CII says reducing dependence on China 'critical' for electronics industry

India’s “heavy reliance” on China for electronic components poses a “significant risk” to its domestic manufacturing ecosystem, the Confederation of Indian Industry (CII) said in a report released on Sunday evening, as the industry body called for a revised PLI to boost local manufacturing of crucial components.

“China accounts for 62 per cent of India’s electronic component imports which poses a significant risk to the long-term sustainability and supply chain needed to build a competitive domestic manufacturing ecosystem,” the report titled ‘Developing India as the Manufacturing Hub for Electronics Components and Sub-Assemblies’ said. 

It added that “prioritising value addition, attracting investments and leveraging the export potential of inputs for facilitating large-scale domestic production and reducing long-term dependency on China” are critical for India’s electronics manufacturing industry and its continual growth.

The CII also said that the demand for electronic components and sub-assemblies is estimated to grow over five-fold to $240 billion by 2030. This would include some of the key parts like motherboard, lithium-ion batteries, camera module etc. that are largely imported.

It recommended the government to come up with revised electronic components production-linked incentive schemes with higher incentives in the range of 35-40 per cent to reduce dependence on imports.

“The demand for components and sub-assemblies stood at $45.5 billion to support $102 billion worth of electronics production in 2023. This demand is expected to scale to $240 billion to support the $500 billion worth of electronics production by 2030. Priority components and sub-assemblies, including PCBAs, are projected to grow at a robust CAGR of 30 per cent, reaching $139 billion by 2030,” the report said.

The report identifies components and sub-assemblies of batteries (lithium-ion), camera modules, mechanicals (enclosures etc), displays and PCBs as high priority for India that cumulatively account for 43 per cent of the components demand in 2022 and is expected to grow to $51.6 billion by 2030.

“These components have either a nominal production in India or are heavily import dependent. India can hardly afford to sustain this trend of importing the priority components.

“Similarly, PCBA is a high potential category for India since most of the demand is met by imports. This segment is expected to grow 30 per cent, leading to a demand creation of around $87.46 billion by 2030,” the report said.

The CII report also recommended that the government craft a scheme aimed at providing fiscal support for select components and sub-assemblies in the range of 6-8 per cent for 6-8 years.

“Additionally, SPECS 2.0 to be introduced with subsidy support ranging from 25 per cent to 40 per cent to support potential investors across brownfield and greenfield categories. The new policy should adopt a gradient approach with support towards the higher end of subsidy,” the report said.

The report recommended that the government aggressively pursue free trade agreements (FTAs) with the EU, the UK, GCC countries and emerging economies in Africa.

“The creation of export demand for India-made products has the twin advantages of increasing export volumes and helping boost domestic manufacturing of components and sub-assemblies,” the report said.

The CII report estimated that the policy support will help in job creation to the tune of around 2.8 lakhs by 2026, increase in the domestic value addition from the current levels, reduction in import dependency, increase in