products

Absence of any of value chain stages locally
Piracy affects usage of branded products which offer

reliability and greater performance
Market is extremely import heavy
73
Component SWOT
The components that make up a memory card or a USB drive are all mounted on the circuitry or the PCB itself due to the small size
of the products. The cost of manufacturing a memory card or a USB drive is quite low due to the scale achieved by flash memory
suppliers and advances in technology. All of these capabilities are present in East Asia on a large scale which acts against any
potential decisions to invest in local manfacturing capabilities. Also, due to the small size of these products and the complexity of
assembly, it is prudent to assemble memory cards and USB drives at the location of flash memory manufacturing and transport
them as finished products to market destinations. The flash memory chip accounts for nearly 80 per cent of the BoM.
In short, the top 4 components that contribute to majority of the bill of materials (BoM) are:
1. Flash memory chip
2. Microcontroller/ASIC
3. Crystal oscillator
4. USB connector
General
The government should impose CVD on memory cards and drives to discourage the import of unbranded products and ensure
safety of customer data.
IP development
Considering the semiconductor design strength of the country and the critical nature of memory storage, the government should
utilize the mooted EDF corpus to encourage design activity in this field. This would give the country a foothold in a valuable stage
of a ubiquitous electronics product globally. The licensing of such IP would seed a great amount of design activity and overall
economic activity. This could also be achieved on a smaller scale through a formalized practicum program wherein fabless design
companies tie with nearby engineering colleges.
Component ecosystem
East Asian countries have already achieved scale in the manufacturing of flash memory chips and they also possess the necessary
capabilities to assembly memory cards and USB drives. Advances in memory technology and the scale achieved by flash memory
manufacturers have led to very affordable prices for these products.
Considering the low margins and the magnitude of investment required to set up a flash manufacturing facility, it seems logical to
divert the available resources towards other areas that would offer greater and faster returns on investment.However, due to the
critical nature of memory storage and the fact that it would add vital functionality to the products it is incorporated in, it would
be prudent to deliberate on the merits of attracting investment in a flash memory fabrication facility, while assessing the other
available opportunities for investment in the electronics ecosystem.
Current Limitation
Tax Structure
Value Addition
74
a. No measures present to
counteract grey market in
flash memory
a. If presence of dumping margins are proved, CVD must be

levied to create confidence among white market players and
create access to reliable products for consumers
a. Absence of flash
manufacturing facilities and
associated assembly activities
a. Considering both the low margin-high volume business

model of flash memory and the critical role it plays in end
user applications, considerable thought should be given to
attracting investment in flash memory manufacturing in the
future, possibly through M-SIPS or through a separate and
dedicated initiative

4W EMS - Product and Ecosystem Analysis

SUMMARY
Assembly and manufacturing

Growth
1.94 million (2012); CAGR (2012-15) 22.4%
Low design, electronic components all imported along with

other materials
Top 4 Components
Mechanicals - Pumps and Injectors (40-50%), Analogs &

Sensors (20%), MCU (10%)
Component Ecosystem
Electronics imported

Why
High; emission norms getting stricter and EMS aids in better engine
performance
a. Focus on product IP and design
b. Indias proposed fab could look at MCU for automotive applications

as a key product for local fabrication

The need for better engine performance and the need to adhere to better emission norms have been influencing the adoption of
EMS in 4 wheelers. The total market for 4W EMS in 2012 was 3.66 million units, which is expected to reach 5.47 million units in 2015
growing at a CAGR of 13.5 per cent during 20112015. Of the total market, domestic manufacturing was about 1.94 million units
in 2012. It is expected to reach 3.56 million units by 2015 growing at a CAGR of 22.4 per cent.
4W EMS Market: TM, TDM Forecasts (2010-2015)

1.4
1.34
1.2
1.0
CAGR (2011 - 2015)
1.22
0.99
0.96
TM: 7.9%
1.12
1.04
0.8
TDM (High value

add): NA
0
0
0.6
0.4
0.2
0.5
0.43
TDM (Low/Med value

add) : 14.9%
0
0.64
0.55
0.75
0.87
HVA-TDM : TM
2011
0%
2013
10%
2015
25%
0
2010
2011
2012
2013
2014
2015

75
4W EMS: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
3.04
1.37
0.00
2011
3.30
1.65
0.00
2012
3.66
1.94
0.00
2013
4.14
2.36
0.00
2014
4.76
2.90
0.00
2015
5.47
3.56
0.00
Industry SWOT
Almost 50 per cent of the total demand is met through imports, while the rest are assembled locally by companies like Bosch, Denso
and MagnetiMarelli. These companies presently conduct testing and development of EMS software which equates to a medium
level of value addition with regard to manufacturing in the country. These companies are also making substantial investments in
the expansion of their local EMS capabilities, which will increase the level of value addition with regard to manufacturing of EMS
in India.
The 4W EMS value chain is depicted in the figure below.
Component and
System Integrators
Downstream
Mechanicals - Pumps
and Injectors
Analogs & Sensors
4W EMS
OEMs
MCU
76

The table below captures the capability in India across the 4W EMS value chain.
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company Names
Level of
Local Value
Add
Fuel Pump
Yes
Yes
Yes
Bosch, Kayne
High
Fuel Injector
Yes
Yes
Yes
Bosch, Kayne
High
MCU
Imports
No
No
Infineon, ST
Microelectronics,
Freescale, Renesas
None
None
Category
Components
and Sub
systems
The Fuel pump and injector

is manufactured and sold to
OEMs as a combined unit
Semiconductor ecosystem
missing
Analogs and
Sensors
Imports
No
No
ST Microelectronics,
Infineon, IR, Onsemi,
Freescale
OEM
Yes
Yes
No
Bosch, Denso,
Magneti Marelli
Low
EMS
No
No
No
NA
NA
4W EMS
Remarks
The SWOT chart below captures the analysis for the 4W EMS market.
STRENGTHS
OPPORTUNITIES
Stricter automobile emission norms encourage EMS

manufacturing in India
Indias growing demand for small car to boost demand

for ECUs
India already the largest market for automobile and a

small-car export hub adds to the demand for EMS
Bosch India availing MSIPS to start production of ECUs

in next 5 years
SWOT
WEAKNESS
THREATS
98% of EMS components imported
Slowdown of the Indian automobile industry
OEMs global offices hold IP rights of EMS design
Importing components from China and Vietnam holds

better business proposition
Import duties on electronics should be reduced

Component SWOT
The top 3 components that contribute to the majority of the 4W EMS bill of materials (BoM) are:
Mechanicals: pumps and injectors
Analogs and sensors
Microcontrollers
Analogs, sensors and microcontrollers are imported components since the Indian electronics ecosystem doesnt possess the
relevant competencies needed for the manufacturing of these components domestically. These are imported by companies such
as STMicroelectronics, Infineon, Freescale, Fujitsu, and the like. Pumps and injectors are sourced locally through companies such as
Bosch and Kayne that possess domestic manufacturing capacity.
77
General:
The need for an efficient fuel management system in vehicles has seen this product segment chart tremendous growth. To
accentuate the growth of the product market further, using the EMC policy, an automotive electronic cluster could be set up in
south India, preferably near the Bangalore-Chennai corridor, since the area already is home to significant automotive manufacturing
activity.
IP development:
India already holds the IP of one of the critical components, i.e. the fuel injector and pump. However, the IP right of the entire
technology is still held by the global offices of the OEM which are shared with their local offices.
Component ecosystem:
Nearly 95 per cent of the electronics and raw materials required are imported from countries such as Japan, Thailand, Korea, etc. The
country needs to develop the electronics ecosystem along with the remaining raw materials to gain value as this product segment
holds tremendous growth opportunities. This could be achieved by attracting investment through the MSIPS policy. Coupled
with preferential excise duties or greater rates of CENVAT, this could provide impetus for electronics manufacturing in the country,
especially in the area of microcontrollers since the Indian electronics ecosystem possesses considerable design competencies as
well. The setting up of the two semiconductor fabs in the country would prove to be a great enabler in this regard.
Product manufacturing:
Bosch, Denso and MagnettiMarelli, manufacture the most critical component in the BoM, the fuel injector and pump, with around
40-50 per cent being locally designed and manufactured as well.
Current Limitation

a. Fab policy could foster manufacturing of
microcontrollers, due to existing design competencies
and automotive manufacturing competencies.
Market/ Value chain
Component market is importheavy; all major electronics

components being imported
b. Manufacturing of electronics components, especially

microcontrollers, to be incentivized using preferential
excise rates or greater rates of CENVAT credit
c. Using MSIPS and EMC, automotive electronics
manufacturing clusters could be setup in the south,
near the Bangalore-Chennai region.
78

LCD Monitor - Product and Ecosystem Analysis

SUMMARY
Finished product imports; Assembly
4.96 million (2012); CAGR (20122015) 20.0%
Low to medium: Assembly activity
Top 4 Components
Display, ICs, Electro-mechanicals, Power Components
Component Ecosystem
Medium; Huge local market; High growth potential;

Export opportunity
a. Preferential excise and facilitate reimbursement of
tax credit
b. Explore attracting investment for brownfield Gen 5

TFT LCD fab
c. Use EDF funds to foster R&D into new display technologies

The LCD monitors market was estimated to have been worth US$ 907 million in 2012, and was projected to grow at about 11.2
per cent during the period 20112015. LCD technology has nearly replaced CRT technology and dominates the display segment
presently. LED backlit monitors, that are more energy efficient than CCFL-backlit LCD monitors, are fast gaining prominence. Already,
major players have begun revamping their product portfolios solely with LED-backlit monitors. This has led to the emergence of
small indigenous players who have moved into the CCFL-backlit LCD business, offering lower pricing. The assembled desktop PC
industry is the biggest driver of the LCD monitor market. Hence, rising adoption of laptops has affected demand to a large extent.
However, efforts to computerize government agencies which created demand for desktop PCs have served to sustain demand for
LCD monitors to an extent. The resilient progress made by the Indian ITeS sector and SMBs is expected to further drive demand
for LCD monitors. Although 50 to 60 per cent of the market consists of finished product imports, LCD panels were exempted from
customs duties beginning 2012, and this is expected to give great impetus for local manufacturing of LCD monitors. Depreciation
of the Indian Rupee has affected prices of monitors in the short term, as has recent hikes in excise duty.
The LCD monitor market is highly competitive. In addition to bigger players like Samsung, LG, Viewsonic, AOC and Philips, PC OEMs
such as Asus, Acer, Dell and HCL also are present. There are also newer and smaller players present like Beetel, Intex, Moser Baer and
iBall that have established fairly strong distribution channels through local contacts.
79
LCD Monitors Market: TM, TDM Forecasts (2010-2015)

1400
CAGR (2011 - 2015)
1245
1200
1008
1000
800
200
907
816
0
490
397
TDM (High value

add): NA
0
0
TDM (Low/Med
value add) : 14.0%
756
600
400
TM: 11.2%
1121
636
558
827
725
HVA-TDM : TM
2011
0%
2013
0%
2015
0%
0
2010
2011
2012
2013
2014
2015

LCD Monitors: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
6.00
3.15
0.00
2011
6.80
4.08
0.00
2012
7.86
4.90
0.00
2013
9.31
5.88
0.00
2014
10.89
7.05
0.00
2015
12.74
8.46
0.00
Industry SWOT
The TFT LCD (thin film transistor-liquid crystal display) industry is very capital-intensive. Typically, the cost of a new TFT LCD fab
is about US$ 3 billion. This is because such a fab would contain expensive process equipment and also critical material handling
equipment that work with the process equipment. The penetration rate of LCD panels has outstripped that of traditional
displays. LCD panels were exempted from basic customs duty beginning 2012, and this is expected to attract investment in local
manufacturing of LCD monitors. However, it is important to be cognisant of the present stage of evolution of display technology
and its relevance to the Indian context.
Globally, LCD fabrication has gone through an evolution of nearly 9 generations since the first generation. The major difference in
generation technology is the size of the mother glass that is used at the beginning of the manufacturing process. The size of the
mother glass used in generation 1 was about 30cm x 40cm, and could make one 15 panel. Presently, the size of the mother glass
used in hybrid generation 8.5 fabs is approximately 220 x 250 cm, and the glass thickness is less than 1mm.
80

The LCD monitor value chain is depicted in the figure below.
Component and
Assemblers
Backlight units
Polarizer
Colour filter
Array glass
substrate
Bridge Rectifier
Filter Capacitor
SMPS
Transformer
Schottky
Diodes
Output Filter
Capacitor
Fuse
Downstream
OEMs
Consumers
LCD monitors
Enterprises
Government
Power IC
Opto-isolator
The progression through fab generations in the TFT LCD industry also involves increases in production efficiency. For example, 32
LCD TV panels were originally designed to be manufactured in generation 6 fabs. But presently more than 70 per cent of them are
produced in generation 8 fabs and generation 6 fabs now produce LCD monitor panels. Also, the usage of 0.5 mm glass substrates
in generation 6 and newer fabs has introduced production flexibility; both laptop and monitor panels can now be made in these
fabs, instead of having to concentrate production on one end user application alone.
81
The table below captures the capability in India across the LCD monitor value chain.
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Display
No
No
No
LG, Samsung, Sharp,

NEC Display
NA
Imported as part of finished

product
Electromehcanicals
No
Yes
No
Medium
Though design capability Exists

there is no local realization of IP
NA
Imported as part of finished

product
Medium
Though design capability Exists

Category
Components
and Sub systems
Himax
Technologies, Orise
Technology, Sitronix,
Raydium,
Semiconductor
ICs
No
No
No
Power components
No
Yes
No
OEM
No
No
No
LG,
Samsung,
AOC
NA
No local manufacturing value

addition
Indigenous
players
Yes
Yes, only Low

Value Add
Assembly
No
Moser Baer,
iBall, Intex
Low
Low manufacturing
value addition
LCD monitors
Generation 5 fabs now mostly produce tablet PC panels; 89 per cent of notebook PC panels are also made in Gen 5 fabs. Generations
5 to 7 currently produce LCD monitor panels.
The SWOT chart below captures the analysis for the tablets market.
STRENGTHS
OPPORTUNITIES
Huge domestic demand for LCD monitors
Government initiative could encourage uptick in LCD

manufacturing activity
Exemption of LCD panels from basic duty

encourages local value addition
Manufacturers evaluating Indias fit as an export hub for

LCD monitors
Sustained demand for desktops drives demand for

LCD monitors
Rising labour costs in China could drive investment

towards India
Highly competitive market increases awareness of

product among consumers
Fairly developed EMS industry capabilities for LCD
monitor manufacturing
WEAKNESS
chips, glass substrates, etc.
Excise duty hike in mobiles could constrains local
manufacturing
Absence of LCD fab that could greatly reduce turnaround
times and optimize costs for consumers
Adequate capacity at global fabs could cause investors
to reconsider investment decision
82
Sustained demand projected for tablets and laptops,

also desktops
SWOT
THREATS
Well established manufacturing ecosystem in East Asia
Capital intensive nature of setting up TFT LCD fabs
Emergence of new display technology that could hinder
return on investment
Infrastructural deficiencies that could delay investment
and implementation

Component SWOT
The biggest contribution to the BoM in terms of dollar value in an LCD monitor is accounted for by the display panel which could
cost up to 50 per cent of the total BoM approximately. Next come the electromechanical components,that could cost 15 per cent
of the BoM, and then the ICs and power components that account for the remaining 15 per cent.In short, the top 4 components
that contributes to majority of the LCD monitor bill of materials BoM are:
1. Display
2. Electromechanicals
3. ICs
4. Power
The bigger players in the market mostly import LCD monitors as finished products and do not need to source locally as the basic
duty on these are exempt as well.
General
Tax structures should be amended to encourage LCD manufacturing through preferential excise duty rates and easier
reimbursement of tax credit. Since finished product imports are also exempt from basic customs duty due to trade agreements,
the government should explore the option of bringing local sourcing of LCDs under the Preferential Market Access Scheme.
IP development
Investing in R&D for new display technologies should also be considered to hedge against investment made in TFT LCD display
fabrication. Samsung has already been pulling out investments in new TFT LCD generations and has begun investing in R&D for
implementing new AMOLED display technology. This would lead to indigenous IP being created in the country, which could make
India a world leader in those technologies, much like how Japan and Korea have a monopoly on cutting-edge display technology
currently.
Component ecosystem
The Indian ecosystem does possess competencies in the manufacturing of electromechanical components, SMPS transformers
and the plastic enclosures used in the assembly of LCD monitors. The manufacturing of these components should be incentivized,
especially since they are relevant to the product ecosystems of other electronics products as well. Local sourcing of these
components should be encouraged through tax credits for vendors who source these components locally. Simultaneously, the
government could encourage local manufacturers to tie up with engineering colleges and institutes in the vicinity through a
formalized practicum program, so that engineering students could contribute to design of these components.
Competencies in the manufacturing of LCD displays,especially for tablet and laptop applications (assuming the supporting
ecosystem for these products are incentivized as well, so that LCD manufacturing can feed into them), could be encouraged. This
would require investment in generation 5 fabs, which are mostly being used for these end user applications79 per cent of tablet
displays and 89 per cent of laptop displays are manufactured in generation 5 fabs. Also, generation 5 fabs are growing at only
3 per cent a year while higher generation fabs are clocking almost 26 per cent annual growth. This could mean that relocating
a generation 5 fab to a brownfield location could be done at an affordable level of investment, instead of the typical $ 3 billion
needed for a new fab.
83
Current Limitation
a. No preferential excise duty

Tax Structure
Value Addition
Policy Initiatives
84
b. Finished product imports exempt from

basic duty
a. Absence of LCD fab

b. Feeding to supporting ecosystems
a. R&D for new display technologies

Preferential excise duty should be given to
manufacturing of LCDs while also facilitating
reimbursement of tax credit. The option of
including LCD under PMAS should also be
explored, if feasible.
Government should look into attracting
investment for an brownfield LCD Gen 5 fab, that
would serve tablet and laptop markets; this could
feed into incentivizing of the tablet and laptop
ecosystems.
Government should also use Electronics
Development Fund (EDF) funds to promote R&D
into new display technologies to hedge against
investment in a Gen 5 fab, and also with an eye on
becoming a future leader in display technology

Servers - Product and Ecosystem Analysis

SUMMARY
No; mostly finished product imports
0.03 million (2012); CAGR (20122015) 18.6%
Low Negligible sourcing; negligible assembly
Top 4 Components
Processor, Memory, Motherboard, Hard Disk Drive
Component Ecosystem
Medium; Sizeable local market; Robust growth potential; Possible

export opportunity
a. Reimbursement of SAD to be made easier for encouraging
investment in manufacturing
b. Increase rate of abatement

c. Motherboard and enclosure manufacturing to be offered preferential rates of customs and excise duty

The servers market in India was estimated to be worth US$ 769 million in 2012. The market is slated to grow at a rate of approximately
11.2 per cent during the period 20112015 and is estimated to be worth at least US$ 1 billion by 2015. The projected growth of the
cloud computing market in India would also require humongous investment in cloud infrastructure, which will create equivalent
demand for servers. Also, the amount of business being transacted by industries such as ITeS, retail and BFSI, among others, has
sustained demand for servers. Contiuning investment in IT infrastructure across various verticals in the corporate sector has also
contributed to the growth of the market. However, the market is import heavy and fluctuation in the value of the Indian Rupee
frequently poses challenges for vendors.
IBM, HP, Dell and Oracle are the key players in the market, accounting for almost 90 per cent of the market cumulatively. IBM is the
market leader, responsible for one-third of the market. Another trend being observed is the consolidation of IT infrastrucutre by
SMBs who now looking towards virtualization as a solution. As a result, channel partners are now are playing the role of solution
providers for SMBs. Hence, server vendors are in turn ensuring that channel partners are up to speed with the latest training and
capabilities to safeguard their brand equity. The progress made by the Indian ITeS industry, the bright fortunes of cloud computing
and increased technology spending by the SMB segment is expected to support the growth of the servers market.
Servers Market: TM, TDM Forecasts (2010-2015)

1200
CAGR (2011 - 2015)
1085
1000
TM: 11.2%
956
853
800
709
677
TDM (Low/Med
value add) : 15.4%
769
600
TDM (High value

add): NA
400
HVA-TDM : TM
200
0
2011
0%
2013
0%
74
80
87
102
119
141
2015
0%
2010
2011
2012
2013
2014
2015

85
Servers: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.11
0.02
0.00
2011
0.12
0.02
0.00
2012
0.14
0.03
0.00
2013
0.16
0.03
0.00
2014
0.19
0.04
0.00
2015
0.22
0.05
0.00
Industry SWOT
The current ecosystem for servers involves local assembly; however, it is limited to SKD assembly or packaging and local testing.
This translates into value addition of not more than 5 per cent. However one opportunity for extra value addition lies in the sheet
metal fabrication of server cabinets, just as in desktops. This can definitely be carried out in India; however, different grades of steel
will have to be used to adhere to the criticalities of IT equipment. This is most definitely an opportunity in the Indian electronics
ecosystem for servers.
A lot of design activity happens in the captive design centres of global MNCs like Intel, Dell, HP, etc. However, this doesnt translate
into any local IP since all IP is held at the base of operations of MNCs. Assembly is carried out at the market destination for preshipment inspection and pre-delivery testing, if those are required.
In the last few years, local sourcing of components has been on the wane because of a convoluted duty structure that increases
business complexity for manufacturers importing individual components for assembly; for e.g., import for finished mother boards
attracts only CVD while import of individual components for motherboard manufacturing attracts CVD and an SAD of 4 per cent
that will be refunded after raising a reimbursement claim for the same. This increases upfront costs for manufacturers and also
increases uncertainty for them due to reimbursement claims that they need to make. This is particularly relevant during times
of currency depreciation when import costs can increase drastically. Such factors discourage entities from making significant
investments in manufacturing facilities considering the relatively thin margins that this industry operates on.
The server industry might undergo vertical integration in the future. Infrastructure software players are re-architecting their
products to support the dynamism of on-demand service oriented architecture. If on-demand becomes a dominant trend in the
future, one can expect that the software providers who align themselves to this trend would gain power in the value chain. On the
other hand, major systems vendors such as IBM and HP may partner with independent software suppliers or develop their own
stack of software.
86

