Connect with us

Headlines of the Day

India becoming a global hub for electronics-A pipe dream?

India’s ambition to become a global hub for electronics faces tough challenges, not only from Vietnam, but a raft of other countries that have emerged as major exporters of electronics. Countries such as the Philippines, Thailand, Mexico, and Malaysia have exported electronics more than double that of India on an average, according to data available till 2021. In the year 2021, exports by Vietnam, Mexico, and Thailand were 9.2 times, 6.3 times, and 3.8 times respectively, that of India, according to estimates by the Indian Cellular and Electronics Association of India (ICEA).

India has very little chance of catching up with Vietnam in the next few years, say experts. Even if the country meets its ambitious electronics export target for FY26, which is between $105 billion and $130 billion, it will still be way below Vietnam’s, which was $131.2 billion in 2021. In FY23, India exported electronics to the tune of $23.57 billion.

And while India’s rank among global electronics exporters was at 26 in 2021, that of Vietnam was far ahead at 8. In fact, the ICEA feels that it will be tough for India to reach even the target set by the government for FY26.

According to it, the export of electronics needs to grow at an average of 64.5 per cent to 76.6 per cent per annum to be able to achieve the magic number. Even if the highest growth rate achieved in 2015 is maintained in the next three fiscal years, India’s electronics exports will be only $89 billion by FY26, and that is nowhere near the government’s target. So how have other countries performed so much better? They have, of course, been more savvy about taking advantage of the free trade agreements (FTAs), kept import tariffs low — with many at zero levels — and ensured policy stability and incentives.Malaysia, which has had a focused policy in semiconductor exports (a large number of OSAT and ATMP players are located in Penang, has become a force to reckon with.

Together with Vietnam and the Philippines, it has become one of the key destinations for global Taiwanese OSAT companies to hedge their risks of keeping their production facilities only in their own countries, and China. Global automakers have told them to find a third location so that chip shortages in case of a war do not impact supplies. India has not attracted their attention because of its taxes.

Malaysian electronic exports hit $116.9 billion in 2021, and $126.98 billion in 2022, which is five times that of India’s electronics exports in FY23.

Meanwhile, Mexico has been able to leverage its advantage of having the US market nearby and hit exports of $90.5 billion in 2021. The Philippines, which was ranked 21 among electronics exporters in 2015 and went up the pecking order to 15 in 2021, had exports worth $41.4 billion in 2021. The country is home to over 926 electronics companies and electronics, especially semiconductors, comprise its largest exports. And Thailand’s electronics exports in 2021 were double that of India in FY23.

One reason that countries like Malaysia, Mexico and Vietnam were able to jack up their electronics exports is that they have increased their exports to the US by replacing the Chinese. China’s exports to the US have fallen due to geopolitical issues. India has not been able to leverage that opportunity.

Between 2018 and 2022, Mexico’s electronics exports to the US went up by $20.4 billion, that of Vietnam by a staggering $39.3 billion, and Malaysia’s by $7.9 billion. India was the laggard as its exports to the US went up by only $3.2 billion to hit $4.5 billion in 2022. Business Standard

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!