Domestic electronics sector set to grow 12-17% in FY22: CRISIL SME Tracker

The domestic electronics sector’s revenue is set to rebound 12-17 per cent to ~8-8.3 trillion in the current fiscal year (FY22), helped by the low-base effect of fiscal year 2021 and government facilitations such as the Production-Linked Incentive (PLI) scheme, which promotes manufacturing rather than just assembling of products.

The outlook, therefore, has improved for the domestic electronics sector, including small and medium enterprises (SMEs) that account for 20-40 per cent of the industry’s revenue.

Segments such as mobile phones, consumer and industrial electronics, computer hardware and strategy (constituting over 70 per cent of industry revenue) are expected to see robust growth, with mobile phones in the vanguard (with 15-20 per cent year-on-year growth expected this fiscal year).

Interestingly, the pandemic has proven to be a boon for mobile phones and computer hardware segments because of work from home/ anywhere, with affordable smartphones making things even better. This “new normal” and PLI are expected to boost the prospects of the domestic electronics sector. Additionally, as the economy recovers, so should discretionary spending, which again will be salutary.

As demand improves and pricing pressure reduces, margins should expand by 0-50 basis points this fiscal year.