Component and
Downstream
Assemblers
Motherboard;
Memory; Processor
CPU
Hard disk /
Cabinet
Power supply / UPS
Enterprises
Consumers
Servers
Video card; Sound

card; Network card
Government
Operating System
Software
Applications
The table below captures the capability in India across the servers value chain.
Category
Components
and Sub
systems
Servers
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Processor
Imports
No
No
Intel, AMD
NA

exists there is no presence
of local IP
Motherboard
Imports/Local
Supply
Yes
No
Pegatron, ECS,
Gigabyte, MSI,
Foxconn
Low
Local motherboard
assembly used to be
operational; shut down now
Hard disk
Imports
No
No
Seagate,
Toshiba
NA
Memory
Imports
No
No
OEM
Yes
Yes, only Low

Value Add
Assembly
No
NA
HCL, HP, IBM
Low
87
Currently, local manufacturing is not competitive globally due to a number of disability factors. In the light of latent manufacturing
strength for certain products, inclusion of those products under the ITA I agreement has constrained the growth of local
manufacturing due to the availability of imported goods. Also, domestic volumes are not growing fast enough for entities to invest
in manufacturing on a large scale. MNCs invested in assembly facilities early on as they needed to be closer to their market; this also
indicates their confidence in the manufacturing capability present in the country. However, the absence of a business environment
in which local manufacturing can thrive has led to the suppression of local manufacturing capabilities.
However, the advent of cloud computing has definitely thrown a spanner in the works in the server market. Cloud computing
offers many advantages to organizations. The cloud allows organization to optimize costs while offering performance guarantees.
However, organizations could possibly implement private and hybrid clouds, which would still require purchase of dedicated
servers.
The SWOT chart below captures the analysis for the servers market.
STRENGTHS
OPPORTUNITIES
Manpower skills available, both vocational and

skilled
Active role of government in fostering electronics

manufacturing
Government schemes and policies expected to

foster growth
Rising manufacturing and labour costs in China driving

manufacturers towards alternative destinations
Strong growth in the government and BFSI verticals

drives market
India as a export hub for servicing Middle East and

African countries
SWOT
WEAKNESS
THREATS
Negative influence of INR depreciation
Well established manufacturing ecosystems in China and

East Asia
Convoluted duty structure causes complexity in business

execution
Limited or nil IP generation; lack of incentives for
indigenous design activities
Lack of wholesome supporting ecosystem for complete
manufacturing
88
Infrastructure inadequacy of power, clean water, and

other utilities
Advent of cloud computing could pose a threat to the
market for servers

Component SWOT
The biggest contribution to the BoM in terms of dollar value in a server is accounted for by the processor which costs anywhere
between $ 60 to 110 approximately. Next comes the motherboard and the hard disk which cost about $ 40 each, followed by
the memory module that costs around $ 30. On the motherboard, the semicondcutor components and the PCB are most critical.
Considering a BoM of $ 40 for the motherboard, it can be estimated that the chipset costs about $ 12, the PCB costs about 6.5, and
that the overall semiconductor cost is about $ 20 including the peripheral chips.
In short, the top 4 components that contribute to majority of the server bill of materials (BoM) are:
1. Processor
2. Memory
3. Motherboard
4. HDD
Processors are sourced from either Intel or AMD. The top suppliers for hard disks are Seagate and Toshiba. However, the situation
with regard to hard disk is slightly in the balance currently due the shift in technology and enterprise business models, i.e., the shift
towards cloud computing and centralized servers, and the movement in technology towards solid state drives.
General
The levying of SAD should be repealed on individual electronic components, or at the very least, individual components of
motherboards. Also, the reimbursement process should be made easier and faster so that companies do not have to contend with
uncertainties of receiving reimbursement. The present rate of abatement should also be raised from 25 per cent to reflect the rise
in costs of doing business. SAD could be levied on finished product imports of motherboard for which a nascent manufacturing
ecosystem exists in India.
IP development
development firms through start-up capital seeding, and possibly through the mooted EDF corpus, could lead to the generation of
Component ecosystem
The manufacturing of motherboards should be incentivized by exempting individual components from basic customs duty and
excise duty, or offering preferential excise duty. Decrease in tax revenues could be offset a little through smaller hikes in sales tax
or through offering greater rates of CENVAT credit on excise duties.The Indian manufacturing ecosystem possesses competencies
in the manufacturing of motherboards, which is a top BoM contributor in terms of dollar value. It also has applications in almost
every electronics product. Once local manufacturing is encouraged by exempting from/ granting preferential excise duties, it is
very possible that investment will flow in and spur organic growth of the value chain. Likewise, sheet metal fabrication and plastic
moulding are fairly mature technologies in India; hence, the manufacturing of cabinets and enclosures could also be incentivized
through preferential excise duties and exempting them from additional duties, for use in servers.
The assembling of servers is already being carried out by global OEMs and indigenous players like HCL and Wipro. India has held
back from discussing the ITA II due to the fact that the government recognizes the need for encouraging the growth of the nascent
manufacturing capabilities in the country. If India were to sign the ITA II, it could potentially push companies into investing in
high-value added manufacturing in the country. Coupled with the wholesome basket of policy initiative being enacted by the
government, this could also lead to the establishment of a thriving product ecosystem.
89
Current Limitation
Tax Structure
Value Addition
Component
Ecosystem
90
a. Inverted duty structure

b. Low rate of abatement
a. Lack of supporting industries

b. Absence of product design/IP generation
b. Demand volumes

a. Simplify reimbursement of SAD
b. Increase rate of abatement to reflect rising costs
of doing business
c. Incentivize manufacturing of PCBs, cabinets,
and enclosures for servers by giving preferential
excise rates
d. Utilize MSIPS and Electronics Manufacturing
Clusters scheme effectively to promote
manufacturing clusters for these components
c. Increase CENVAT credit for locally sourced
components/raw material
d. Increase basic duty for imports and reduce sales
tax for finished goods

Base Stations (BTS) - Product and Ecosystem Analysis

SUMMARY
Product Local Manufacturing/ Assembly/ Design
Very negligent complete local manufacturing; Predominantly low

value add manufacturing for exports; local demand through imports
Local Manufacturing/ Assembly Volumes and

Growth
0.25 million (2012)

CAGR 7.1% (2012-2015)
Low heavily reliance on imports of critical components
Top 4 Components
ICs (40%), Power Amplifier (15%), Power Supplies (12%),

Antenna (10%)
Component Ecosystem
Entire Electronics including the Power Amplifier is imported; rest

supplies, body casing, packaging, etc. are sourced locally

Why
High; Indias telecom growth story commendable; has 2nd largest

subscriber base in the world which is expected to grow further
a. Focus on design and development of PCBs, power supplies, and

antennas
b. Freight duty/entry tax on transportation of heavy goods across
states should be rationalized

The Base Station (BTS) industry is capital intensive since nearly 55 to 60 per cent of the total operational and management costs
of a telecom operator is accounted for by the purchase, installation and maintenance of mobile towers. The high-growth telecom
sector saw a decline in 2011 and 2012 due to oversupply and penetration saturation in urban areas. However, surging data usage
through mobile networks has necessitated new installation and up-gradation of the existing BTS infrastructure to maintain quality
and speed of data flow.
BTS shipment volumes in the country are anticipated to grow from 0.08 million units in 2012 to 0.15 million units by 2015, growing
at a CAGR of 23.3 per cent. The domestic manufacturing landscape of BTS mostly serves the export market. India exported
0.25 million units in 2012, which is expected to reach 0.29 million units in 2015, growing at a CAGR of 5.1 per cent. Indigenous
manufacturing of BTS for local sales is very negligible.
91
GSM BTS Market: TM, TDM Forecasts (2010-2015)

1.4
1.35
1.26
1.2
1.0
CAGR (2011 - 2015)

TM: 11.3%
1.08
TDM (overall): NA%
0.98
TDM (Low/Med
value add): NA%
0.88
0.8
TDM (High value

add): NA
0.72
0.6
HVA-TDM : TM
0.4
0.2
0
0
0
2010
2011
2012
0
2013
0.18
0.09
2014
2011
0%
2013
0%
2015
0%
2015

BTS GSM: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.120
0.000
0.209
2011
0.110
0.000
0.240
2012
0.080
0.000
0.252
2013
0.120
0.000
0.272
2014
0.140
0.000
0.289
2015
0.150
0.000
0.309
Industry SWOT
The BTS value chain consists of BTS suppliers, EMS partners, sub-part suppliers and telecom operators. Almost all the leading
suppliers of BTS globally, namely NSN, Ericsson, Alcatel Lucent, Huawei and ZTE, supply BTS in CBU form to Indian telecom
operators by directly importing BTS units to the installation sites anywhere across the country. For the export market, a gamut of
activities arecarried on by the OEMs, their EMS partners and the sub-part suppliers.
92

The BTS value chain is depicted in the figure below.
Component and
Downstream
System Integrators
ICs
Discretes
Semiconductors
Passives
Metals
Interconnex
Antenna
OEM
Electro-mechanicals
BTS
Customers
EMS Partner
Power Supplies
packaging
Operating System
Software
Applications
There is some low value added assembly-cum-manufacturing of GSM BTS happening in Indian through manufacturing plants
situated in Tamil Nadu. However, the entire production of these plants is exported to markets across Europe. The board with key
components already mounted is imported while succeeding activities such as PCB assembly, casing mounting, etc. are carried
out locally. While import of the critical components is unavoidable, some 25 to 30per cent of the BoM, comprising of the antenna,
interconnectors, power supplies, metal casing, packaging materials, etc., are sourced locally from domestic sub-part suppliers.
Local suppliers either source the raw materials locally or import them to match the specification of OEMs. In some cases, OEMs
may provide the local suppliers with the reference designs for the manufacturing of sub-parts/systems. As for components, all
the semiconductors and electro-mechanicals are imported into the country while local players ensure the supply of packaging
material, metal parts, antennae, power supplies, interconnectors, etc. The amount of design activity that happens in the country
for BTS manufacturing is small.
93
The table below captures the capability in India across the BTS value chain.
Product
Local
Supply
Company
Names
Level of Local Value Add
ICs
Imports
No
No
TI, Freescale,
NXP, ST
Microelectronics
NA
Power
Amplifier
Imports
No
No
Power wave,
Ericsson, NSN,
Huwaei
NA
Power
Supplies
Yes
Yes
Yes
VMC, Acme Tele,

GE power
High
Antenna
Yes
Yes
No
High
Interconnex
Yes
Yes
No
High
Metals,
Packaging
Yes
Yes
No
High
OEM
No
Yes, only Low

Value Add
Assembly
No
NSN, Huawei,
ZTE, Alcatel
Lucent, Erricson
Low

realization of IP
EMS
No
Yes, only Low

Value Add
Assembly
No
Sanmina
Low
Local manufacturing feeds

exports only
Category
Components
and Sub
systems
BTS
Local
Local IP
Remarks
Companies use the designs

given by the OEM and source
raw materials locally
Huawei and ZTE possess large-scale manufacturing bases in neighbouring China. The recent rise of Vietnam and Africa as
emerging destinations for low cost manufacturing is seen as a credible threat to Indias dream of becoming a global manufacturing
destination. Most of the BTS MNCs have established R&D centres in India; however, the intellectual output from the design and
R&D activities carried out is held at their global headquarters. The recent policy initiatives are expected to attract investments into
the local BTS sector given the enormous demand and export potential.
The SWOT chart below captures the analysis for the BTS market.
STRENGTHS
OPPORTUNITIES
Rise of India as a telecom giant globally

Increase in data traffic in mobile networks
India used as an export destination by global suppliers
Roll out of 3G and 4G services with the penetration of

smart phones
EMS companies capable in BTS manufacturing
Local freight charges needs rework in-land cost

higher than total import cost of product
Govt. committed to improve and expand telecom

infrastructure in Far East and rural interiors
100% FDI in telecom to boost penetration and demand

for BTS further
SWOT
WEAKNESS
THREATS

chips, power amplifiers, PCBs
Urban saturation and over-supply of BTS limiting

demand generation
Inverted duty structure discouraging investment in

local manufacturing

neighbouring China.


like Vietnam and Africa.
Fledgling ecosystem of raw materials and components
94

Component SWOT
The BTS consists of thousands of components and almost half of the product cost is contributed by electronics used in the BTS. The
top 4 components that contribute to majority of the BTS bill of materials (BoM) are:
1. ICs
2. Power Amplifier
3. Power Supplies
4. Antenna
The BTS value chain in India lacks the presence of a well-endowed ecosystem for manufacturing of both components and the
end product. The electronic components of BTS are exempt from import duty (under ITA-1) which could act as a restraint against
investment in the Indian component ecosystem.
General:
BTS are exempt from customs duty for import of electronic components used in its manufacturing anywhere in the world, being
part of the ITA- 1 list of products. Also, suppliers have raised concerns about the high in-land freight charges in India, which accounts
for about 15 to 17 per cent at present, which is exceptionally high compared to the freight charges of importing BTS globally.
Decreasing the in-land freight costs from 17 per cent to about 3 to 4 per cent would reduce costs for indigenous manufacturing
and encourage local value addition.
IP development:
Irrespective of the presence of numerous captive and third party design houses in the country, along with individual design
centres of the global BTS OEMs, none of the IP is realized locally as all the patenting is done overseas. Although a good percentage
of design related work is carried out here, probable lack of Governmental support and encouragement has led India to lose out
on patent filing.
In the domestic BTS manufacturing ecosystem, parts and sub-parts such as the antennas, interconnectors, power supplies, metal
casing, packaging materials, etc., are sourced from local suppliers, and these contribute around 25 to 30 per cent of the total BTS
BoM. A closer look at the component composition of BTS indicates that only the electronic components are imported into the
country, besides a few electro-mechanical parts. However, the setting up of semiconductor fabs in the country is a positive step
towards becoming self-sufficient with regard to semiconductor manufacturing. This factor could incentivize manufacturing of
electronic components and other downstream activities that feed into the manufacturing of BTS.
The local PCB industry not only serves the domestic market but also serves the export market; around 24 per cent of the total PCBs
manufactured annually is exported. Indian PCB manufacturers have also enhanced their capabilities from single 2-layered PCBs
to 16-24 multiple-layered PCBs. However, local sourcing of PCBs is not considerable because the PCBs needed are too complex
for Indian PCB manufacturers. Competency should be built so that local sourcing of the required PCBs can be done. Domestic
manufacturers should also be encouraged to build their capabilities to design and develop power supplies and antennas used in
the BTS from scratch to the final product indigenously. The MSIPS, EMC and NMP policies serve as a holistic guideline for suppliers
to take cognizance of, and apply for appropriate subsidies.
95
Current Limitation
Tax Structure
a. BTS is a ITA1 product, and is thus a zero

duty product
b. High freight costs of approx. 17 per cent is
undesirable
a. Lack of feeding industries
Value Addition
Policy Initiatives
96
b. Countrys infrastructure is lacking in some

aspects
a. No policies for logistics support

a. Freight costs should be rationalized through
amending road tax and entry tax
a. Development of support infrastructure like roads,
power
b. Setting up of electronics clusters to promote
downstream activities
a. Government should help subsidize logistics costs
until such subsidy is no longer necessary

Power supplies - Product and Ecosystem Analysis

SUMMARY
Local design, assembly and manufacturing
187 million (2012); CAGR (2012-2015) 10.2%
High local sourcing, local assembly, packaging
Top 4 Components
Transformer, Power Semiconductor, Rectifier Diodes, PCB
Component Ecosystem
Only electronic imports
High; Huge Local Market; High Growth Potential;

Export Opportunity
a. Top 4 Components do not have much potential for
indigenization (global capacities, lack of local infrastructure etc)
b. Incentivize electronic component manufacturing
c. Provide Infrastructure - land, water and energy facilities for

electronic component manufacturing
d. Incentives to encourage exports

The increasing growth of laptops, mobile phones and tablet PCs is propelling the growth of the power supplies market in India. The
market generated revenues of US$ 574 million in 2012 and is expected to reach US$ 660 million by 2015 with a CAGR of 5 per cent.
Tablet PCs, smartphonesand laptops use external adapters, which arethe highest growing segment in the power supplies market.
The rollout of 3G and 4G is expected to boost the demand for smartphones and thereby influence the growth of power supplies for
the same. The expected lanuch of newer verison of gaming consoles by Microsoft and Sony is also expected to boost the demand
for external power adapters. The driving factors for increasing demand for products such as tablet PC, LED lighting, mobile phones,
gaming consoles etc., is expected to boost the level of local manufacturing. India has a huge unorganized market for this particular
market which indulges in high value addition local assembly. The domestic manufacturing for this product market was valued at
US$ 444 million in 2012 and is expected to reach a value of $ 510 million by 2015 with a CAGR of 4.7per cent.
Power Supplies Market: TM, TDM Forecasts (2010-2015)

0.7
0.6
0.5
0.4
0.43
0.41
CAGR (2011 - 2015)

TM: 4.8%
0.57
0.55
0.52
0.66
0.63
0.60
0.51
0.47
0.44
0.48
TDM (overall): 5.3%

TDM (Low/Med
value add) : NA
TDM (High value
add): 4.8%
0.3
HVA-TDM : TM
0.2
0.1
2011
78%
2013
78%
2015
77%
0
2010
2011
2012
2013
2014
2015

97
Power supplies: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
200
154.55
NA
2011
220
220.00
NA
2012
242
170.00
NA
2013
267.9
242.00
NA
2014
294.7
187.00
NA
2015
324.2
267.89
NA
Industry SWOT
The power supplies value chain comprises of various material and component suppliers, subsystem suppliers and the downstream
segments like IT, ITeS, etc. The Indian market witnesses a huge unorganized market for power supplies comprising a number of small
local players who execute local assembly activities. The electronic components are imported while the rest of the components are
locally sourced and assembled. This contributes to high value addition in the indigenous manufacturing of power supplies. India
meets around 70 per cent of the local demand through local manufacturing. The remaining 30 per cent is imported majorly as
finished goods and either sold at lower prices since they do not undergo safety certifications or tested locally and sold at a higher
price.
The power supplies value chain is depicted in the figure below.
Component and
Assemblers
Downstream
Transformer
Power supply
Copper wires
Capacitor
Rectifiers
Power Supplies OEM
Consumer
Power Supplies EMS
IT / ITes
IC
Mosfets
Mechanical
Components
Rubber
Plastic,
Sheet Metal
98

VMC is one of the top players and holds patents for its designs. There are numerous small players carrying out their own design and
assembly catering to particular end user segments. Manufacturing and local assembly are the countrys greatest strengths with
high quality labour availability and cheaper labour costs when compared to China or other neighbouring countries.
The table below captures the capability in India across the power supplies value chain.
Category
Components
and Sub
systems
Product
Local Supply
Capacitors
Only Sales
Offices; Total
Imports
Local
Local IP
Level of Local
Company Names
Value Add
No
No
Koshin, STM,
Infineon
NA
Majorly local
Transformer supply, partially
imported
Yes
No
Pulse magnetic,
Many local
players
NA
Rectifier
diodes
Partially
Imported, Partial
local supply
Yes
No
Many small
players
High
PCB
Local supply
Yes
No
AT&S, Derg
electronics, Many
local players, EMS
High
Mosfets/
Switching
devices
Local supply
Yes
No
Many local
players
OEM
Yes
Yes, High value

add
No
VMC, many local

players
High
EMS
Yes
Yes, High value

add
No
Delta Electronics,
many small
players
High
Power
supplies
Remarks
there is no local realization of IP,
Lack of infrastructure
The challenge that the industry is currently facing is the component customs duty which is around 12.36 to 16.85 per cent.
Mechanical components are locally sourced though. Although huge opportunities lie ahead, especially with the booming IT and
ITeS sector, local manufacturing largely caters only to local demand. There are very minimal exports with respect to this product.
Lack of scalable manufacturing capacity deprives the ecosystem of export opportunities.
The SWOT chart below captures the analysis for the power supplies market.
STRENGTHS
OPPORTUNITIES
Availability of high quality labour
Consistent end user growth in terms of laptops,

Smartphones, LED lighting etc
Availability of mechanical components at par with

China/ Taiwan in terms of price and quality

driving manufacturers to invest in facilities in India
Labour costs are cheaper in India when compared to

China

Europe countries
Well laid EMS industry outsourcing assembly and PCB

manufacturing
Increasing demand for high voltage power supplies in

the IT/ ITes sector
SWOT
WEAKNESS
THREATS
Reliance on imports for some of the critical components

