ESDM sector requires an ecosystem approach for value chain resilience: PwC India report

• India excels in the global market with over 70% of its manufacturing in mobile phones, consumer electronics, IT hardware, and components.¹
• From 2015 to 2022, India's mobile phone production jumped from 60 million to 310 million units, showcasing a 26% CAGR, a testament to effective policy-driven manufacturing growth.²
• By 2040, India is poised to surpass the United States (US) as the world’s second-largest economy, aiming for a 15% share of global GDP.³
• Government incentives of 20–25% on capital expenditure bolster the capital-intensive electronics manufacturing sector, including smartphone production.⁴

New Delhi, 23 February 2024: "The India Opportunity: Developing Resilient Electronics Supply Chains," a comprehensive report by PwC India, outlines the potential and strategic imperatives for India's Electronics System Design and Manufacturing (ESDM) sector. Emphasising an ecosystem approach for value chain resilience, the report highlights India's ascendancy in the global electronics market, particularly in mobile phones, consumer electronics, IT hardware, and electronic components, which account for over 70% of the nation’s domestic manufacturing output. ¹ The report also outlines essential policy actions needed to enhance the sector's stability and growth, from integrating production systems into global supply chains to fostering intra-regional and domestic self-sufficiency in value chains.

Reflecting on India's exponential growth in mobile phone production, which increased from 60 million units in 2015 to 310 million units in 2022 (a CAGR of 26%) ², the report showcases how targeted policy objectives can spur manufacturing excellence. Further underscoring India’s global economic potential, the report indicates that India is on track to surpass the US to become the world's second-largest economy by 2040³, aiming to contribute 15% to global GDP. The report offers a deep dive into understanding the ESDM sector's dynamics within India, addressing the components conundrum, the critical role of minerals, and advocating for an ecosystem approach towards resilience. 

Sanjeev Krishan, Chairperson, PwC in India said: “As the global landscape evolves, India stands at a pivotal juncture to redefine its role in the global electronics supply chain. Through strategic collaboration, innovation, and conducive policy environment that focuses on inclusive growth, India can seize the immense opportunities ahead to become a resilient and competitive electronics manufacturing powerhouse.”

A key insight from the report is the emphasis on the capital-intensive nature of electronics manufacturing. The current government schemes, offering incentives of 20–25% on capital expenditure for electronics manufacturing, including smartphone manufacturing and its ancillary industries ⁴, are pivotal for nurturing the sector's growth and competitiveness on the global stage.

Mohammed Athar, Partner and Leader Industrial Development and Investments Promotion, PwC India added: "The ESDM sector harbours immense growth potential and is pivotal for manufacturing-led growth in India. Achieving mineral security, targeted technological investments, and bolstering R&D, infrastructure, and human capital are essential for sustainable growth," notes Saif, underlining the strategic imperatives for fortifying India's ESDM sector.

Highlighting the strategic significance of policy reforms, the report delineates short-term and long-term recommendations to stabilise and energise the ESDM sector. In the short term, it emphasises the need to clarify the scope of policy support post-PLI scheme and address non-tariff barriers, such as complex customs and licensing regulations, which are vital for smoothing the sector's growth trajectory.

Over the long term, skill development emerges as a paramount policy area, underscored by the necessity to generate employment for the burgeoning population, bridge the manufacturing pay gap, and ensure the continuous upgrading of workforce skills. This approach not only promises to enhance India's socio-economic fabric but also positions it as a formidable player in the global ESDM market by leveraging its demographic dividend and manufacturing capabilities.

Samir Saran, President, Observer Research Foundation (ORF) said: “India's reputation as a reliable partner places it at an advantage as it makes its place in the global manufacturing supply chain. Capitalising on this momentum to align India's internal strategies with its future aspirations is crucial. A concerted ecosystem approach is vital for ensuring the ESDM sector's resilience." 

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 152 countries with over 327,000 people who are committed to delivering quality in Assurance, Advisory and Tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.