- IC, electrolytic capacitors
Many Chinese imports are sold in the local market

without any testing
Identifying right suppliers for component imports

like Vietnam
Limited product design activities locally; Limited IP

generation

neighbouring China
99
Component SWOT
The top 4 components that contribute to majority of the power supplies bill of materials (BoM) are:
1. Transformer
2. Power semiconductor
3. Rectifier diodes
4. PCB
The transformer, the most expensive component in an external adapter, is majorly sourced locally with a number of local players
offering the same. Local transformer manufacturers are largely dependent on imported copper. The presence of large manufacturing
capacities in China, Hong Kong, Taiwan etc.,make it more attractive for manufacturers to import transformers than source them
locally. The ICs, capacitors, rectifiers and MOSFETs are also predominantly imported. The PCBs, mechanical components, plastic,
sheet metal, rubber etc., are locally sourced and are available at competitive prices and reputable quality.
General
The component duty currently ranges between 12.36 to 16.85 per cent, which is considered high for the industry especially since
India is a price sensitive market. Offering subsidies for indigenous manufacturers through capital subsidies and preferential excise
duties would prove to be very beneficial since the ecosystem possesses considerable competencies already.
IP development
Around 30 per cent of the power supplies are imported as finished goods, of which around 15 per cent of them are sold in the local
market without safety certifications and testing. This necessitates the need for a policy initiative to prevent dumping of power
supplies which would bolster the quality of power supplies available in the Indian market. Regional level testing labs should be
established and testing for imported goods should be mandated. The proliferation of unbranded products in the market calls for
CVD to be levied to prevent dumping in the local market.
Component ecosystem
Lack of volume capacities forces some manufacturers to import transformers from the neighbouring countries. The Indian
Government could aid in ensuring continual availability of copper through the year at subsidized prices. This will reduce the overall
cost of the components, thus making it price competitive.
Product development
Power supplies is a high growth market due to the increasing demand for laptops, mobiles etc. Hence the market also possesses
considerable export potential. However, export subsidies should be offered only after standardizing safety regulations and
certification. Considering the low margins needed to set up the ecosystem for some of the critical components, it seems logical
to leverage the EPCG scheme, which would help exporters to import machinery and equipment at affordable rates and produce
quality products for the export market.
Current Limitation
Tax structure
Value
Addition
a. High component duty of 12.36 - 16.85 %
a. Incentivize customs duty to encourage local

manufacturing
a. Absence of Product Design/IP

Generation
a. Establish design houses either through academia

- industrial collaborations or in association with the
Government
Component
Ecosystem
Policy
Initiatives
100
b. Demand Volumes
a. Subsidizing copper and enamel duty rates to carry out

scaled quantities of transformers
c. Components like transformers, Mosfets

etc are imported in spite of local supply
b. Increase R&D efforts to reduce price further and minimize

the power supply units
a. Lack of policies for testing imported

external power supplies
a. Policy initiatives to set up single point testing labs and

also testing of imported power supplies to bring about
standardization
b. Concession on export duty to encourage exports
leveraging the manufacturing strength

Set Top Boxes - Product and Ecosystem Analysis

SUMMARY
Design and Manufacturing (though low volumes), Assembly by

EMS companies
5.7 million (2012); CAGR (20122015) 54.4%
Medium
Top 4 Components
IC (MPU, Memory, Tuner), PCB, Power Supply, Plastics and

Mechanicals
Component Ecosystem
~40% BoM Components locally Available; Rest Imported

Opportunity
a. Restructuring of Tax and Duty Structure
b. Redressal of From C issue
c. Priority Product Preferential Loans for Manufacturers and

Channel Partners
d. Localization of components and peripherals RCA Cables,
Remote control, Passives etc
e. Indigenous Development of CAS module
f. Definition of Indigenous Standards for Local STB

Rapid proliferation of FPD TVs, which offer better viewing experience, combined with the broadcast digitization drive is driving
growth of the Indian Set Top Box (STB) market. One of the hallmark product categories in the consumer electronics segment, the
set top box (STB) market in India is poised for unprecedented growth. The Cable Television Networks (CTN) Amendment Bill 2011
mandates digitization of TV broadcasts pan India by 2014. This bill has provided the necessary thrust for driving growth of the set
top box market, both cable and satellite. The STB market recorded a total market (TM, which represents consumption) of 18.4M
units, of which satellite STB accounted for 10.4M units in 2012. The total STB market is expected to reach volumes of 39.4M units
by 2015, representing a healthy CAGR of 28.8 per cent. In 2011, only 30 per cent of the local demand was serviced by indigenous
manufacturing. TDM for 2011 was estimated at 4M units, 25 per cent of which represents manufacturing by EMS primarily for
exports, thus increasing the reliance on imports from local demand. Apart from the analog to digital transition of Pay TV services,
the other significant demand creators for STB in the near future include:
Digitization of Doordarshans terrestrial TV network planned for completion by 2017 creates demand for millions of STB based
on DVB-T or higher standards
Government initiatives such as the National Optic Fiber Network (NOFN) and National Knowledge Network (NKN) driving
demand for STB for secure delivery of content and interactivity
Replacement of MPEG2 to MPEG4 technology and average product life of 5 years for STBs ensures a huge replacement demand
for the existing installed base of 40 M+ STBs.
101
Set Top Box Market: TM, TDM Forecasts (2010-2015)

1
0.95
CAGR (2011 - 2015)
0.9
TM: 27.5%
0.8
0.7
0.6
0.5
TDM (Low/Med
value add) : 54.9%
0.62
0.52
0.5
0.4
0.1
HVA-TDM : TM
0
0
0.17
TDM (High value

add): NA
0.36
0.3
0.2
0.75
0.14
0.52
0.37
0.25
0.18
2011
0%
2013
0%
2015
0%
0
2010
2011
2012
2013
2014
2015

STB: TM, TDM Volumes Forecasts

Product
TM Volumes (Million units)
TDM Volumes for Local Sales

(Million units)
2010
15.50
4.50
2011
10.50
4.00
2012
18.40
5.70
2013
23.52
8.70
2014
30.08
14.00
2015
39.35
21.00
102

Industry SWOT
STB value chain comprises various component and subsystem suppliers, technology licensors and software developers apart from
the downstream players comprising the cable operators, multi system operators (MSO) and retailers.
The STB value chain is depicted in the figure below.
Component and
System
Integrators
Downstream
Memory
MPU
Core Chips
Tuner
RCA Cable
PCB, Passive
Component
Core
Components
Set Top
Boxes
Power Supply
CAS
Operating
System
Cable
Operators
Consumers
MSO
External
Components
Software
Applications
The leading suppliers of STBs in India are, Huawei, Pace, Cisco, Chang Hong, Skyworth, Hathway, HUMAX, Technicolor, Echostar and
MCBS, whose customers are the major DTH and Cable MSOs, namely, DishTV, Airtel, Tata Sky, Hathway, Incable, WWIL, etc. Most of
these suppliers are already operating from their sales office in the country. The after sales support activities of the companies are
outsourced to local companies like Carbon and SS Mobile.
The domestic STB manufacturing sector has received the much needed fillip recently with active participation from companies
such as Videocon, Beetel, Mybox, Bharat Electronics and Indieon technologies. Beetel started importing free-to-air STBs as early as
2004 and continues to supply to Airtel, a service provider. Another DTH operator, Videocon, initially imported STBs to meet their
captive demand, but started in-house manufacturing of STBs through their subsidiary Trend Electronics in 2008. Mybox, established
in 2008, is a Govt. recognized R&D centre, which designs and develops STBs in-house. Even Indieon Technologies, started in 2008,
contract manufacturers STB from different EMS companies and also fulfils the rest of the demand by importing components and
assembling in its plant. Some global EMS companies in India, like Jabil Circuits, manufacture STBs primarily for their European
clients, with a very small percentage being supplied to local service providers. Jabil, Dixon, Quad, Nainko, andKortek Electronics are
some of the EMS companies manufacturing STBs in India. For the Doordarshan free-to-air service, STBs are manufactured in India
by contract manufacturers, but they have very little expertise in making conditional access system (CAS) boxes.
The ecosystem for STB manufacturing in India is fairly developed when compared to other high priority products. Nearly 40-45
per cent of the BoM for STB can be locally sourced or there is localization capability. However the most critical challenge for local
manufacturers is to keep their cost of production at a level that makes them competitive on par with global suppliers. Currently,
there are various fiscal and supply chain related factors that prevent STB manufacturers from pricing their products lower than
global competition.
103
Local capabilities in product design and IP are also abundant. With the product being developed with standard features and
specifications, possessing local IP is not seen a great differentiator any longer. Local IP and design capabilities help in reducing the
product cycle time and also in rapid technological advancements. Apart from local manufacturers holding IP, there are a few third
party design houses like Tata ELXI that provide complete design service solutions for overseas STB OEMs.
The table below captures the capability in India across the STB value chain.
Category
Company
Names
Level of
Local Value
Add
Remarks
No
NXP, STM
NA
Though design capability exists there is

no local realization of IP
Yes
Yes
VMC, Axiom
High
Only
Predominantly
Imports
No
No
Multiple
Suppliers
NA
Local PCB suppliers do not have

capability to produce 2 layer at 0.5 mm
Imported
No
No
Cisco, Nagara
vision
Low
Foreign MNCs completely control this

market; all STB manufacturers license
their CAS
Yes
Yes
Yes
Multiple
Suppliers
High
RCA Cables
Partial Imports
Yes
Yes
Multiple
Suppliers
High
Currently minimal localization; however

capability exists for increasing it
Remote
Control
Imported
Yes
Minimal
Multiple
Supplier
Low
High probability for localization; Needs

to be encouraged
High
Local Supply
IC
Only Sales
Offices; Total
Imports
No
External
Power Supply
Yes
PCB
CAS
Plastic ,
Components Sheet Metal,
Packaging
and Sub
Material
systems
Smart Card
Yes
Yes
Yes
G&D,
Oberthur,
Sagem,
Sharon
Solutions
Passive
Components
Imported
No
No
Multiple
Suppliers
Low
High
Low
OEM
Yes
Yes
Yes
Videocon,
myBox
Technologies,
Indeon
Technologies
EMS
Yes
Yes, only Low

Value Add
Assembly
Yes
Jabil Circuits,
Kortek
Set Top
Boxes
104
Local
Local IP
Product
Localization is possible; needs

encouragement

The SWOT chart below captures the analysis for the STB market.
STRENGTHS
OPPORTUNITIES
Export Potential Ongoing digitization initiatives in

many global economies
Technology Upgradation and Replacement driving

demand
Local design and manufacturing capability
Inclusion of STB under the Special Focus Product

Scheme provides incentives for exports
Preferential minimal policy intervention hike in import

duty

Fairly developed local ecosystem - ~40% of BoM

components available locally. Indigenous capability
exists for another 20% of BoM.
Appreciating dollar promoting local manufacturing
SWOT
WEAKNESS
THREATS
Local manufacturing costlier than imports debilitating

tax and duty structures
Cheaper imports

ICs, tuners and even remotes
Lack of indigenous standards for STB favouring imports

over local product
Only 2-3 indigenous manufacturers with IP and

manufacturing capabilities
Component SWOT
The component ecosystem for STB is partially developed in India. There are certain components in which India has selfsufficiency,and afew others where this is no local capability. The top 4 components that contribute to majority of the STB bill of
materials (BoM) are:
1. ICs (MCU, Memory, Tuner etc.)
2. Printed Circuit Board (PCB)
3. External Power Supply
4. Plastics and Mechanicals
Of the top 4 components, there is local capability and complete local sourcing of the external power supply in STBs. Companies
such as VMC and Axiom provide the power supplies needed for STB. These companies are also engaged in exports. Beyond the
top 4 components, there is local ecosystem and supply of sheet metal, plastics, packaging material or gift box and smart card (pay
tv). All these cumulatively account for approximately 40per cent of the overall BoM. The most critical components of the BoM are
the IC and tuner ICs, which are completely imported. NXP Semiconductor, STMicroelectronics and Renesas Technologies are some
of the suppliers of these ICs. PCBs for STB are predominantly imported as local suppliers do not provide 2 layered PCB of 0.5 mm
thickness desired for STB manufacturing. The PCBs are typically sourced from multiple Chinese vendors.
The other significant component, the CAS, is currently supplied by foreign players. Companies such as Cisco (which acquired NDS),
Nagara Vision and Irdeto dominate and control the market through their licenses that are used by the various STB manufacturers.
Indian manufacturers will be able to achieve cost competitiveness if local sourcing of CAS is possible. The ongoing initiative of
DeitY to develop indigenous CAS will help in addressing this challenge.
105
General
Hiking the import duty for STBscan curbimports and promote local manufacturing of STBs. The 2012-13 Budget did see a hike in
the customs duty but it has been found to not be sufficient in this regard. Countries such as China and Brazil are known to have
high tariff rates for STB imports as a measure of promoting local manufacturing; this needs to be emulated by India too.
The existing business model for STB in the country involves the cable operators and MSO who package the STB as part of their
offerings to customers. They do not pay VAT and hence are constrained from issuing Form C. This results in local manufacturers
having to pay CST equivalent to local VAT (~12.5per cent) making the landed cost for locally manufactured products high and thus
costlier than imports. The remedial measure sought is the issuance of Form C without affecting the existing business model which
is highly possible with Government intervention.
The DTH industry and cable operators are plagued by huge operational challenges. This is due to lack of financial assistance from
the Government. The industry also pays multiple taxes such as service tax, entertainment tax, licence fee and VAT. The support
system in countries like China and Korea is extremely industry friendly; this is reflected in the high level of exports from these
countries. Today, the suppliers in these countries are tied up with financial institutions like EXIM banks, which offer long term credit
over three to five years at an extremely low interest rate. No such financing is available in India as this is not treated as a capital
goods industry. The STB market needs to be made a priority sector and low interest special loans need to be made available to both
manufacturers as well as the DTH service providers.
Current Limitation

a. Creation of trade barrier through higher import duties
Tax Structure
a. Imports cost effective compared to

indigenous manufacturing
b. Normalization of tax rates; Uniform tax rates across States

c. Resolution of Form C issue;
106
Value Addition
& Component
Ecosystem
a. Minimal activity in some sub

components despite local capability
Financial
Incentives
a. Lack of low interest loans / financing

for STB manufacturers and Cable
Operators, MSO
a. Promotion of indigenous capability for RCA cables, remote

control, passive components
b. Definition of Indigenous Standard to promote local IP and
manufacturing
a. Priority product status to create preferential financial loans
for STB and DTH sector

Printers and MFDs - Productand Ecosystem Analysis

SUMMARY
Assembly/Design
Mostly finished product imports
Volumes and Growth
0.33 million (2012); CAGR 27.9% (20122015)
Low only for assembly of dot matrix printers
Top 4 Components
Photosensitive Drum, Fusing Roller, Transformer, Lens and scanner
Component Ecosystem
Negligible

Promotion; Why
Low; Small local market; Huge investment required; Market shifting to enterprise
segment
a. It would not be wise to offer incentives for manufacturing of inkjet and laser
printers and MFDs
b. Offer greater CENVAT credit for local sourcing of components for dot matrix
printers; raise import duties simultaneously

The Indian printers & MFDs market in 2012 was estimated at 3.22 million units or about US$ 474.05 million. The total market is
projected to grow at a rate of approximately 16 per cent through 2015 in revenue terms. HP, Canon, Samsung and Epson are the
key players in the overall printers and MFD market and hold a combined market share of nearly 90 per cent; Ricoh and Konica
Minolta have strong presence in the A3 MFD segment. The Indian market is very import heavy; more than 90 per cent of the market
comprises finished product imports except for dot matrix printers that are manufactured/assembled locally by players like TVSE
and WeP. Hence investment in the manufacturing or local value addition of printers and MFDs in India doesnt present a justifiable
bsuiness case for global OEMs. Design activities are carried out in the home countries of the OEMs at their global HQs for the most
part and proudcts are manufactured in China and East Asia, although software design is carried to an extent in the Indian locations
of the global OEMs. The robust growth of the enterprise sector has contributed to the demand for printers, especially MFDs.
Increased business activity in the IT, BFSI, education, government and SMB segments have contributed the most to the growth
of the market. However, fluctuations in the value of the Indian Rupee and cautious spending of IT budgets served to temper the
growth of the market to a small extent. Also, the increasing ubiquity of tablets and smart phones has led to a decline in the fortunes
of print in the home segment. With productivity services being offered through apps, a general decline in the usage of paper at
home has been noticed. There is also a possibility of a shift towards devices with lower power consumption keeping in mind the
increasing emphasis on going green and greater awareness about the power deficit situation in the country. Printer technology
is seen as a very mature and saturated technology and no radical developments are expected, save the nascent rise of 3D printing.
Global OEMs have been expanding their retail presence and have been releasing new models of laser printers, expecting a shift in
consumer preference from inkjet to laser printers. Also, the market for colour printing and MFDs has been steadily increasing at the
expense of the demand for monochrome printing machines.
107
Printer and MFDs Market: TM, TDM Forecasts (2010-2015)

800
756
700
TM: 16.1%
630
600
545
500
400
CAGR (2011 - 2015)
396
TDM (Low/Med
value add) : 24.2%
474
417
TDM (High value

add): NA
300
HVA-TDM : TM
200
100
0
0
28
2010
42
49
61
76
2011
2012
2013
2014
2011
0%
2013
0%
99
2015
0%
2015

Printer and MFDs: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
2.56
0.18
0.00
2011
2.78
0.28
0.00
2012
3.22
0.33
0.00
2013
3.71
0.42
0.00
2014
4.38
0.53
0.00
2015
5.25
0.69
0.00
Industry SWOT
The business conducted by enterprises, especially in the ITeS and BFSI sectors, calls for robust documentation which are fulfilled
satisfactorily by MFDs. The rising number of entities in the SOHO (Small Office Home Office) segment has also led to the purchase
of affordable MFDs or laser printers. Global vendors and distributors are also targeting these segments. To this effect, OEMs are
working closely with channel partners to expand their market reach and optimize their distribution strategy.
108

Component and
Assemblers
The printers
and MFDs
value chain is depicted in the figure
below.
Sub-system
Suppliers
Motherboard / PCBs
LCD displays
Memory
Network ports
Transformer
Power supplies
Motors and
drives
Drum and
roller
Downstream
Enterprises
Printers /
MFDs
Consumers
Government
Lens and
scanner
Cabinet and
casing
Printheads
Cabling and
filters

Since almost all of the products sold in the country are finished product imports, all of the hardware design activity happens at the
global headquarters of the OEMs in their home countries, mostly in Japan which has legacy capabilities in printing technology.
The Indian offices of these OEMs are engaged in software design to a small extent. The design of dot matrix printers conceivably
happens in India through indigenous players such as TVSE and WeP. These companies also possibly source locally for their assembly
operations since India possessing capabilities in the manufacturing of transformers, metal and plastic casings, cabling and PCBs.
However, the market for dot matrix printers is relatively small compared to the overall market and hence the overall value addition
contributed by this activity is small.
109
The table below captures the capability in India across the printers and MFDs value chain.
Category
Components
and Sub
systems
Local
Local IP Company Level of Local
Manufacturing Capability Names
Value Add
Product
Local Supply
Photosensitive
drum
Part of finished
product import
No
No
NA
Fusing Roller
Part of finished
product import
No
No
NA
Transformer
Imports/Local
Supply
Yes
No
Low
Lens and scanner
Part of finished
product import
No
No
NA
PCBs and power

supplies
Imports/Local
Supply
Yes
No
Low

Cabinet, casing,
and cabling
Imports/Local
Supply
Yes
No
Low

OEM
No
Yes, only
assembly of dot
matrix
No
EMS
No
No
No
Printers and
MFDs
TVSE, WeP
Remarks

Low
Nil
There are no such entities in

India
The printers and MFD market possess high entry barriers. Primary among them is that established players have entrenched market
shares (overall, the top 4 players possess cumulative market share of 90 per cent). Newcomers would either have to differentiate
themselves uniquely or contend with making lower margins and possessing enough working capital to stay in business until
they break even. Also, distribution channels of the bigger players are more or less well established and newcomers would find
it difficult to match the reach of bigger players. Also, competing with the strong brand equity of the bigger players would be
a daunting proposition. However, due to the depreciating value of the India Rupee, bigger players have been increasing prices
recently, which would not appeal to the value conscious nature of Indian consumers, in both the enterprise and home segments.
Newcomers such as Pantum have entered the A4 market with a product portfolio of laser printers aimed at the home segment and
the small business segment. Also, companies such as Ricoh and Canon that normally operate in the A3 market have entered the
A4 market too. This indicates a trend towards offering greater value to the home and SOHO segment which are demanding greater
functionality at lower prices in light of increasing independence from print.
110

The SWOT chart below captures the analysis for the printers and MFDs market.
STRENGTHS
OPPORTUNITIES
Existing customer base exhibits a sticky need for

print
Concentrating on enterprise usage of MFDs and printing

services
Established trade
relationships
customer
Awareness of 3D printing should encourage appropriate

investment in R&D
Presence of branded stores has led to widespread

brand recognition
SMBs and smaller operations in rural areas could be

penetrated better
channels
and
Relatively mature adoption of latest technology

and colour printing
SWOT
WEAKNESS
THREATS
Relatively small market size doesnt justify need for

greater investment locally
Increasing prevalence of smartphones and tablets eating

into relevance of print
Marketing and selling practices not up to speed with

consumer sentiments
Go Green initiatives in IT sector and enterprises

constrains IT spending on print
More difficult to entice new customers, who prefer

e-based output (e-tickets, etc.)
Currency volatility affects costs since market is very

import-heavy
Import-heaviness of industry-latest
introduced after global launch
Slowdown in usage of printing devices in the home

segment
products
are
Component SWOT
A printer or MFD is made up of a number of components and the value chain for the manufacturing or assembly of these
components is nearly absent in India. Almost 90 per cent of the printers and MFDs sold in the Indian market are imported in the
form of finished products. A few components such as transformers, cabling, cabinets and PCBs could be sourced locally if there
were local assembly capabilities. These components are possibly being sourced locally for the local assembly of dot matrix printers
by indigenous players like TVSE and WeP.
The top 4 components that contribute to the majority of bill of materials (BoM) are:
1. Photosensitive Drum
2. Fusing Roller
3. Transformer
4. Lens and scanner
111
General
It has been observed that companies have been entering the A4 market space offering affordable laser printing products. This
indicates that the companies are betting on these products gaining acceptance in the home segment, and possibly the SOHO
segment too. However, a trend towards m-tickets and e-tickets and other such modes of display on electronic devices might act
against the growth of the A4 market. It is quite possible that, in combination with the trend towards cloud printing, the home
segment could witness consolidation of printing needs among users in a specific area or group. This could also lead to consolidation
of functionalities at the printing node which could be satisfied by MFDs and its future version. The enterprise segment though, has
a stated and compulsory need for specialized, state-of-the-art, and reliable printing solutions. This could be satisfied by high-end
laser printers and MFDs alike depending on the enterprises needs.
IP development
Almost all of the design activity in the printers and MFD happens at the headquarters of the global OEMs, which is Japan for
the most part. The design activity that does happen in India is mostly concerned with software, not core hardware design that
contributes most of the value to the overall design of the product.
Component ecosystem
Some of the components used in the manufacturing of dot matrix printers, such as transformers, PCBs and cabling, are currently
being manufactured in India. Dot matrix printers are still being used on a large scale in both urban and rural areas by the retails
sector and by SMBs. Hence, the government could incentivize local value addition through preferential excise duties and greater
CENVAT credit for suppliersthese components possess a larger relevance in the electronics ecosystem too outside of the dot
matrix printer product ecosystem.
Considering that the Indian print market is relatively small compared to the global market, possesses no export opportunities, and
requires considerable investment to build manufacturing capabilities, it would not be a wise option to incentivize manufacturing
of printers and MFDs in India. However, dot matrix printing still holds sway in the Indian market, with indigenous players also being
present in the market. Considering the shift towards high-end laser printing and MFDs space, the government could offer these
tax credits on R&D activity in these areas. The government could also facilitate the formation of joint ventures between indigenous
players and global OEMs to take advantage of latent manufacturing capabilities; there could be export opportunities to the Middle
East, Sri Lanka and Africa due to Indias geographical location.
Current Limitation
a. Relatively small market does
not justify investment in local
manufacturing/assembly
Market / Value chain
b. No export opportunities
c. Shift towards MFDs which possess
complex design
d. Shift to e-based output (e-tickets,
etc.)
112

Considering the shift towards convergence of specialized
functionalities (MFDs), the relatively small size of the
market, paucity of export opportunities, and shift to
e-based output, it would make better sense to divert
resources towards incentivizing other electronics products.
Dot matrix printing has legacy capabilities in India, and
could still witness sustained demand from SMBs and
government sector. Hence, the local assembly of dot matrix
printers could be incentivized through offering greater than
100% CENVAT credit for local sourcing.

Router/Switches - Product and Ecosystem Analysis

SUMMARY
Entirely imported in CBU form by all suppliers

Growth
Nil
Nil
Top 4 Components
Software and OS (50%), Processor (10%), Memory (10%), Electromechanicals
Component Ecosystem
Absent
Medium demand entirely based on broadband penetration in the

country considered quite low in the world
a. Focus on upgrading PCB Assembly capabilities specifically for
routers
b. Making tax structures stable and friendlier

c. Policies should not compel Global OEMs into forced manufacturing

The growing need to support diverse networks of wired and wireless devices has kept the enterprise networking market on an
upward trend and also as an area of constant focus for IT and network managers. Additionally, increasing preference for built-in
multiple capacity integrated devices, capable of supporting 3G/4G services, load balancing, content processing capabilities, etc.,
have catapulted the demand of sophisticated router and switching equipment.
The demand for routers and switches in the country has been steadily rising over the years, barring 2012 when the telecom industry
was impacted by the global recession. The market for Routers/Switches in 2012 was 0.33 million units, which is expected to reach
0.059 million units in 2015 growing at a CAGR of 21.4 per cent. There is no domestic manufacturing competency present of the
manufacturing of routers and switches.
Router / Switches Market: TM, TDM Forecasts (2010-2015)

0.8
0.72
0.7
TM: 9.6%
0.65
TDM (overall): NA%
0.59
0.6
0.5
CAGR (2011 - 2015)
0.50
0.47
TDM (Low/Med
value add): NA%
0.47
TDM (High value

add): NA
0.4
0.3
HVA-TDM : TM
0.2
2011
0%
0.1
2013
0%
2015
0%
2010
2011
2012
2013
0
2014
2015

113
Routers/Switches: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.030
0.00
0.00
2011
0.033
0.00
0.00
2012
0.033
0.00
0.00
2013
0.044
0.00
0.00
2014
0.050
0.00
0.00
2015
0.059
0.00
0.00
Industry SWOT
The Router/Switches value chain in India consists of only the supplier and the end-user, with all the major global OEMs being
present in the Indian market. World-leader Cisco, leads the Indian market followed by Avaya, Juniper, HP, Huawei, Pointred, AlcatelLucent, ZTE, etc. All of the domestic market is served by imports from the global manufacturing bases of these OEMs.
The Router/Switches value chain is depicted in the figure below.
Component and
System Integrators
Downstream
Software and OS
Memory
EMS companies
Customers
Processor
Electromechanicals
114

Globally, the OEMs and their EMS partners operate completely across the larger and global routers/switches value chain. In this
regard, the biggest competency of the EMS partners is in the making of printed board assemblies which are then integrated
into systems for direct order fulfilment. EMS companies also carry on other value added manufacturing activities depending on
the scale of engagement with their OEM partners. However, this is not the case in India despite the presence of global OEMs
and EMS companies. Since the manufacturing of routers and switches is relatively more complex, these companies find it more
expedient to utilize the capacity of their manufacturing bases in China and East Asia and import into the Indian market. Also, since
the manufacturing of hardware has become increasingly commoditized, companies are beginning to divert the majority of their
investment towards R&D and innovation. Hence, there havent been any concrete plans of investment in the Indian manufacturing
ecosystem in this regard.
The lack of a component ecosystem has been the biggest pain factor inhibiting the growth of the domestic manufacturing market.
The table below captures the capability in India across the Router/Switches value chain.
Category
Components
and Sub
systems
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Software
and OS
Imports
No
No
Processor
Imports
No
No
Memory
Imports
No
Company
Names
Level of
Local Value
Add
NA
NA
No
Toshiba,
Samsung,
Micron, Hynix
NA
NA
NA
Electromechanicals
Router/
Switches
Remarks
OEM
No
No
No
Cisco, Avaya,
HP, Juniper,
Huawei,
Pointred, etc.
EMS
No
NA
NA
NA
The highly complex nature of Router/

Switches has restricted its development
to the global headquarters of OEMs
and they are not keen to change this
equation anytime soon in future
OEMs might manufacture through EMS

companies in future
However, the abundantly available indigenous skilled manpower has seen establishment of captive R&D centres in the country by
global suppliers like Cisco, Huawei, NSN, etc., who employ thousands of engineers and post-graduates in different fields of R&D. For
instance, The Cisco ASR 901 Router developed by Ciscos engineering team in India received numerous industry awards. However,
the IP of product was not registered in the country, a practise seen with all other players, since it is easier to file patents for products
in the same series in one location where the preceding patents were filed, which invariably is their global headquarters. The SWOT
chart here captures the analysis for Router/Switches market.
STRENGTHS
OPPORTUNITIES
Indias edge in skill set competencies attracting global

companies to set up their captive R&D centres in the
country
To become a global manufacturing cum exports hub

through existing EMS competencies already present
Companies beginning to divert investment towards
R&Dopportunity for Indian design ecosystem
Domestic demand for enterprise routers is on the rise

Rise in cloud services adoption driving sales of routers in
the country
Launch of 4G/LTE services to demand sophisticated

routers
SWOT
WEAKNESS
THREATS
Marginal demand and non-availability of raw materials/

components encourage imports
Market proximity to South East Asian manufacturing

ecosystem constrains manufacturing potential
Underdeveloped electronics manufacturing ecosystem

unable to support complex manufacturing process of
routers
Multiple layers of bureaucracy and transaction delays

discourage business
Limited indigenous IP generation
Dependent on imports for two most important

components: processors and memory
115
Component SWOT
The top 4 components that contribute to majority of the Router/Switch bill of materials (BoM) are:
1. Software and Operating System
2. Processor
3. Memory
4. Electro Mechanicals
The Indian electronics manufacturing ecosystem does not presently possess competencies in the manufacturing of the above
components. Even though the country possesses excellent software development capabilities, the source code and IP created are
registered in the global offices of the suppliers, thus creating no real value addition in the country. In a router/switch, the software
and OS account for about 50 per cent of the total BoM, and the system installation and software uploading is strictly done by
suppliers personnel at the premises of the customers.
General:
Efforts are needed to boost the demand of routers and switches in the country which will ensure domestic manufacturing of the
same by both global as well as domestic telecom players as opposed to them being imported in the country as is the present
scenario. Also, the Government can formulate supportive policies and incentives in the areas of transfer pricing and royalty
withholding to make them more conducive and also towards bringing down the inbound freight charges to offset these policy
handicaps to encourage domestic manufacturing in India.
IP development:
A majority of the global suppliers of routers conduct their design and development activities associated with routers in their Indian
design centres. However, the patents for the same are filed in their global headquarters for it holds large financial value from the
scope of licensing. India can make an effort to make patent laws more friendly and rewarding by giving R&D sops, reducing patent
fees, etc.
Lack of availability of local raw materials and the concern for the quality of the available raw materials has been a major reason
for the import of this product in the country. The manufacturing of routers is a highly complex process and requires 24-60 layered
PCB assemblies, which is currently not within the competencies of the Indian electronics manufacturing ecosystem. Indias PCB
manufacturing capabilities are very nascent. To encourage domestic manufacturing of such complex processes, the government
should either offer preferential excise duty rates for such complex processes or alternatively offer greater rates of CENVAT to
encourage investment. Also, the government could prioritize, or call for, investment in such PCB manufacturing under the MSIPS
scheme and offer associated benefits to those investors.
The product complexity limits its domestic manufacturing by both the local and global players. However, investments can be made
under the MSIPS or EMC initiatives to gain benefits.
Tax Structure
Value Addition
Policy Initiatives
116
Current Limitation
a. Inbound freight charges for components at

4-6% of BoM
a. Incentives needed to offset this cost in the form

of direct reimbursement
a. Lack of feeding industry

a. Unpredictable tax regime

b. Stability issues limit business confidence
a. Manufacturing of advanced multi layered PCBs

(greater than 24 layers) should be encouraged
through the MSIPS policy and offering
preferential excise duties, or offering greater
rates of CENVAT
a. Transfer pricing and Royalty withholding norms
needs relook
b. Robust implementation of policy benefits
needed to build investor confidence

Car Radio - Product and Ecosystem Analysis

SUMMARY
Product Local Manufacturing/Assembly/
Design
90% Entirely imported in CBU form; 10% assembled

and Growth
0.72 million (2012); CAGR (2012-15) 44.0%
Low Mostly imported in CBU form, a few units assembled
Top 4 Components
ICs, Electro-mechanicals, PCB and Power
Component Ecosystem
Entirely missing

Promotion; Why
High; Consumers spending on car infotainment and navigation

system on rise
a. Component ecosystem needs to be built
b. Branded companies will not prefer domestic manufacturing for Car Radio
as it is a low volume product
c. IP design creation and generation should gain attention from domestic

manufacturers

As the concept of a the connected car gains momentum in the country, car manufacturers are ensuring that the customers
benefit from in-vehicle technologies and have constant connectivity. As a result, the infotainment market comprising of in-dash
music players has seen a deluge of features being introduced very frequently by the car-radio manufacturers. The total market for
car radios in 2012 was 4.03 million units, which is expected to reach 6.15 million units in 2015 growing at a CAGR of 15.2 per cent.
Of the total market, the domestic manufacturing of car radios has been only 0.72 million units in 2012. It is expected to reach 2.15
million units by 2015, growing at a CAGR of 43.8 per cent.
Car Radio Market: TM, TDM Forecasts (2010-2015)

0.60
0.6
CAGR (2011 - 2015)
0.55
TM: 10.9%
0.50
0.5
0.46
0.44
0.42
0.4
TDM (Low/Med
value add) : 68.4%
0.3
TDM (High value

add): NA
0.2
0
0.1
0
0.042
0.044
2010
2011
0
0.125
0.083
2012
2013
HVA-TDM : TM
0.165
2014
0.21
2011
0%
2013
0%
2015
0%
2015

117
Car Radio: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
3.34
3.33
0.00
2011
3.63
0.36
0.00
2012
4.03
0.72
0.00
2013
4.64
1.16
0.00
2014
5.33
1.60
0.00
2015
6.15
2.15
0.00
Industry SWOT
The car radio industry presently caters to the domestic demand mostly through imports. Thus, leading OEMs such as Sony,
Panasonic, Pioneer, Kenwood, etc., are involved only in marketing activities in the country. The value chain consists of importers and
domestic manufacturers. Domestic manufacturers, such as Nippon, Audiotronix, and Visteon, import raw materials and execute
low level assembly of standard car radios. However, they import high-end systems in CBU form from countries like China, Thailand
and Vietnam, much like the importers. Several after-market non-branded car radios are imported from China and sold thru retail
market, which constitutes only 10-15% of the total market. Most of the car owners prefer branded car radios, and Japanese brands
rule the after-market radios segment. The growing trend of factory fitted car radios is expected to make the factory fitted car radio
market share equal tothat of after-market (dealer fitment) radios by 2016.
The Car Radio value chain is depicted in the figure below.
Component and
System Integrators
Importers
Downstream
Passives
OEMS
Semiconductors
Car Radio
PCB
Aftermarket
Electromechanicals
118

Although some of the leading companies like Sony and Pioneer had decided to start manufacturing car radios in India, they
shelved their plans since car radios are not considered fast moving items; car sales also has not kept up recently with the rapid pace
that it set in the past decade. However, the recent policy initiatives such as the National Manufacturing Policy, the National Policy
on Electronics, and the MSIPS policy could encourage these companies into investing in local manufacturing facilities. Domestic
manufacturers lack design and IP capabilities since the IP is held by the OEMs and only licenced to their manufacturing partners.
The SWOT chart below captures the analysis for the Car Radio market.
STRENGTHS
OPPORTUNITIES
Global automobile majors have set up their

manufacturing plant in India
Annual vehicle sales projected to be 4 million units by

2015
Country emerging as an export hub
PMAC and EMC might attract investments
SWOT
WEAKNESS
THREATS
Design and IP capability missing
Domestic automotive industry on a downslide
Component ecosystem missing
Taxes and Duties for the key growth sub-segments

Utility vehicles and Diesel driven cars have been
increased
Quality of locally available raw materials do not meet

OEMs expectations
Rising fuel prices deterring consumer to buy
automobiles
Component SWOT
The top 4 components that contribute to majority of the car radio bill of materials (BoM) are:
1. ICs
2. Electromechanical components
3. PCB
4. Power
The component ecosystem for car radios has been reliant on imports. Most of these components are imported in CBU form. Even
for the amount of assembly activity that does happen in the country, the components other than ICs are imported from China or
Taiwan due to their cost competitiveness. The Indian electronics ecosystem does possess competencies in the manufacturing of
PCBs though; this could be taken advantage of to further promote assembly activity in the country. With enough impetus in this
regard, the ecosystem could potentially gain competencies in activities higher up in the value chain.
General
Although considered a very niche product market, the growing demand of automobiles in Tier-2 and Tier-3 cities along with the
second hand market has sustained the demand of car radios. The use of basic entertainment systems in cars has prompted many
OEMs to start assembling them locally. Also, the excise duty is at par with other products and there is zero import duty on import of
electronic components. Offering preferential excise duties and imposing BCD on the components that have indigenous presence
could promote domestic manufacturing activity.
IP development
India has capability in design services, thus generating indigenous design activity and holding IP in the country should be the
prime area of focus. Offering car radios with features based on the local needs, such as regional language interfaces, local on-board
content, etc., could be a game changer
119
Component ecosystem
Of the top four components, India possesses a good chance of elevating itself as a global supplier of PCBs. The country already is
manufacturing and exporting almost 20 to30 per cent of the total production of PCBs across the world. However, the volumes and
the subsequent price points in comparison with China is a major hindrance as is the ability of Indian PCB makers to handle complex
products that require more than 24 layers. Government support in the form of lower excise duties and rebates for up-gradation of
capital equipment will make a positive impact.
Carrying out measures such as offering preferential excise duties, imposing BCD on components with indigenous capabilities,
and creating local design and content, could entrench the manufacturing of car radios in the medium term. With greater design
capability, the country could even be a forerunner in the design and manufacturing of futuristic on-board entertainment platforms
in cars that succeed car radios.
Current Limitation
Value Addition
a. Feeling industry missing

Component Ecosystem
b. Quality of available raw materials do not

meet OEMs expectations

a. Semiconductor ecosystem to be made a reality
b. The component ecosystem will draw attention
to local IP generation and creation
a. All raw materials entirely imported
b. Quality to meet global standards
Policy Initiatives
120

CFL - Product and Ecosystem Analysis

SUMMARY
Local Assembly, Design and manufacturing
562.5 million (2012); CAGR (20122015) 24.6%
High; Only electronics imported
Top 4 Components
Transformer, Transistor, Capacitors, Glass tube
Component Ecosystem
Most of them manufactured locally, only electronics imported

Opportunity
a. Develop a proper mechanism for mercury disposal

b. Top 4 Components do not have much potential for indigenization
(global capacities, lack of local infrastructure etc)
c. Frame uniform excise duty and incentivize sales tax
d. Block component imports and aid local manufacturing Single
window clearance for manufacturers to set up foundry
e. Encourage certifications for component manufacturing

The CFL market in India was worth about 562 million units in the year 2012 and is expected to reach a size of 1090 million units by
2015 with a CAGR of 25 per cent. India has about 200 crore light points, of which about 60 per cent is still ICL, about 24 per cent
CFL, and the remaining 16 per cent being LED and other lamp types. Though newer technologies like LED are eating into CFL sales,
the trend is not expected to change until the prices of LED lamps are brought down significantly. Presently only a small quantity
of high wattage CFLs are imported from China. Most of the local demand is met through local manufacturing. India is the second
largest consumer of CFLs and has also the second largest capacity in the world.
Flat Panel Display TV Market: TM, TDM Forecasts (2010-2015)

0.89
0.9
0.8
0.76
0.7
0.64
0.6
0.53
0.5
0.4
0.39 0.37
0.45 0.43
0.84
CAGR (2011 - 2015)

TM: 18.6%
0.72

TDM (Low/Med
value add) : NA
0.60
0.50
TDM (High value

add): 18.2%
0.3
HVA-TDM : TM
0.2
2011
96%
2013
94%
2015
94%
0.1
0
2010
2011
2012
2013
2014
2015

121
CFL: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
375.00
354.17
0.00
2011
450.00
425.00
0.00
2012
562.50
531.25
0.00
2013
708.75
669.38
0.00
2014
885.94
836.72
0.00
2015
1089.70
1029.16
0.00
Industry SWOT
The CFL value chain comprises various component and subsystem suppliers, assemblers and the downstream retailers and
consumers. Three types of players exist in Indian market: manufacturer-cum-importers, importer-cum-assemblers and importercum-traders. The first category comprises of big brands that belong to well-known manufacturers of lighting products. These
suppliers import both ready-to-use CFLs and raw material such as cut glass tubes, tri-band phosphor and electronic components
in the ballast. Most of these companies have their own production facilities where about 90 per cent of the manufacturing process
is carried out. The second category is a mix of well-known brands and tier 2 players who import parts of CFL and assemble locally.
While the first and the second category are ISI certified, the third category represents the unorganized traders who import and sell
non-certified products.
Component and
Assemblers
Downstream
Glass tube
Filament
Burner
Residential
Phosphor coating
PCB
CFL - OEM
Capacitor
Commercial
Ballast
Transformer
CFL - EMS
Government
Transistor
Industrial
Burner
Capsule
Base
122

Contract manufacturing plays a huge role in this industry. However, the real challenge in the ecosystem lies in terms of mercury
disposal and the import of tri-band phosphor. Unfortunately, there is no mandate or industry-wide standard for regulating mercury
in CFLs.
The table below captures the capability in India across the CFL value chain.
Category
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Remarks
Ballast
Yes
Yes
No
Associated
Lighting, Future
electronics
High
Ballast is done locally; however the

electronics kits are imported
Burner
Yes
Yes
No
Total
Imports
No
No
Many Chinese
players
NA
Base
Yes
Yes
No
Many local
players
High
PCB
Yes
Yes
No
Many local
players
High
OEM
Yes
Only ISI
Yes, High Value
certifications,
Add Assembly
No IP
Philips, Bajaj,
Surya
High
EMS
Yes
Only ISI
Yes, High Value
certifications,
Add Assembly
No IP
Many tier 2, 3
companies
High
Components Phosphor
Coating
and Sub
systems
CFL
High
China holds 90% phosphor reserves
whereas India holds 1-2% of the same
CFL requires ISI certification; there is no

local IP
The country is largely dependent on China and other countries for the import of tri-band phosphor, an important element for
manufacturing of CFLs. Having captured almost all of worlds demand, China has now started restricting mining of rare earth
and tri-band phosphor. There has been an increase in the price of tri-band phosphor to more than US$ 420 per kg, an increase of
nearly US$ 40,,besides imposing an export duty of US$ 50 per kg. Priceshave been rising on a very frequent basis and India, being a
major importer,has been severely impacted. This has forced CFL manufacturers in India to increase prices. The CFL industry in India
contributes to high value added manufacturing though. BIS standardization, ISI certifications and anti-dumping duty have made
the industry very robust. Except for the electronic circuits, phosphor and filament imports, all of the other components are locally
developed and assembled either by OEMs or through EMS.
The SWOT chart below captures the analysis for the CFL market.
STRENGTHS
OPPORTUNITIES
Growing replacement demand from ICL to CFL still
prevalent in the rural areas
Europe countries
Complete customized product design can be
outsourced
High demand driving growth; replacement demand

from ICL is still prevalent in rural areas
EMS services available locally in plenty
Entire product design is done locally, caters to ballast
manufacturing
High design and skillset availability
SWOT
WEAKNESS
THREATS

tube and capsule
Mercury disposal - Lack of congruent policies
Existing tax structure pushing up the price of the

product
Illegal CFL products in the market with fake certification
ISI certification process is cumbersome
Expected phase out owing to mercury toxicity and

energy efficiency
Evident replacement market - LED lighting
Components like transistors and capacitors are cheaper
when imported owing to huge volumes
123
Component SWOT
The component ecosystem for CFL is quite simple with the components common across all wattage type lamps. The top 4
components that contribute to majority of the CFL bill of materials (BoM) are:
1. Capacitor
2.
Glass tube
3. Transformer
4. Transistor
India has design and skillset availability to design the electronic components but does not have the infrastructure to develop the
same. Although raw materials like copper are present, the country is dependent on enamel imports for manufacturing locally.
Volume and cost issuesare challenges that the country faces. The volume demand is so high that it is difficult for local manufacturers
to cater to such volumes, and hence turn to imports which also works out to be cheaper. In countries like China, Taiwan etc.,,
component manufacturing takes place on a large scale and hence orders are also fulfilled within a very short turnaround time.
General recommendations
It is noted that the VAT for CFL manufacturing varies from state to state. Although some of the states have brought down the VAT
to zero per cent, other states as wellneed to bring it down to zero per cent to bring about a uniform reduced lamp cost.
IP development
Although there is no IP development, presence of ISI certifications ensures standardised manufacturing of CFLs in the country.
The greatest challenge faced by manufacturers in India is the severe documentation process involved in the ISI certification for the
bulbs. Such processes can be made available through the internet to ensure easy access and adoption.
Component ecosystem
In order to address the challenges of using tri-band phosphor, immediate actions need to be taken by the government both at
the central and state levels. By approaching bodies like WTO or Energy conservation bodies, the issue can be taken up with China
in protecting the interest of CFL manufacturers. The current 2 to 3 percent reserves of tri-band phosphor that India has should be
tapped and explored for local manufacturing.
The most urgent need is to bring about a regulation that will ensure safe disposal and recycling of CFLs. Recycling facilities should
be set up by manufacturers and the entire recycling mechanism should be funded through taxes levied on the manufacturer. The
government could incentivize the setting up of recycling facilities through a capital subsidy for the manufacturers for an initial
period of 3 years. It would be ideal for state governments to come forward in offering land at subsidized rates for setting up of the
same.
The current CFLs are designed for a life of 5000 hours. A regulation on increasing the life of CFLs to about 15000 hours will help
CFLs last for about 3 to 4 years,and also cut down the issue of mercury recycling issue.. This could be enabled by electronic circuit
improvements.
Current Limitation
124
Tax
Structure
a. a. Zero duty for component imports; makes it

easier to import and assemble locally
b. b. Manufacturing concentrated in HP and
Haridwar No excise duty
c. Difference in VAT from state to state
d. Incentives on sales tax and excise duty structure

e. Bring down VAT to zero per cent
Value
Addition
a. No IP for CFLs, only ISI certification
b. Encourage certifications for component

manufacturing
Component
Ecosystem
a. Highly reliable on certain component

imports
b. Lack of availability of certain raw materials
c. Block component imports and incentivise local

manufacturing
d. Setup semiconductor fabs
Policy
Initiatives
a. Lack of an efficient policy for mercury

disposal
b. BIS - Cumbersome ISI certification process
c. Evolve a policy for safe management of Mercury

d. Introduce a lamp recycling mechanism, incentivise the
policy through capital subsidy. Recycling facilities etc.
e. BIS To develop regulations for control of mercury
level and methodology for mercury measurement

Energy Meters - Product and Ecosystem Analysis

SUMMARY
Design

and Growth
25.41 million (2012); CAGR (20122015) 8.9%
High mechanical, electronic hardware design, assembly
Top 4 Components
System on chip, Current Transformer, LCD display and backlight,

Super capacitor
Component Ecosystem

Promotion; Why

a. Smoothening of Tendering system
b. Huge potential for local manufacturing of SoC and LCD
c. Incentivize electronic component manufacturing
d. Provide Infrastructure - land, water and energy facilities for electronic
componenet manufacturing
e. Incentives to encourage exports

Extensive power capacity augmentation and improvement of electrical grid networks are imperative to support the growth of
energy meter market in India.
Several sectors in India, especially industrial and infrastructural that include commercial and residential corridors, are presently
witnessing substantial rise in investments. The electricity meters market in India is expected to grow at a compound annual growth
rate (CAGR) of 5.3 per cent by 2015. All the energy meters in the Indian market are manufactured locally. Import and export volumes
are also negligible, although few companies do small level exports and the industry caters to the unique end-user requirements of
distribution companies. The Restructured Accelerated Power Development and Reform Program (R-APDRP) implemented by the
government endeavours to implement efficient energy metering and demonstrate sustained loss reduction. Adoption of prepaid
and smart meters will further support the growth of the market in the medium term.
Energy Meters Market: TM, TDM Forecasts (2010-2015)

0.35 0.35
0.35
0.30
0.28 0.28
0.29 0.29
0.30 0.30
0.31 0.31
0.33 0.33
CAGR (2011 - 2015)

TM: 4.8%
TDM (overall): 5.3%
0.25
TDM (Low/Med
value add) : NA
0.20
TDM (High value

add): 4.8%
0.15
HVA-TDM : TM
0.10
0.05
2011
100%
2013
100%
2015
100%
0
2010
2011
2012
2013
2014
2015

125
Energy Meters: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
22.41
22.41
0.7
2011
23.75
23.75
0.72
2012
25.41
25.41
0.75
2013
27.19
27.19
0.78
2014
29.87
29.87
0.82
2015
32.85
32.85
0.87
Industry SWOT
The energy meters value chain comprises various component and subsystem suppliers, assemblers and the downstream consumers.
The outstanding fact is that almost the entire local demand is met through local manufacturing with some companies doing a
considerable level of exports to countries like UK and Australia. The Indian market is flooded with a number of players who are into
product manufacturing with one foreign player being one of the top 5 players and the remaining being local manufacturers. All
the top competitors do high local value addition with only the electronics parts being imported.
The energy meters value chain is depicted in the figure below.
Component and
Assemblers
Downstream
Transformer
Power supply
Copper wires
Memory
Microprocessor
System on chip
Energy Meters OEM
Utilities
Energy Meters EMS
Government
LCD driver
Microcontroller
Super capacitor
Sheet metal
Housing /
Packaging
Plastic
126

All the players carry out product design locally and most of the top competitors also have IP protection for the same. Contract
manufacturing plays a huge role in terms of component placement on bare boards which are utilized by some of the top OEMs.
Other than the electronic parts, all the other raw materials are sourced locally and developed indigenously. All of the mechanical,
electronic hardware, firmware and calibration design and testing areperformed indigenously.
The table below captures the capability in India across the Energy Meters value chain.
Local IP
Capability
Company Names
No
No
Texas Instruments,
STM, Freescale
NA
Only Sales
Offices; Total
Imports
No
No
Texas Instruments,
STM, Freescale
NA
Bare boards
Locally
developed
Yes
Yes
Many local players
High
Passive
components
Locally done
Yes
Yes
Many local players
High
OEM
Yes
Yes, High value

add
Yes
Securemeters,
Landis+gyr, L&T
High
EMS
Yes
Yes, High value

add
Yes
Flextronics,
Foxconn, Jabil
High
Category
Components
and Sub
systems
Product
Local Supply
System on
chip
Only Sales
Offices; Total
Imports
Active
components
Energy Meters
Local
Manufacturing
Level of Local
Value Add
Remarks
realization of IP, No
semiconductor fabs
realization of IP, No
semiconductor fabs
In the Energy meters value chain, the main challenge is that the country is highly dependent on advanced electronics imports for
which we do not have a capability in the country. Although chip design for energy meters is carried out by some of the leading
semiconductor players in India, the country doesnt have the manufacturing capability of the same. India, with an expertise in this
segment for two decades, is one of the very few countries that have developed anti-tamper metering devices. With the design
capability of the engineers and a robust technology, Indian meters are looked upon as best in class devices in the global industry.
The presence of numerous companies that take reference designs from semiconductor suppliers and build products on them
without any R&D efforts are a threat to the core suppliers. With no IP capability, they become a huge hindrance in the tendering
system where companies with real IP and design capability are forfeited due to the low cost meters offered by these companies.
The SWOT chart below captures the analysis for the energy meter market.
STRENGTHS
OPPORTUNITIES
Two decades of expertise in handling energy meters
Government policies such as R-APDRP propelling the

tariff meters market
High consumption demand, Well developed EMS

industry, Complete product design capability and IP
realization
Accelerated industrialization, focus on energy

conservation driving demand for panel meters
Anti tamper technology is unique to the Indian meters

Europe countries
Manufactures the best meters that stand against harsh

electrical environments with accuracy in measurement
Smart meters, the next replacing product in this market
SWOT
WEAKNESS
THREATS
Reliance on imports for some of the critical components

System on chip, LCD display, Memory
Mushrooming companies that use public reference

designs to offer cheaper products
The Indian bureaucracy does not help in component

manufacturing
Lack of local IP for the semiconductor companies
Lack of incentives for electronic component

manufacturing
Growing shift towards Smart meters, an expected phase

out of electronic meters by 2020, although this creates
other new opportunities
Complex tendering system at the Utilities department
127
Component SWOT
The component ecosystem for energy meters is quite simple with a certain set of components that are present across all types of
Energy meters. The top 4 components that contribute to majority of the Energy meters bill of materials (BoM) irrespective of the
type or price are:
1.
System on chip
2.
Current transformer
3.
LCD display and backlight
4.
Super capacitor
It is to be noted that all the top 4 components constitute about 60 per cent of the product value. Semiconductor companies like
Texas Instruments and Freescale do chip design at their design houses in Bangalore and Noida. Copper for transformers is available,
but we are dependent on countries like Germany for the capsule, giving rise to a volume and cost issues and making it easier to
import the same. An important factor to be noted is the turnaround time. Although there are a few good quality local suppliers of
capacitors and resistors, manufacturers predominantly import to benefit from the faster turn-around time when dealing with high
volume suppliers from overseas.
General
In terms of tendering process, tenders must be evaluated both on technical and financial aspects in order to produce standardized,
robust meters. In due course, such processes can be made internet friendly to cut down high documentation processes which is
highly challenging to the manufacturers. A regional level single-point testing laboratory can conduct all tests, which can save time
and deliver authenticity. Also, the imported meters can be tested to check if they meet Indian standards thereby enhancing safety
and environmental protection.
Development of standards for communication and band allocation is one of the top priorities in this market. Involvement of
regulatory bodies and WPC for band allocation and creating standards (like the ones adopted in Europe, Korea, Japan) will help
strengthen the product ecosystem at a large scale.
Component Ecosystem
With the evolution of smart meters, itis the most opportune time for Government to bring about standards for manufacturing of
smart meters, create a R&D fund for innovations in smart meters and also create opportunities for manufacturing of components
like communication module, transceiver etc., which are key to the smart meters.
IP development
The Indian energy meters market is competitive enough with design strengths at a product and component level especially in
the electromechanical parts. With an expected shift towards smart meters, preparing for the future by investing in R&,especially in
development of relays by leveraging R&D tax credits, will lead to the establishment of the entire product ecosystem.
Product development
Given our strengths in high value add energy meter manufacturing, product modifications suiting international requirement can
be effected to drive exports in huge volumes. Incentivizing export duty can boost exports as Indian meters are one of the most cost
competitive having anti-tampering features incorporated.
Current Limitation
Component
Ecosystem
b. Demand Volumes
c. Price factor
Policy
Initiatives
128
a. Lack of policies for testing

laboratory and imported meters
b. Complex tendering system

a. Incentivize and Leverage local sourcing of capacitors and
resistors
b. Increase R&D efforts to reduce price further and gain
technological competence
a. Policy initiatives to set up single point testing labs and also
testing of imported meters to bring about standardization
b. Tendering system to be evaluated on a technical basis; in the
long run to make it available on the Internet
c. Concession on export duty to encourage exports leveraging
the low cost of Indian energy meters

Digital Instrument Clusters (DICs) Product and Ecosystem Analysis

SUMMARY
Assembly/Design
2W Design, testing, manufacturing all done in India

4W Only 28% imported for high end cars
Volumes and Growth
2W: 8.6 million (2012); CAGR (2012-15) 13.6%

4W: 2.64 million (2012); CAGR (2012-15) 15.0%
High Local Sourcing, Manufacturing, Design IP held in India
Top 4 Components
Stepper motor (20%), PCB (15%), MCU (10%), LCD (7%)
Component Ecosystem
90% of Electronic components imported

Promotion; Why
High
a. Domestic manufacturing to be promoted using preferential excise duty rates or

greater rates of CENVAT
b. Using MSIPS and EMC, setting up electronics manufacturing clusters for
automotive applications should be encouraged and subsidized.

Affordable two-wheelers and cars have become increasingly popular in emerging markets such as China, India and Brazil, and
further growth is projected. This growth is directly proportional to the growth of ICs, especially digital ICs in the 4W segment due
to their functionality, reliability and accuracy.
For 2011, the analog to digital ratio of IC stood at 50:50; however, the transition to digital IC is projected to be well pronounced
over the forecast period. This trend promises a positive impact on consumption of electronics. The growth of the digital IC market
follows the growth of the two-wheeler market, backed by an expected increase in growth of local manufacturing capabilities.
The market for 2W and 4W Digital ICs in 2012 was 8.6 million units and 3.7 million units respectively. 2W ICs are expected to grow
at a CAGR of 13.6 per cent from 2012-15 to reach 12.6 million units in 2015 and the 4W ICs is expected to reach 5.5 million units in
2015. Digital 4W IC market is expected to grow as a result of more foreign players entering the Indian market.
129
Instrument Clusters Market (2W Digital): TM, TDM Forecasts (2010-2015)

0.20
0.18 0.18
0.18
0.16
0.15 0.15
0.19 0.19
CAGR (2011 - 2015)

TM: 12.2%
0.16 0.16

TDM (Low/Med
value add) : 0
0.14
0.12
0.12 0.12
0.12 0.12
TDM (High value

add): 12.2%
0.10
0.08
HVA-TDM : TM
0.06
0.04
0.02
2011
100%
2013
100%
2015
100%
0
2010
2011
2012
2013
2014
2015

Instrument Clusters Market (4W Digital): TM, TDM Forecasts (2010-2015)

0.16
TM: 6.2%
0.13
TDM (overall): 9.3%
0.12
0.12
0.10
CAGR (2011 - 2015)
0.14
0.14
0.11
0.11
0.10 0.10
0.10
0.09
0.08
0.08
0.10
TDM (Low/Med
value add) : 0
TDM (High value
add): 9.3%
0.07
0.06
HVA-TDM : TM
0.04
2011
100%
0.02
2013
100%
2015
100%
0
2010
2011
2012
2013
2014
2015

130

Instrument Clusters (2W Digital): TM, TDM Volumes Forecasts
Product
TM Volumes
(Million units)

(Million units)
2010
6.33
6.33
0.00
2011
6.54
6.54
0.00
2012
8.60
8.60
0.00
2013
9.70
9.70
0.00
2014
11.20
11.20
0.00
2015
12.60
12.60
0.00
Instrument Clusters (4W Digital): TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
3.04
2.89
0.00
2011
3.30
2.34
0.00
2012
3.66
2.64
0.00
2013
4.14
3.04
0.00
2014
4.76
3.50
0.00
2015
5.47
4.02
0.00
131
Industry SWOT
Leading manufacturers of ICs in India are Pricol, Visteon, Minda, Continental and Stoneridge. While both analog and digital IC
for 2W are entirely manufactured in India, about 35 per cent of 4W digital ICs that are mostly used in high-end carsare imported.
Pricol & Visteon are the dominant players in the instrument clusters market in India. Pricol, with seven manufacturing plants across
the country, also has its own design and testing facilities. Denso has recently acquired a 51 per cent stake in Pricol Components
to manufacture ICs in India at Pricols two plants, in Coimbatore and Manesar. Visteon also has three design centres and four
manufacturing facilities in the country.
The digital ICs value chain is depicted in the figure below.
Component and
System Integrators
Downstream
Digital ICs
OEMs
MCU
Stepper Motor
PCB
LCD
The table below captures the capability in India across the digital instrument clusters value chain.
Category
Components
and Sub
systems
Digital ICs
132
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Stepper
Motor
Import
No
No
Sonce Boz,
VID, Switec
NA
NA
MCU
Import
No
No
Fujitsu,
Freescale,
Renesas
LCD
Import
No
No
Chinese
companies
NA
PCB
Local
supply
Yes
Yes
Many small
companies
High
OEM
Yes
Yes- High
Value Add
Assembly
Yes
INEL,
Varroc
High
EMS
No
NA
NA
NA
NA
Remarks
Importing has proven

to be a cost effective
option as well; apart
form inadequate local
capability
None

The SWOT chart below captures the analysis for the Digital Instrument Clusters market.
STRENGTHS
OPPORTUNITIES
Has a well developed ecosystem
Investment opportunities recent M&A activities

Companies have in-house design, testing and

manufacturing facilities
Increasing semiconductor content in vehicles to drive

digital IC market
Demand for Digital ICs growing
SWOT
WEAKNESS
THREATS
Currency depreciation affecting vehicle market, that

could in turn impact IC market in the short term
Underdeveloped electronics manufacturing ecosystem

Limited indigenous IP generation
Component SWOT
The top 4 components that contribute to majority of the digital ICs bill of materials (BoM) are:
Stepper motor
PCB
Microcontroller
LCD display
Except for PCBsthere are indigenous players that manufacture PCBsthe other components are imported since there are no
indigenous capabilities present in the Indian electronics ecosystem for the manufacturing of these components. Microcontrollers
are sourced from companies such as Freescale and Fujitsu while LCD displays are easily sourced from a lot of Chinese companies
that manufacture small LCD displays. Stepper motors are sourced from overseas from companies such as VID and Sonceboz.
133
General:
This is a mature product market which only relies on less than 30% import of digital ICs for high end cars, and has seen exceptional
growth all through these years. With constant innovation, technology change and aesthetics, the market holds great scope for
exports and as global automotive hub. The industry can gain if provided with export-friendly policies and support structure from
the Government.
IP development:
The enormous availability of design and software skills in the country can be leveraged as the IP for instrument clusters is not held
locally in India; global OEMs possess design, testing and manufacturing facilities in the country though. Government can promote
the development of IP locally by setting up an R&D corpus and promoting tax exemption in R&D activities for these companies.
The country is entirely reliant on import of the most critical parts used in manufacturing of digital ICs. The Indian electronics
ecosystem already possesses a fair amount of competency with regard to the manufacturing of PCBs and smaller sized LCD
displays. The manufacturing of these components could be further incentivized through preferential excise duties or offering
greater rates of CENVAT credit.
However, the other important components such as microcontrollers and stepper motors are imported. With the setting up of
semiconductor fabs and the existing semiconductor design competencies in India, the manufacturing of microcontrollers could
present a justifiable business case for willing investors.
The MSIPS and EMC policies could be taken advantage of to set up an automotive electronics manufacturing cluster near the
Bangalore-Chennai area; Bangalore possesses the desired design expertise while a lot of automotive manufacturing happens in
and around the Chennai region.
Current Limitation

a. Manufacturing of PCB and LCD displays to be incentivized
using preferential excise rates or greater rates of CENVAT
credit
Market/ Value
chain
Component market is very importheavy; all major components being

imported
b. Fab policy could foster manufacturing of microcontrollers,

due to existing design competencies and automotive
manufacturing competencies.
c. Using MSIPS and EMC, automotive electronics manufacturing
clusters could be setup in the south, near the BangaloreChennai region.
134

Smart cards - Product and Ecosystem Analysis

SUMMARY
Design

and Growth
Nil
High- Local souring, local assembly, local manufacturing
Top 4 Components
Chipset, Plastic body, Software, Printed ink antenna
Component Ecosystem

Promotion; Why
High; Huge Local Market; High Growth Potential;

Export Opportunity
a. Top 2 Components do not have much potential for indigenization (global
capacities, lack of local infrastructure, IP etc)
b. Incentives to encourage exports

c. Encourage passive components manufacturing locally to encourage
assembly level activity

Government ID programs, social welfare schemes and telecom SIM applications are the prime influencers of demand for smart
cards. Smart cards technology, with its security and versatility, is being increasingly adopted for social and commercial applications
in telecom, transport, driving license (DL) & registration certificate (RC), access control and Government projects. The annual
shipment of smart cards in 2012 was estimated at 670 million units. Dominated by the telecom market, the future of the Indian
smart card market is expected to be driven by the segments of government, banking & loyalty programs and transportation.
Contact smart cards currently dominate the market, but going forward a proclivity for contactless cardsis expected. The equation
which stands at 75 to 80 per cent in favour of contact cards currently is expected to drop to equal proportions by 2015. The
government is driving the adoption of smart cards by planning smart chips in in ration cards, UID, NREGA, RSBY etc., thus creating
a huge opportunity for the local market.
135
Smart Cards Market: TM, TDM Forecasts (2010-2015)

0.6
0.57
0.52
TM: 25.4%
0.5
0.44
TDM (Low/Med
value add) : NA
0.4
0.1
TDM (High value

add): 44.7%
0.31
0.3
0.2
0.27
0.23
0.21
0.2
0.13
0.1
HVA-TDM : TM
0.16
0.4
0
CAGR (2011 - 2015)
0
2010
2011
2012
0
2013
2011
62%
2013
70%
2015
100%
2014
2015

Smart cards: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
550
300
0.00
2011
600
375
0.00
2012
670
450
0.00
2013
620
540
0.00
2014
680
621
0.00
2015
650
714
0.00
136

Industry SWOT
The smart cards value chain comprises various material and component suppliers, system integrators, and the downstream
segments like government, IT, transportation, banking etc. The Indian market is currently dominated by around 5 to 6 players who
hold the majority of the market share for smart cards. All the top players in this product market have their own manufacturing
facilities locally where assembly activity is carried out. The electronics components are imported while the on-card and off-card
technologies are done locally. The software and integration part is carried out in-house and the plastic sheets are partially imported
and partially sourced locally.
The smart cards value chain is depicted in the figure below.
Component and
Assemblers
Downstream
PETG
Plastic body
PVC
Government
Memory
Microprocessor
Smart cards OEM
IT / ITes
Smart cards EMS
Banking
Chipset
Connector
Substrates
Telecom
OS
Softwares
RoM Softwares

The top players in this product market are Syscom, Madras Security Systems, Gemalto, Orga, VCT, Manipal technologies, Oberthur
and G&D. Oberthur and G&D execute the majority of their projects in for banking applications. The greatest strength that lies
in India with respect to this product market is that we have enormous software developing capabilities. On-card and Off-card
technologies, interoperability, operating system development, hard mouse chips, embedding and milling capabilities are available
in India. These are carried out by most of the top players locally which contributes to a high value addition in the manufacturing
ecosystem.
137
The table below captures the capability in India across the Smart cards value chain.
Category
Components
and Sub
systems
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company Names
Level of
Local Value
Add
NA
Chipset
Imports
No
No
NXP,
STMicroelectronics,
Infineon,
Renaissance, Atmel
Antenna
substrates
Imports
No
No
AFK, French and US

companies
NA
Software
Local
Yes
Yes
In-house
High
Plastic
body
Partial
Imports,
Partial Local
supply
Yes
No
OEM
Yes
Yes
No
EMS
No
No
No
Smart cards
Madras Security
Printers, Manipal
Press, Syscom,
Bayer, United Tech
Star
Syscom, VCT,
Oberthur, MSS,
Gemalto, Oberthur,
G&D
No
High
Remarks
France and US holds the highest

number of patents; no design
capability
Local manufacturing capability

exists, but many OEMs prefer to
import from China, HongKong etc
High
NA
The challenges that the industry is currently facing is demand. Most of the announced new projects will take a few years to be
operational and therefore capacity building will gradually rise when volumes go high. With respect to product design, the country
lacks intellectual property in this field and most of it is owned by French and US companies on a technology front. The foreign
companies dominate the patent environment with respect to chip and antenna substrates design. In spite of these challenges,
smart cards still continue to be a high value add product which are also exported by the top players.
The SWOT chart below captures the analysis for the smart cards market.
STRENGTHS
OPPORTUNITIES
Huge consumption demand, Government and Banking

are the high growth end user segments
High Growth potential in the planned Government

projects
Software OS development, chip management, on-card

and off-card technologies are well established
Increasing manufacturing and labour costs in China

Well developed EMS industry to carry out assembly

activity

Europe countries
Continuous R&D to reduce overall cost and enhance

customization
PMAS for smart cards to help boost local manufacturing
SWOT
WEAKNESS
THREATS
Reliance on imports for the electronics System on

chip
Well established manufacturing ecosystem in countries

like China, Japan, Korea etc.
Lack of product design activities locally; No IP

generation. Most patents held by French companies
Well explored technology France and US hold the

highest number of patents for chip and substrate
technology
Constant pressure on manufacturers to reduce the

power unit size and increase efficiency
High risks in terms of security and hacking
138


Component SWOT
The component ecosystem for Smart cards is quite simple across all types. The top 4 components that contribute to majority of
the smart cards bill of materials (BoM) are:
1. IC
2. PETG/Polycarbonate body
3. Software OS
4. Antenna (wire or printed)
It is noted that India possesses design capabilities for the chip at the local design centres of MNCs such as NXP, Infineon and
STM. However, lack of chip fabrication facilities results in negligible value addition contribution from design. Plastic is the second
most expensive component in a smart card which is partially sourced locally and majorly imported from China, HongKong etc.
Although there are numerous players in India who provide equally competitive PETG at competitive prices, many players still prefer
to import owing to volume issues. Printing and personalization is thoroughly local. We do have personalization capabilities but lack
of demand prohibits from exploring the same.
General
Smart cards are a high growth market possessing a huge export potential. Leveraging export subsidies and considering product
manufacturing under the EPCG scheme will benefit manufacturers in importing machinery at subsidized prices and exporting
huge volumes. Large presence of unbranded products in the grey market calls for a consideration of CVD tax on finished goods
imports to prevent dumping of the same.
IP/ Copyrights development

The Indian market has enormous skillset availability in the software and integration part of smart cards. The software development
is largely outsourced or developed in-house which are copyrights protected. Colourful designs, attractive smart chips and high
end customization is achievable, but there is a lack of demand in this segment. Exploration in personalization of smart cards
paves way for an opportunity in the export market where it is highly preferred. In terms of component design, the integrated chip
is entirely imported which does not undergo any local value addition. In this case, fabrication can be outsourced to dedicated
foundries which will bring down the cost and encourage local fabless design companies to develop chip by granting capital
subsidy, possibly through the mooted EDF corpus. The application of regional language software could provide opportunities
considering the expected penetration of computing and connectivity in semi-urban and rural areas; the idea of setting up central
government grants for such software development activity at the NITs should be considered.
Component ecosystem
Plastic (PETG),one of the major raw materials in smart cards,is available in plenty locally. In spite of this, many manufacturers still
prefer to import from the neighbouring countries. The PETG available locally is price and quality competitive. The government
should encourage sourcing of such components locally by bringing smart cards under Preferential Market Access (PMA).
Product development
The ecosystem for smart cards is currently at a modest level with large amounts of local sourcing and manufacturing by a number
of global OEMS and indigenous players. Chip, which is the most important component of a smart card, is majorly imported and
all other components are available locally. Smart cards adoption is increasingly growing with its massive adoption in social and
commercial applications in telecom, transport, driving license (DL) & registration certificate (RC), access control and Government
projects. To cater to such demands at a quicker rate, investments in local chip fabrication facilities would be required. At least
4 dedicated chip fabrication units for smart cards manufacturing will ensure constant high local value addition and volume
shipment. Such a situation in the long term will facilitate export activities as well. The coupled strength of software, design and
chip fabrication gives rise to an uninterrupted ecosystem with export opportunities to the neighbouring countries.
139
Current Limitation
Value Addition
Component
Ecosystem
140
a. Absence of Product Design/IP

Generation
b. Lack of demand in terms of
Personalization
a. Reliance on electronics imports
b. Demand Volumes

a. Global companies who own IP elsewhere can set up
local design houses with appropriate support from
the Government
b. Promote new and colourful designs which will
increase the uptake of smart cards in the export
market as well
a. Awareness programmes for sourcing of components
like Plastic
b. Subsidize capacity scale up to aid exports

GPON ONT - Product and Ecosystem Analysis

SUMMARY
Local design and manufacturing capabilities exist

Growth
ONT: 0.08 M units (2012); CAGR 132.1% (2012-15)
High design, development, manufacturing
Top 4 Components
Optical Modules (35-40%), SoC (15%), Power Supplies (8%)

and Memories (5%)
Component Ecosystem
70% of product BoM entirely imported

Promotion; Why
Huge; GPON as a technology is more efficient and last-mile

solution in Indian terrain
a. CDOT has indigenously developed GPON technology
b. Top 3 Components do not have much potential for indigenization

(global capacities, lack of local infrastructure etc.)

Fibre to the home (FTTH) is an effective technology for efficient distribution of fibre networks to serve small businesses and homes.
Among the various FTTH technologies, GPON is the strongest contender for widespread deployments, and thus, has attracted the
interest of the Indian Government to reach out to the rural interiors of the country. The merits of GPON technology prompted the
Indian Government to start developing the technology indigenously through CDOT, resulting in the filing of patents and licensing
of the technology by 7 Indian companies (ITI Ltd., Bharat Electronics Ltd. (BEL), VMC Systems Ltd., Sai Infosystems Ltd., SM Creative
Electronics, United Telecoms Ltd. (UTL) and Tejas Networks India Ltd.) to develop the hardware. Also, the proposed government
outlay of INR 20 crores, for the construction of the National Optical Fibre Network (NOFN) to build a countrywide OFC network of
250,000 km covering 2.5 lakh gram panchayats is expected to greatly increase the demand for GPON deployments in the coming
years.
The demand for GPON customer premise equipment, called the ONTs has been steadily growing . Registering a CAGR of 132.1 per
cent, GPON ONTs are expected to grow from 0.4 million units in 2012 to 5.00 million units in 2015. The domestic manufacturing of
GPON ONTs was 0.08 million in 2012, which is expected to reach 1 million units by 2015.
GPON ONT Market: TM, TDM Forecasts (2010-2015)

250
244.3
CAGR (2011 - 2015)

TM: 126.4%
207.9
200

TDM (Low/Med value
add) : 100.9%
150
TDM (High value

add): NA
100
HVA-TDM : TM
54.7
50
6.3 0
1.3
0
9.3
3.0
2010
2011
23.0
0
5.5
0
4.6
2012
2013
0
26.0
2014
48.9
2011
0%
2013
0%
2015
0%
2015

141
GPON ONT: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.10
0.02
0.00
2011
0.16
0.05
0.00
2012
0.40
0.08
0.00
2013
1.00
0.10
0.00
2014
4.00
0.50
0.00
2015
5.00
1.00
0.00
Industry SWOT
Touted as one of the technologies that can boost broadband penetration in the country, the GPON value chain is quite elaborate,
consisting of the R&D, design and technology licensors, the manufacturers, the sub-part suppliers and the consumers. The major
suppliers of GPON hardware in the country are Alphion, Huawei, NSN and Alcatel Lucent, along with CDOT and ITI, BEL, VMC
Systems, Sai Infosystems, SM Creative, UTL and Tejas Networks.
The GPON value chain is depicted in the figure below.
Component and
System Integrators
Downstream
Memories
Semiconductors
System on Chip
Optical Module
GPON ONT
Customers
Power Supplies
Mechanical Items
142

With regard to domestic capability in R&D, designing and developing GPON technology, CDOT has designed and developed ONT
and OLT, the hardware as well as the software part of both. With five patents already filed, the license to develop the hardware
has been given to seven domestic companies mentioned previously. In terms of component ecosystem, the raw materials/
components available locally are more expensive in comparison to those imported from China or Taiwan, prompting import of
nearly 60 per cent of the BoM which comprise the entire semiconductor and electronics components, including certain electromechanicals components. However, power supplies are sourced from the local market. It is believed that the reference designs
for the components are provided by the OEMs to the components manufacturers and the reference designs are followed as such
during manufacturing.
The table below captures the capability in India across the GPON ONT value chain.
Product
Local Supply
Local
Manufacturing
Local IP
Capability
Company
Names
Level of Local
Value Add
Optical Module
Imports
No
No
Delta, Ligent,
Source
Photonics
NA
No
Broadcom,
PMC Sierra,
Marvel, Lantiq
NA
High
NA
Category
System on Chip
(SoC)
Components
and Sub
Power supplies
systems
Imports
No
Yes
Yes
Yes
VMC, Acme
Tele, GE Power
Memories
Imports
No
No
Micron, Hynix,
Samsung
Mechanical
items cables,
etc.
Yes
Yes
Yes
OEM
Imports as
well as local
supply
EMS
No
GPON
Yes
Remarks
1. Local capability unavailable

for Optical module, SoC and
Memories
2. Volume imports is cost
effective than local
procurement
3. Also zero customs duty for
electronic components
makes it a sweet deal
Low
Alphion,
Huawei, NSN,
Alcatel Lucent,
Teracom,
Utstarcom
Yes
Low
Field-trials on-going for

indigenously developed
GPONs, thus domestic demand
is fulfilled by imports
The SWOT chart here captures the analysis for the GPON ONT market.
STRENGTHS
OPPORTUNITIES
IGPON technology designed and developed by CDOT,

IPs filed
An advanced wire-line technology, best option to cover

the last-mile customer; offers 2.5 GBPS compared to 3Gs
75 MBPS
Indigenous development of GPON equipment by

domestic companies and field trial on
R&D activities are 100% tax exempted in the country
Government projects NOFN and NKN to increase

demand of GPON
Indian skill-sets at par with global standards
WEAKNESS
SWOT THREATS
Demand failed to meet expectation and thus eroding

profitability of suppliers
Infrastructure inadequacy creates business uncertainty

with regard to investment decisions
Poor infrastructure limits deployment to new and

planned locations
Implementation delays and conviction level further

alienate users
Reliance on import of raw materials and components
Still developing component ecosystem limits

manufacturing abilities currently
Higher Indian price points in comparison to imported

equipment
143
Component SWOT
GPON consists of both hardware and software. With regard to hardware, there are a large number of PCB manufacturers in India
who supply boards pre-loaded with ICs, resistors, capacitors, optical modules, etc. With over 60 per cent of BoM entirely imported,
domestic manufacturing of the products does not make for a viable business proposition as the volume demand is heavily skewed.
On the other hand, large volume orders that are fulfilled by the Chinese and Taiwanese companies allow them to price their
product at a much lesser value due to economies of scale. Sourcing of power supplies is however done in India from companies
such as VMC, Acme Tele, GE Power, etc.
The top 4 components that contribute to majority of the GPON ONT bill of materials (BoM) are:
1. Optical module
2. System on Chip
3. Power supplies
4. Memory
General:
The GPON technology and its advantages over other competing technologies have overseen its domestic development in the
country. Although the domestically manufactured price points are still higher than imported units, supportive policies like reduced
excise duties for the domestic manufacturers will promote the local industry.
IP development:
India has advanced itself with the design, development and manufacturing of GPON hardware as well as software technology.
With the help of CDOT, the Government undertaking, India has filed 5 Patents and the licenses to use the indigenous technology
to develop the product has been already granted to seven of the domestic telecom equipment manufacturing companies.
Of the top 4 components, the electronic and semiconductor components are entirely imported while the power supplies are sourced
from India. Considering that telecom sector serves critical functionalities, it is desirable that the Indian electronics ecosystem
develop manufacturing competencies in this area to become self-sufficient to an extent. This could possibly be achieved through
the setting up of the two semiconductor fabs, possibly devoting capacity towards the manufacturing of electronics components
needed for GPON ONT.
The MSIPS and EMC policies could be taken advantage of to set up a telecom electronics manufacturing cluster near the BangaloreChennai area or in Delhi-NCR region.
Current Limitation
Market / Value
chain
144
a. 60% of BoM currently imported.

b. Only assembly done in India; only power
supplies sourced indigenously

CDOT is already building on developing GPON
technology indigenously. 5 patents have already been
filed and licenses to develop hardware been granted to
7 companies. The government has also started various
programs to use GPON as the base technology like in
National Knowledge Network (NKN), National Optical
Fibre Network (NOFN), etc. The upcoming fabs might
also help develop relevant electronics component
manufacturing competencies.

Tablets - Product and Ecosystem Analysis

SUMMARY
No; some amount of assembly

Growth
1.05 million (2012); CAGR 40.0% (20122015)
Low Negligible sourcing; negligible assembly
Top 4 Components
Display, Memory, Processor, Battery
Component Ecosystem

Why

Opportunity
a. Reimbursement of tax credit to be made easier

for encouraging investment in manufacturing
b. Motherboard, LCD display, and enclosure manufacturing to be offered preferential rates of customs and excise duty
c. Emerging technologies to be thoroughly evaluated for feasibility to stay ahead of technology
curve in the future

The Indian tablet was estimated to have been worth about US$ 190 million in 2012 and is estimated to grow at about 33 per cent
during the period 2011 through 2015. However, unlike rest of the tablet markets in developed countries, the Indian market is
not dominated by either Apple or Samsung, the clear leaders in the global market. Affordable 7 inch tablets offered by domestic
players like Micromax and HCL are also going toe to toe with Apple and Samsung in the local market. Samsung and Micromaxare
the top 2 players in the Indian market though, holding close to 40 per cent of the market cumulatively, followed by Apple which
holds about 10 per cent. The year 2012 was an interesting year for the tablet market as a number of Indian players entered this
market such as Karbonn and Lava. In terms of operating systems, Android is the dominant OS followed by iOS, with Windows 8
tentatively making inroads into the market.
Tablets have taken over the mantle from laptops of being devices that are portable and can be used on-the-go. This has become
increasingly relevant with development in wireless technology and rising pervasiveness of wireless networks and data connections.
The tablet market is expected to witness increasing demand from various industries such as small and medium businesses,
educational institutes, hospitality industry and food service industry. The market for tablet PCs in the education sector is already
growing extremely well as a result of government initiatives aimed at providing affordable tablets to students at schools and
educational institutes.
145
Tablets Market: TM, TDM Forecasts (2010-2015)

700
688
CAGR (2011 - 2015)
TM: 33.0%
600
500
400
289
220
200
100
21
190
140
469
353
265
200
2010
2011
2012
TDM (Low/Med
value add) : 35.3%
TDM (High value
add): NA
300
453
2013
2014
HVA-TDM : TM
2011
0%
2013
0%
2015
0%
2015

Tablets: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.10
0.00
0.00
2011
1.10
0.70
0.00
2012
1.00
1.05
0.00
2013
1.60
1.47
0.00
2014
2.64
2.06
0.00
2015
4.22
2.88
0.00
146

Industry SWOT
The tablet market has huge potential for both domestic consumption and export opportunities. Parallels can be drawn with the
mobile phones market; Nokia saw the great potential in the Indian market and set up local manufacturing value addition in Tamil
Nadualbeit, mostly box assembly and packagingwhich helped the local economy tangibly. They also manufactured Made for
India mobile phones by closely studying the dynamics of the local market and these products also gained widespread acceptance
in certain export markets. Likewise, the table market could also present huge potential in this regard. Given that tablets have
a disruptive form factor and are poised to be a mainstay in the electronics product industry and the daily lifestyle of people,
the government should definitely incentivize local value addition in the manufacturing of tablets. The tablet as an educational
tool could have phenomenal spinoff applications and create disruptive innovation in the delivery of education as we know it.
However, the manufacturing of tabletslike the manufacturing of laptop and desktopshas already been commoditized by
East Asian nations. Instead of trying to compete with such entrenched capabilities, there could be a case for investing in futuristic
manufacturing techniques like flexible electronics, and the like. Since the country already possesses considerable design skills,
Indian electronics design could lead the world in that particular field if the lead were taken on such innovative and futuristic
techniques.
The tablets value chain is depicted in the figure below.
Component and
Touchscreen
display
Assemblers
Downstream
Input / Output
USB / Ethernet
ports
Enterprises
Motherboard;
Memory; Processor
Battery
Processing module
Tablets
Consumers
Video card; Sound

card; Nerwork card
Government
Operating System
Software
Applications

Minimal design activity happens in India with respect to the manufacturing of tablets. There is considerable Indian participation
in populating each OS app ecosystem though; there are a number of start-ups that have introduced innovative apps spanning the
fields of productivity, entertainment, lifestyle, health, etc. Bigger enterprises and organizations have also commissioned apps of
their own as a new way of interacting with their customers and also as a new trade channel. There are a few indigenous companies
that are currently limited to board level assembly. However, the setting up of the semiconductor fabs has the potential to spawn
supporting activities and foster the growth of a holistic ecosystem for the manufacture of tablets. A few independent design
houses as well as public sector companies are involved in creating indigenous designs of tablets for specific target applications.
However, these design activities are sporadic and scarce. It would be beneficial to create a consortium for consolidating these
different design efforts and develop world class indigenous designs.
147
The table below captures the capability in India across the tablets value chain.
Category
Local IP
Capability
Company Names
No
Imports
Imports
Product
Local Supply
Display
Only Sales Offices;

Total Imports
Memory
Battery
Local
Manufacturing
Level of Local
Value Add
Remarks
No
Samsung, Sharp,
AOU
NA
LCD panels are exempt

from basic duty, and
this could seed greater
assembly activity
No
No
Toshiba, Samsung,
Micron, Hynix
NA
No
No
Samsung, LG,
NA
Though design
capability exists there is
NA
Though design
capability exists there is
NA
Processor
Only Sales Offices;

Total Imports
No
No
all-Winner,
Freescale,
Qualcomm,
Rockchip,
Marvel, Nvidia;
Samsung and
Apple proprietary
processor
OS
No
NA
No
Apple, Google,
Microsoft,
Blackberry
Apps
Yes
NA
Yes
OEM
No
No
No
EMS
Yes
Yes, only Low

Value Add
Assembly
No
Components
and Sub
systems
Tablets
High
Nokia, Samsung
NA
Low
Recently, companies have begun coming out with tablet-hybrids: phablets, offering functionality and appearance of a phone and
a tablet like the Samsung Galaxy Note, and tablet-laptop hybrids like Microsofts Surface Pro. These devices have found takers
among the demographic segment that prefers convergence in functionality to owning multiple devices. The tablet-laptop hybrids
are yet to receive mass appeal. The relative lack of manufacturing and assembly activities, if not addressed, could add greatly to
the countrys import due to the exponential growth forecast for the market. It is highly imperative that tablet manufacturing and
assembly be addressed by government policies, especially the aspect of the National Policy on Electronics that envisages the
setting up of Electronics Manufacturing Clusters. With regard to tablets, there is huge potential for an EMC to be set.
148

The SWOT chart below captures the analysis for the tablets market.
STRENGTHS
OPPORTUNITIES
Huge domestic demand for tablets
Impending 4G roll out to drive sales of tablets, making

for easier online access
Presence of design skill with regard to app

development for tablet OS

could driver investment to India
Nascent manufacturing/assembly facilities present

that should be developed further
India could potentially be an export hub for North Africa,

ME, and other regions
Active government support for electronics products

with domestic and export potential

SWOT
WEAKNESS
THREATS

- chips, displays and PCBs
Well established manufacturing ecosystem in China and

East Asia

limited IP generation

Absence of semiconductor fabs that could foster

growth of supporting activities
Emergence of a disruptive form factor could supersede

tablets potentially, for e.g., wearable electronics
Wireless penetration is fairly low outside of Tier 1 cities
Component SWOT
The biggest contribution to the BoM in terms of dollar value in a tablet is accounted for by the display which could cost up to US$
80 approximately. Next come the processor, memory modules and the battery, that could cost anywhere between US$ 15 to 20. In
short, the top 4 components that contribute to majority of the tablet bill of materials (BoM) are:
1. Display
2. Memory
3. Battery
4. Processor
Since tablets are imported in finished product form for the most part, none of these components are locally sourced. As is the
case for laptops and desktops, the Indian electronics ecosystem possesses very nascent capabilities in manufacturing, such as
PCB assembly and box assembly and packaging. However, with the advent of the semiconductor fab units and government
policies such as M-SIPS and the intention to set up EMCs, the country could potentially witness the development of a wholesome
manufacturing ecosystem for tablets.
149
General
The reimbursement process for claiming tax credit should be made easier and faster so that companies do not have to contend
with uncertainties of receiving reimbursement.The reimbursement process should be moved to an online portal, there should be
no restrictions on the number of times reimbursement can be claimed in a particular period of time, and reimbursements should
be directly transferred to merchants bank accounts.
IP development
There is a lot of on-going independent design activity on tablets across various private independent design houses as well as
public sector enterprises. The lack of visibility into these various activities and the absence of financial support, in some instances
results in the design efforts not culminating into a commercial product. There is a pertinent need to setup a centre of excellence
for mobile and tablets within one of the proposed EMCs to consolidate all of these design efforts and create a platform for taking
these designs from lab to fab. Leveraging the strengths of the local EMS industry, these indigenous designs can see the day of light
as Made in India tablets that could have wide appeal in the export market too.
Component ecosystem
The manufacturing of motherboards and LCD displays for tablets should be incentivized by exempting individual components
from basic customs duty and excise duty or offering preferential excise duty. Sheet metal fabrication and plastic moulding are fairly
mature technologies in India; hence, the manufacturing of tablet enclosures could also be incentivized too. It is also important to
note that the pace of technological change in the IT industry is rapid, and hence there is a need to ensure that investment in a
particular technology is sustainable in the medium to long term. For e.g., shift to SSDs, flexible electronics, etc.
The tablet industry in India has certain competencies in assembly that could be leveraged to make it a favourable destination
for value-added assembly of tablet computers for both domestic and export markets. Since this is a fairly new product market,
developing design competencies will gradually lead to organic development of the product ecosystem, especially since nascent
manufacturing capabilities are present along with a holistic policy basket for the electronics ecosystem. Organic development of
the product ecosystem will be inevitable once design activities and component manufacturing gain traction, since the demand
for tablets is projected to grow steeply in the next few years and hence the business case for making indigenous investment will
be fairly straightforward.
Current Limitation
Tax Structure
Value Addition
Ecosystem
150
Convoluted process of claiming tax credit
Reimbursement process should be made easier

to encourage investment in manufacturing and
ensure peace of mind for manufacturers
Lack of feeding activities
Manufacturing of motherboard and LCD displays

should be offered preferential basic duty and
excise duty rates; also enclosures
Awareness of technological trends
Emerging technologies should be thoroughly

evaluated for their feasibility and appropriate
investment made in order to get ahead of the
technological curve in the future

LED Lighting - Product and Ecosystem Analysis

SUMMARY
Assembly/Design
Local Manufacturing, Design and Assembly
Volumes and Growth
5.2 million (2012); CAGR (20122015) 57.6%
High Some components imported, some sourced locally, Local Assembly
Top 4 Components
LED, Drivers, Heat Sink, Thermal Interface material
Component Ecosystem
Partial Imports, Partially sourced locally
Product Importance for

Ecosystem Promotion; Why

a. Focus on technical standardization
b. LED and Optics do not have much potential for indigenization (global capacities, lack
of local infrastructure etc)
c. Attract leading manufacturers to invest in India and have a co-benefit of reduced cost
d. Appropriate fiscal incentives (tax, duty, tariff ) to manufacture in India
e. Set up testing facilities and labs at a national level

The LED lighting market in India has gained prominence with increasing energy efficiency awareness and a growing Green energy
drive. The Indian LED Lighting market generated revenue of $ 168.6 million in 2012 and is expected to reach a market of $ 440.7
million by 2015 growing at a CAGR of 38 per cent.
Street lighting and commercial lighting are slated to be the next biggest applications for the next few years. The residential segment
could become significant in 5 to 7 years time. Although households still prefer compact fluorescent lamps (CFL), the demand for
LED lighting is increasingly rising in the commercial segment. Despite the growing consumption volumes, absence of indigenous
LED fabs results in complete reliance on imports. Indigenous manufacturing volumes of LED lights in 2012 were estimated to be
5.2 million units in 2012 and are poised to scale to 20.35 million units by 2015 growing at a CAGR of 57 per cent.
151
LED Lighting Market: TM, TDM Forecasts (2010-2015)

0.44
0.45
CAGR (2011 - 2015)
0.40
TM: 38.4%
0.35
0.32
TDM (Low/Med
value add) : NA
0.30
0.25
0.23
0.20
0.15
0.10
0.05
0.20
0.17
0.14
0.12
HVA-TDM : TM
0.09
0.09
0.04
0.03
TDM (High value

add): 49.5%
0.06
2011
33%
2013
39%
2015
45%
0
2010
2011
2012
2013
2014
2015

LED Lighting: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
7.03
2.11
0.00
2011
10.20
3.06
0.00
2012
14.79
5.20
0.00
2013
21.45
8.48
0.00
2014
31.10
13.57
0.00
2015
45.09
20.35
0.00
152

Industry SWOT
LED Lighting value chain comprises various material suppliers, component and subsystem suppliers, assemblers and the
downstream retailers, distributors and consumers. The industry in India is highly fragmented, with a large number of small players,
and is also capital intense, with a high level of entry and exit barriers especially to setup infrastructure. Most of the components
required for manufacturing LEDs are imported. In order to get white light from LEDs, yellow phosphor has to be used as a coating,
which is an expensive rare earth metal currently imported from China. Rare earth export restrictions applied by China have had
companies exploring other rare earth sources such as Indiaand also attempt recycling. The number of patents filed in the LED
lighting space has increased steadily year-on-year, from approximately 600 in 2000 to over 2,500 in 2010.
The LED Lighting value chain is depicted in the figure below.
Component and
Assemblers
Heat Sink
Thermal Interface
Material
Driver
Downstream
Residential
Housing
LED lighting OEM
Testing
LED lighting EMS
Certification
Licensors
Commercial
LED
PCB
Government
Lens
Optics
Diffusers
Industrial
153
The Indian LED lighting market is a complex network of more than 350 players including assemblers, traders, distributors, resellers
and importers along with an equally big unorganized sector which has a share of around 55 per cent of the entire LED lighting
market. As LED is a highly expensive technology, in the absence of an ecosystem in the country, not many lighting suppliers in India
have been able to manufacture LED light source in India. Heat sink and drivers are manufactured in India whereas the light source
with lens, reflector and chip is entirely imported.
The table below captures the capability in India across the LED lighting value chain.
Category
Components
and Sub
systems
Level of
Company Names Local Value
Add
Product
Local Supply
Local
Manufacturing
Local IP
Capability
LED
Only Sales Offices;

Total Imports
No
No
Philips Lumileds,
Cree, Nichia,
Osram, Epistar
NA
No semiconductor fabs,
No IP realization
Heat Sink
Partial Imports, Partial

local manufacturing
Yes
No
OEMs, Lot of
Chinese players
High
Design registrations is
encouraged, but no IP
realization
Driver
Partial Imports, Partial

local manufacturing
Yes
No
TI, NXP, STM
High
realization
Optics (lens,
reflectors,
diffusers)
Imported
Yes
No
Yes
No
Remarks
NA
OEMs. Lot of
EMS players,
unorganized
players
High
PCB
Locally done
OEM
Yes
Yes, High value Only design

add
registrations
Philips, Havells,
Osram, Wipro
High
EMS
Yes
Yes, High value Only design

add
registrations
Instapower,
Promptec, VIN
High
LED Lighting
realization
The semiconductors, reflectors and lens are entirely imported as their manufactureinvolves high level of technology and expertise.
The critical challenge is that there are no semiconductor fabs to manufacture the semiconductor material or develop the ICs. The
bigger players either import the individual components or assemble locally in-house or through a contract manufacturer. There are
some traders and small players in the unorganized market who import the entire LED light as a finished product.
154

The SWOT chart below captures the analysis for the LED lighting market.
STRENGTHS
OPPORTUNITIES
Unfurling opportunities in Street lighting, Commercial

and industrial segment
Replacement sales of CFL in driving demand for LED

lights
Product Design Many companies do complete product
design locally
LED Efficiency (Lumen/Watt) increasing at a rate of 20%

per decade, is reducing the payback period for LED,
ultimately ensuring quick ROI
R&D activities aimed at futuristic value addition, cost

reduction and better performance

Europe countries
Well developed EMS industry capabilities for entire

product manufacturing

SWOT
WEAKNESS
THREATS
Lack of testing protocols, facilities, and accredited labs

at the national level

neighbouring China
High initial cost even after carbon finance assistance

like Vietnam
Absence of National technical standards leading to

import of sub standards LED lights
Lack of testing protocols and laboratories
Lack of incentives to attract major LED firms to
manufacture in India

No incentives to set up manufacturing facilities in India
Component SWOT
The component ecosystem for LED Lighting is extremely diverse in line with the wide range of prices of LED Lights. While
components such as driver, heat sink, LED, reflectors, lens, etc., are common for all types of lights, the cost and capacity of these
components vary depending on the wattage and efficiency of the light. The top 4 components that contribute to majority of the
LED Light bill of materials (BoM) irrespective of the type or price are:
1. LED
2. Driver circuit
3. Heat sink
4. Thermal interface material
The light source/ LED are entirely imported and India currently does not have LED fabrication facilities. This is due to lack of
infrastructure and incentives and high investment costs. Driver circuits and heat sink are very well manufactured locally by a lot
of players. Lack of IP protection and skill training prohibits the market from carrying out indigenous activities. Aluminium, an
important raw material for heat sink, is very expensive. In order to promote local manufacturing, the government should offer
incentives on raw materials purchase for domestic manufacturing.
155
Strategic Recommendations
General
Restrictive tax structure with a high VAT of 14.5 per cent obstructs LED lighting penetration. Reduction and a uniform VAT structure
across all states will increase penetration. Exemption for capital goods for LED light manufacture will encourage manufacturers to
enhance the manufacturing ecosystem
IP development
With approval from the Ministry, 3 more testing facilities are to be established in three regions in the country. Setting up of
design houses, both for product and components, will create a labour pool and also enhance design capabilities locally. Product
awareness across the value chain is an immediate necessity to promote adoption and penetration and thus bypass the volume
issue for manufacturing.
Component ecosystem
Considering the market size of Led lighting in India, local design activity of driver circuits, heat sink and LED can be incentivized
by granting R&D credit. Photometry is a crucial part in product development and can be encouraged through academia-industrial
collaborations. With a large presence of local PCB development, thr driver circuit board itself has the potential to be indigenized.
Grant of tax credit for local sourcing will further strengthen high value addition in the value chain.
With the growing shift from CFL to LED, especially in the B2B segment, there is going to be a tremendous demand for this market.
LED chips being the most expensive component in the product, there arises a need for setting up LED wafer fabs in the country.
LED wafer fabs, along with the testing facilities, will not only prevent the import of sub-standard light fittings but also increase the
local value addition.
Product development
DeitYmust mandate technical specifications in order to manufacture standardized lamps. The imported LED lamps (finished
goods) also must be tested to prevent dumping. The Government could extend support to mandate new or secondary roads
to be replaced with LED fittings. All Government projects can include self-ballasted LED lamps. The Ministry of Power (MoP)can
provide at least one LED lamp under the electricity to all villages scheme. These initiatives will bypass the volume issue and lead
to constant high value add manufacturing which can be considered for exports in the long term.
Current Limitation

a. Capital subsidy, grant and rebate
Tax Structure
a. High VAT of 14.5%
b. Investment and production tax credits
b. Restrictive tax structure obstructs LED

lighting penetration
c. Reduction in sales tax, VAT

d. Exemption from SAD
e. Exemption for capital goods for LED light manufacture
Value Addition
a. Lack of testing facilities and product

awareness
b. Absence of IP Generation
Component
Ecosystem
Policy Initiatives
156
a. Reliance on imports for electronics

and optics
b. Demand Volumes
a. Absence of National standards for
LEDs
b. Lack of incentives to set up
manufacturing facilities
a. Immediate setup of 3-4 trusted testing facilities

b. Create labour pool to encourage component design
capabilities, set up design houses
a. Set up chip fabrication facilities
b. Subsidize raw materials cost for manufacturers
a. Recommendation to MoP to provide at least one LED
lamp under electricity to all villages scheme
b. Technical standards to be mandated by BIS
c. Mandating phased domestic manufacturing to be
integrated in the policy framework

Payment Terminals - Product and Ecosystem Analysis

SUMMARY
Assembly/Design
Only Assembly (Only by local players who hold a share of 5%)
Volumes and Growth
0.035 million (2012); CAGR (20122015) 16.3%
Low Mostly finished good imports, local manufacturers source some materials
locally while most components are imported
Top 4 Components
Communication Module, LCD/TFT, Printers, Processors
Component Ecosystem

Promotion; Why
a. Incentivize EMV certification cost

b. Top 4 Components do not have much potential for indigenization (global
capacities, lack of local infrastructure etc)
c. Reduce excise duties
d. Encourage semicon fabrication initially through BEL, BHEL, etc

One of the defining characteristics of the electronic payment market in recent years has been that it grows steadily year on year.
Ease and convenience of purchase for cardholders drives the market wherein the merchant is also ensured of a safe and secure
transaction, thus offering a wide range of payment options to consumers. In 2012, the credit, debit and other electronic payments
grew at a rate of 30 per cent from the previous year with 1.2 billion transcations. POS systems shipment volumes in the country are
anticipated to grow from 0.7 million units in 2012 to 1.1 million units by 2015 growing at a CAGR of 16.3 per cent.
India is currently the 13th largest non-cash payment markets in the world with a high potential to grow significantly as more
merchants install POS systems and accept card payments. The government has announced that it will setup nearly 14 lakh Aadhar
linked Micro ATMs across the country which will deploy PoS terminals to read cards and communicate with the banks core banking
system. Despite the high consumption volumes, there is very minimal local manufacturing or assembly activity. There are only a
few local manufacturers who indigenously produce terminals, however, limitations of huge investment cost and certification costs
do not make it viable for mass production.
157
Payment Terminals Market: TM, TDM Forecasts (2010-2015)

0.25
CAGR (2011 - 2015)
0.22
0.20
TM: 18.9%
0.18
TDM (Low/Med
value add) : 17.4%
0.16
0.15
0.10
0.14
0.10
TDM (High value

add): NA
011
HVA-TDM : TM
0.05
0
0.005
2010
0
0.0058
2011
0
0.007
2012
0
0.008
2013
0
0.011
0
0.009
2014
2011
0%
2013
0%
2015
0%
2015

Payment Terminals: TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
0.50
0.025
0.00
2011
0.58
0.029
0.00
2012
0.70
0.035
0.00
2013
0.80
0.04
0.00
2014
0.90
0.045
0.00
2015
1.10
0.055
0.00
158

Industry SWOT
The Payment terminal value chain comprises various component and subsystem suppliers, assemblers and the downstream
retailers and consumers. While local manufacturing is restricted to just assembly activities, the country is highly reliant on imports
for all the electronics components in the product. The cost of investment involved in component manufacturing and also the EMV
certification act as huge barriers for local manufacturers to explore local value addition.
The Payment Terminals value chain is depicted in the figure below.
Component and
Downstream
Assemblers
Processor
Processor Module
ROM
Dial Up
Communication
Module
GPS
Retailers
Payment
Terminals - OEM
Banking/Financial
Licensors
Battery Circuits
Displays
Interfaces
Utilities
Payment
Terminals - EMS
Certification
Licensors
Government
Printers
Operating System
Software
Applications
159
In this product market, prominent players like Ingenico and Verifone together account for 95 per cent of market share. The
remaining is accounted for by very small local manufacturers like Visiontek, Analogix who offer customization services to serve
applications like utilities reading, transport, bill generation etc., which do not require an EMV certification. This is because the cost
of certification is huge and is unaffordable for smaller manufacturers. The indigenous manufacturers import all of the electronics
components required and execute assembly activities while packaging and integration, and casing manufacturing is done locally.
There are design houses present in Bangalore which develop product design and also have IP capability. The very minimal local
sourcing in this product market results in a very minimal local value addition. With regard to components, the electronic modules,
processors, communication modules, interfaces, battery circuits, displays and printers are imported. Local capability exists for the
casing, packaging and integration. The table below captures the capability in India across the Payment Terminals value chain.
Product
Local Supply
Local
Manufacturing
Local IP
Capability
CPU Module
Only Sales
Offices; Total
Imports
No
Components Communication
and Sub
Module and
systems
Interfaces
Only Sales
Offices; Total
Imports
Battery Circuits
Category
Level of Local
Value Add
Remarks
No
NA
Product design exists, involves

high setup cost for Foundry
No
No
NA

Only Sales
Offices; Total
Imports
No
No
NA

Displays and
Printers
Only Sales
Offices; Total
Imports
No
No
NA

Integration
and Casing
(Packaging)
Developed
locally
Yes
No
High
Sheet metal and Plastic produced

locally, including electrical cables.
Yes
Yes, Low value

add
Yes, at
product
design
level
Ingenico,
Verifone,
G&D, HCL,
Visiontek,
Analogix
Low
Yes
Yes, only Low

Value Add
Assembly
Yes, at
product
design
level
Flextronics,
SGS, Kanes
Low
OEM
Payment
Terminals
EMS
Company
Names
The proportion of the retail market that employs POS systems is still less than 15 per cent. The use of plastic money is still nascent
and the conversion rate is very high;this acts as a huge opportunity for POS installations. The first step to encourage the use of
plastic money is to create awareness amongst the citizens to have banking facilities and hence own a transaction card. Also, it is
noted that there is lack of standards which necessitates manufacturers to make customized terminals for clients. Lack of client
demand leads to a volume issue, hence manufacturers are unable to manufacture in mass thus leading to many cheaper product
imports.
160

The SWOT chart below captures the analysis for the Payment terminals market.
STRENGTHS
OPPORTUNITIES
Increasing average online spend per person
Continuous improvement to reduce product cost

Various design houses present locally who carry out

entire product design
Good skillset availability and reasonable labour cost
Increasing adoption of debit and credit cards, significant

rise in online transactions, Micro ATMs
Other raw materials like sheet metal and plastics is made

cheaper
Mobile phones: Best medium for cashless payments

SWOT
WEAKNESS
THREATS

Processor, Communication and interfaces module,
battery circuits, display, printers
High cost of manufacturing; capital intense
High certification costs prohibits local manufacturers to

invest
Incentives on sales and excise duty in certain pockets

of India thus attracting industries to one particular
geographic location
Volume demand of certain raw materials is very low and

hence rely on imports to get it cheaper. Penetration of
PoS systems is still very less; Retail not more than 15%

neighbouring China

Component SWOT
The component ecosystem for payment terminals is diverse in accordance to the application segments it caters to. The cost of
certain components varies depending on the application that it performs. Modules such as processor, communication and battery
circuits are common for all types of systems whereas the high end terminals may have smart chips, Bluetooth, GPS, etc. The top 4
components that contribute to majority of the payment terminals bill of materials (BoM) irrespective of the type or price are:
1. Communication module
2. LCD/ TFT
3. Printers
4. Processor
Analysing the payment terminals component value chain in India, it is observed that sustained and growing demand for POS
systems is a key strength for the industry. Key strengths include design capability, EMS services and also PCB development, but
the critical challenge is that there is no feeding industry present and most of the components are imported. This creates a lack
of basis or fundamentals for developing the local manufacturing for this market. Huge investment costs to set up foundry, fabs
and certifications acts as a major challenge for local manufacturers. Another major challenge is the volume; the demand is very
high and outstrips the indigenous manufacturing capacity. Hence, the market is import-heavy and incidentally importing in large
volumes from China and Taiwan also presents cheaper acquisition costs for companies.
General
The current customs duty for terminals is 12 per cent on 80 per cent of the product price against a 14 per cent excise duty on the
product price. This makes it economical for OEMs to import rather than produce locally especially when there is lack of incentives for
component sourcing. Reduction in sales, VAT and excise duty would attract more manufacturers to consider local manufacturing.
A notable issue is that although the Indian Governments gives a tax rebate of SAD for local manufacturers, the complexity of the
process is a major challenge. Making the whole system as an Internet Online portal (similar to Income Tax) and creating awareness
of the same would act as a boon to manufacturers. Allocation of funds by the Government for providing domain training in the
payment industry would be of great help for people in the manufacturing sector of POS and payment enabling products.
161
IP development
EMV certifications, which are a mandate for PoS system authorization incurs huge cost. This is a huge roadblock for local
manufacturers. This is where the need for an expansion of a national switch like NPCI comes in. The expansion will act as huge
clearing houses and will abrogate the current VISA/ Master/ Maestro certifications thereby reducing the cost for local PoS system
manufacturers. The brand name of the NPCI switch is called RuPay which currently is applicable only for ATM cards, and few debit
cards is much cheaper when compared to the EMV costs. Their expansion to all debit cards, credit cards and merchant sites will
encourage manufacturers to invest in local manufacturing and also help the entire value chain (banks, merchants and customers)
to move towards plastic money.
Any certification like EMV/ product or component import is very complex. The number of processes and signatory documents
involved is too complex thus making it difficult for manufacturers to consider this option. Simplification of the process by hosting
the certification online with upload of scanned documents will make the process simple and easy to adopt. With software
development being one of our core strengths, allocation of funds by the government to enable the Indian IT entrepreneurs to
develop the EMV Kernel targeting various emerging platforms including Android will help in strengthening the ecosystem.
The end customers requirements are very niche and are very specific to this market, thus creating a volume issue for manufacturers.
Manufacturers are unable to produce in bulk due to this customization issue. Lack of standards or policies for product design paves
way for cheaper product imports as substitutes. Devising an appropriate manufacturing standard will help in manufacturing of
quality products and will forfeit the volume issue.
Component ecosystem
India is largely dependent on imports for most of the critical electronic components which constitute about 60% of the BoM value.
Incentivising component imports by providing tax rebates for local manufacturing and encourage fabless design companies by
providing seed capital will promote higher local value addition. Setting up local design houses and leveraging R&D tax credit will
attract global OEMs to invest in local manufacturing of components.
Product development
The Micro ATMS once established will quicken the process to a plastic economy. The Indian cash economy has to be encouraged to
get converted to plastic economy. Encouragement for the usage of no frills debit cards with no surcharge and creating awareness
about usage of the same is pertinent. Tax rebate to merchants, if at least 50 per cent of transactions in value terms are through cards,
needs to be mooted. The NPCI (National Payment Corporation of India) must be brought to force thereby creating an infrastructure
for RuPay as clearing houses and ultimately enabling the use of plastic money and necessitating a PoS implementation.
The government has to initiate steps to fund and encourage the indigenous development of EMV Kernel and setup EMV and
PCI-PTS test facilities to help the indigenous product manufacturers. Setting up of labs is an urgent need to prevent dumping of
sub-standard devices. The Indian government should consider setting up of Accredited Labs for EMV Certification and PCI-PTS test
facilities which are easy and cost effective for device manufacturers.
Current Limitation
Tax Structure
Value Addition
Component
Ecosystem
Policy
Initiatives
162
a. Excise duty varies from state to state

b. Current duty is at 12% on 80% of the
product price
a. Reduce excise duty, sales and VAT

b. Incentivize tax on component imports
a. Lack of Feeding Industries

b. High EMV certification costs leading to a
halt in progress for local manufacturers
a. Promote design through setup of design houses

b. Collaborate with academia to carry out design activities,
both product and component level
c. IP generation for local design
d. Incentivize certification costs for local manufacturers
b. High demand volumes makes it
cheaper while importing
a. Offer incentives to source raw materials locally

b. Set up Semiconductor fabrication, packaging and
testing facilities
a. Lack of policies to encourage citizens to

have banking facilities
b. Lack of standardization policies leading
to many cheap imports of terminals
a. Create awareness to attract citizens to have bank

accounts
b. Bring about standardized protocols for local
manufacturing and component quality

2W Ignition - Product and Ecosystem Analysis

SUMMARY
Assembly/Design
Done in India
Volumes and Growth
16.83 million (2012); CAGR (2012-15) 12.3%
High Local Sourcing, Manufacturing, Design IP held in India
Top 4 Components
Microcontroller (20%), Power Semiconductor (20%), CDI Capacitors (10%),

Transformers (10%)
Component Ecosystem
90% of Electronic components imported

Promotion; Why
Medium; An ECU for 2W on way, which will replace CDIs by 2015-16

a. Constantly increasing Petrol pricing a dampener for the growth of
the 2W industry

The double-digit growth of Indian two-wheeler industry, especially the scooter segment, followed by motorcycles and mopeds
respectively at 25 per cent, 14 per cent and 12 per cent, has led to the steady growth of 2W ignition market in the country. The growth
in demand for 2W ignitions, also known as CDI (Capacitor Discharge Ignition), has been reciprocated by auto-part manufacturers
adding capacities to their existing manufacturing facilities and plans of subsequent capacity expansion in the coming years. This
product, which is entirely manufactured in the country, is is expected to exhibit greater demand in the coming years. The total
market for CDIs in 2012 was 16.8 million units, which is expected to reach 23.9 million units in 2015 growing at a CAGR of 12.4 per
cent. The entire demand generation is accounted for through high-value add domestic manufacturing of the CDIs in the country,
which is expected to grow at 12.4 per cent in the period 2012 to 2015. Of the total domestic production, a small proportion of CDIs
is also exported to suppliers across the globe.
Capacitor Discharge Ignition Market: TM, TDM Forecasts (2010-2015)

350
308.1
300
280.7
255.8
250
210.4 210.4
200
231.0
308.1
280.7
CAGR (2011 - 2015)

TM: 10.2%
255.8
TDM (Low/Med
value add) : 0
231.0
190.8 190.8
TDM (High value

add): 10.2%
150
HVA-TDM : TM
100
50
2011
100%
2013
100%
2015
100%
0
2010
2011
2012
2013
2014
2015

163
CDI : TM, TDM Volumes Forecasts

Product
TM Volumes
(Million units)

(Million units)
2010
13.23
13.23
0.00
2011
15.03
15.03
0.00
2012
16.83
16.83
0.00
2013
19.02
19.02
0.00
2014
21.30
21.30
0.00
2015
23.86
23.86
0.00
Industry SWOT
The 2W ignition value chain is quite elaborate as this product is manufactured in the country with high value addition activities
undertaken by different stakeholders. With players like Denso, INEL (India Nippon Electricals) and Varroc present in the country
and their manufacturing facilities dedicated to serving the local demand, India is in a dominant position with regard to the CDI
manufacturing ecosystem.
The 2W ignition value chain is depicted in the figure below.
Component and
System Integrators
Downstream
Microcontrollers
Power
Semiconductors
Semiconductors
Diodes, ASICs
Capacitor, Resistor
Connectors
2W Ignition
OEMS
PCB
Transformer
Plastic casing
with Potting
chemical
164

The growth of the two-wheeler market in comparison to that of the 4 wheeler market has indeed seen more new players venturing
into this space, thereby leading to the commoditization of the product and eroding of profit margins of many players. This is
also the reason why EMS companies have not ventured into manufacturing of CDIs despiteIndian OEMs having shown higher
capabilities in design, engineering, assembly and manufacturing of CDIs.
The table below captures the capability in India across the 2W ignition value chain.
Product
Local
Supply
Local
Manufacturing
Local IP
Capability
Company Names
Level of Local
Value Add
Microcontrollers
Imports
No
No
Microchip, Renesas
NA
Power
Semiconductors
Imports
No
No
IR, Onsemi
NA
Passives
Imports
No
No
Samsung,
Panasonic,
NA
Transformer
Yes
Yes
Yes
Many small
companies
High
Plastic casing with

Potting chemical
Yes
Yes
Yes
Many small
companies
High
Connectors
(water-proof )
Yes
Yes
Yes
Molex, Besmac,
Vinay, Motherson
High
OEM
Yes
Yes high
value added
manufacturing
Yes
INEL, Varroc, Denso
High
EMS
No
No
No
NA
NA
Category
Components
and Sub
systems
CDI
Remarks
Made by numerous small

scale companies as they are
very low value products
The SWOT chart below captures the analysis for the 2W ignition market.
STRENGTHS
OPPORTUNITIES
Mature product market
Indian still has a hugely un-tapped rural segment
Established ecosystem in place


Domestic companies have excellent R&D, testing and

manufacturing processes and capabilities
Growing demand of 2W following fuel deregulation and

price rise
Good availability of machineries and skill-set
SWOT
WEAKNESS
THREATS

chips, displays and PCBs
Release of Next version of emission norms will make the

existing models obsolete
Export numbers not impressive
Deficient power situations in states like Tamil Nadu

impacts production cost
Market becoming commoditized

Low entry cost encouraging smaller players entering
market
An ECU for 2W may make CDIs redundant in 4-5 years

time
165
Component SWOT
Companies in the 2W Ignition space are focusing their efforts on localising the sourcing of raw materials to keep the cost of the
product low.
The top 4 components that contribute to majority of the 2W ignition bill of materials (BoM) are:
1. Microcontrollers
2. Power semiconductors
3. CDI capacitors
4. Transformers
Microcontrollers and power semiconductors are still imported from East Asia; companies like Fujitsu, Freescale and Onsemi are
prominent suppliers. Transformers and CDI capacitors are manufactured and also designed locally.
General:
The India 2-wheeler industry has been witnessing robust growth for an extended period of time. Since the market has matured,
the domestic manufacturers can gain a great deal by exporting CDIs. The industry can gain if provided with export-friendly policies
and support structure from the Government.
IP development:
Barring the IP capability of electronics components that are used in CDIs, the Indian OEMs hold IP rights of the other locally
sourced components such as the transformers, the connectors, the potting chemicals, etc.
Barring the electronic components, all the other raw materials used in CDIs are sourced from India. By fostering the growth of the
Indian electronics manufacturing ecosystem, the manufacturing of 2W ignition units could be completely indigenized. Considering
the top 4 components, CDI capacitors and transformers are already being indigenously sourced with numerous small and big
players manufacturing varieties of transformers across the country. For the electronics component sourcing, the declaration of the
setting of the semiconductor fab in the country hits the right note.
The MSIPS and EMC policies could be taken advantage of to set up an automotive electronics manufacturing cluster near the
Bangalore-Chennai area or in Delhi-NCR region.
Current Limitation
Tax Structure
None
Ecosystem already developed
Value Addition
None
Component
Ecosystem
Policy Initiatives
166
a. Reliance on imports for 60-75%

of BoM value since this is mostly
semiconductors
None
Local fab shall help address this


Appendix
Definitions
TM: Total Market: Total consumption of electronics in India, in whatever form (can be purchased locally,
imported as part of CKD or SKD, imported as a complete product), by whatever source
(Sources are directly from product company offices in India, distributor sales, direct imports
etc) and in whichever currency (US$ or Indian rupee).
TDM:
Total Domestic Market: Total domestic manufacturing including CKD assembling that caters
to domestic market consumption; does not include exports.
ESDM Industry Size: Electronics TM + Electronics TE + Electronic Component Market Revenues from Local
Manufacturing + Semiconductor Design Market Revenues + EMS Services Revenues
HVA:
High local value addition: Value addition > 50%; high level of local sourcing, high level of
indigenous design, complete system manufacturing.
MVA:
Medium local value addition: Value addition 20%-50%; EMS, CKD Assembling, sourcing of
minimal components.
LVA:
Low local value addition: Value addition <20%; SKD Assembling, no local sourcing, no local
design influence.
Acronyms
ASIC:
Application Specific Integrated Circuit
ASSP:
Application Specific Standard Product
BTS:
Base Terminal Station
CAGR:
Cumulative Average Growth Rate
CBU:
Completely Built Unit
CDI:
Capacitor Discharge Ignition
eBoM: Electronics Bill of Materials

ECU:
Engine Control Unit
EMS:
Engine Management System
IC:
Integrated Circuit
IP:
Internet Protocol
LCD:
Liquid Crystal Display
MCU: Microcontroller
MPU:
Microprocessor
STB:
Set top Box
TM:
Total Market
TDM:
Total Domestic Market
TAM:
Total Available Market
UPS:
Uninterrupted Power Supply
167
Tax and Duty Structure for the High Priority Products and Components
168
Import Duty structure
No
Product
CUSTOMS TARIFF
No./HS Code
Basic
Duty
Mobile Phones
Domestic taxes and duties
CVD
Edu.
Cess on
Addl.
Duty
Edu.
Cess on
Total
Duty
Spl.
Addl.
Duty
(SAD)
TOTAL
DUTY
Excise
Duty
CST
VAT
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
85171210/85171290
0.00%
1.00%
3.00%
3.00%
0.00%
1.07%
12.00%
4.00%
4 to 12.5%
FPD TV
85287116-19
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
12.00%
4.00%
4 to 12.5%
Notebooks
84714110
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
Desktops
84713010
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
Digital Camera
85258020
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
12.00%
4.00%
4 to 12.5%
Inverters and
UPS
85044010
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
12.00%
4.00%
4 to 12.5%
Memory cards
and USB drives
85421020
7.50%
16.32%
3.00%
3.00%
4.00%
31.70%
4.00%
4 to 12.5%
4W EMS
84129030
7.50%
12.00%
3.00%
3.00%
4.00%
26.53%
12.00%
4.00%
4 to 12.5%
LCD Monitors
84716030
0.00%
10.00%
3.00%
3.00%
4.00%
15.18%
4.00%
4 to 12.5%
10
Servers
84714120
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
11
Base Stations
85176100
0.00%
12.00%
3.00%
3.00%
4.00%
17.41%
12.00%
4.00%
4 to 12.5%
12
Power Supplies
85044029
7.50%
12.00%
3.00%
3.00%
4.00%
26.53%
12.00%
4.00%
4 to 12.5%
13
Set Top Box
85287100
10.00%
12.00%
3.00%
3.00%
4.00%
29.34%
12.00%
4.00%
4 to 12.5%
14
Printes and
MFDs
844332
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
15
Routers/
Switches
85176290
0.00%
12.00%
3.00%
3.00%
4.00%
17.41%
12.00%
4.00%
4 to 12.5%
16
Car Radio
85255010
7.50%
16.32%
3.00%
3.00%
4.00%
31.70%
12.00%
4.00%
4 to 12.5%
17
IPPBX
85177090
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
18
Energy Meters
90283010/ 90283090
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
12.00%
4.00%
4 to 12.5%
19
Digital
Instrument
Clusters
91040000
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
12.00%
4.00%
4 to 12.5%
20
Smart Cards
85235220/ 85235210
0.00%
6.00%
3.00%
3.00%
0.00%
6.43%
12.00%
4.00%
4 to 12.5%
21
2W Ignition
85111000
7.50%
12.00%
3.00%
3.00%
4.00%
26.53%
12.00%
4.00%
4 to 12.5%
22
Tablets
84713090
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
23
LEDLighting
94054090
10.00%
12.00%
3.00%
3.00%
4.00%
29.57%
6.00%
4.00%
4 to 12.5%
24
GPON ONT
85177090
0.00%
12.00%
3.00%
3.00%
4.00%
17.41%
12.00%
4.00%
4 to 12.5%
25
Payment
Terminals
84713000
0.00%
12.00%
3.00%
3.00%
4.00%
17.41%
12.00%
4.00%
4 to 12.5%
26
PCB
85340000
0.00%
12.00%
3.00%
3.00%
4.00%
17.42%
12.00%
4.00%
4 to 12.5%
27
LCD Display
Panel
85312000
0.00%
12.00%
3.00%
3.00%
4.00%
17.41%
12.00%
4.00%
4 to 12.5%
28
Transformer
85041090
7.50%
12.00%
3.00%
3.00%
4.00%
26.53%
12.00%
4.00%
4 to 12.5%
29
Semiconductor
IC
85426000
7.50%
16.32%
3.00%
3.00%
4.00%
31.70%
4.00%
4 to 12.5%
Notes

169
Notes
170

171
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FROST

INDIAN ESDM MARKET - ANALYSIS OF

Supported by the Department of Electronics & Information Technology,

Copyright 2014, India Electronics & Semiconductor Association

IESA - Frost & Sullivan : Indian ESDM Market

CONFIDENTIAL IESA COPYRIGHT

INDIAN ESDM MARKET - ANALYSIS OF 2014

Shri J. Satyanarayana, IAS

CONFIDENTIAL IESA COPYRIGHT

IESA - Frost & Sullivan : Indian ESDM Market

Copyright 2014, India Electronics & Semiconductor Association

India Electronics & Semiconductor Association

DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY

Indian ESDM Market

Assessment of challenges and identification of steps to develop ecosystem and

Supported by the Department of Electronics & Information Technology,

Room No : 105, Sanchar Bhawan, 20 Ashoka Road, New Delhi - 110001

(Dr. Ajay Kumar)

Top 10 Products and Components Markets to Focus for

Mobile Handsets - Product and Ecosystem Analysis

Flat Panel Display TV - Product and Ecosystem Analysis

Notebooks - Product and Ecosystem Analysis

Desktops - Product and Ecosystem Analysis

Digital Camera - Product and Ecosystem Analysis

Inverters and UPS - Product and Ecosystem Analysis

Memory Cards and USB drives - Product and Ecosystem Analysis

4W EMS - Product and Ecosystem Analysis

LCD Monitor - Product and Ecosystem Analysis

Servers - Product and Ecosystem Analysis

Base Stations (BTS) - Product and Ecosystem Analysis

Power supplies - Product and Ecosystem Analysis

Set Top Boxes - Product and Ecosystem Analysis

Printers and MFDs - Product and Ecosystem Analysis

Router/Switches - Product and Ecosystem Analysis

Car Radio - Product and Ecosystem Analysis

CFL - Product and Ecosystem Analysis

Energy Meters - Product and Ecosystem Analysis

Digital Instrument Clusters (DICs) - Product and Ecosystem Analysis

Smart cards - Product and Ecosystem Analysis

GPON ONT - Product and Ecosystem Analysis

Tablets - Product and Ecosystem Analysis

LED Lighting - Product and Ecosystem Analysis

Payment Terminals - Product and Ecosystem Analysis

2W Ignition - Product and Ecosystem Analysis

14. Printers and MFD

Flat Panel Display (FPD) TV

15. Routers and Switches

16. Car Radio

18. Energy Meters

Inverters and UPS

19. Digital Instrument Clusters

Memory Cards and USB Drives

20. Smart Cards

21. PON, GPON ONT

23. LED Lighting

11. Base Stations

24. Payment Terminals

12. Power Supplies

13. Set Top Box

Mr. Sanjeev Keskar

Mr. PVG Menon

INDIAN ESDM MARKET - ANALYSIS OF 2014

India ESDM Industry Forecasts (2010-2015)

Base Year: 2011 Source: IESA-Frost & Sullivan