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Electronics manufacturing services (EMS) companies provide a wide range of services to assist original equipment manufacturers (OEMs) and original design manufacturers (ODMs) with the design, manufacture, testing and distribution of electronic components and assemblies. Often used interchangeably with contract manufacturing, EMSs help companies improve operational efficiencies and focus on core activities like research and development.
According to EY, India has carved out a strong foothold in the EMS sector in recent years and is poised to become a major player in the coming years. In “Why India’s electronics manufacturing services (EMS) sector is growing,” the professional services firm says the country is expected to become an “electronics manufacturing powerhouse” over the next decade driven by increasing domestic demand and improving export competitiveness.
Doubling Production Rates
India’s domestic electronics production nearly doubled between 2017 and 2022, according to EY, and is on track to post a compound annual growth rate (CAGR) of 24% between now and 2027. It says EMS is one of the major pillars of the growing electronics manufacturing industry in India, whose government has introduced numerous initiatives incentivizing electronics manufacturing.
India's federal government has also enacted a series of policy reforms and committed resources to attracting and diversifying its electronics industry. Introduced in 2020, for example, the Production-Linked Incentive [PLI] program offers substantial subsidies to companies that invest in domestic manufacturing, Nikkei Asia reports.
“The federal government has allocated over $6 billion for incentive programs in the electronics sector,” the publication adds. “The financial outlay for these programs, which in total exceed that available for any other industry in India, reflects the strong level of political support for growing the local manufacturing ecosystem.”
“The [PLI] scheme addresses challenges associated with the high cost of capital in India,” EY says. “It provides 4% to 6% incentive on incremental sales of goods manufactured in India and targets specific sectors within India’s electronics industry.”
Heading to the $80 Billion Mark
Over the next five years, the EMS market in India is expected to reach $80 billion (USD), providing growth opportunities to strategic and financial investors. “A large chunk of this growth will be seen in mobiles and consumer electronics and appliances, followed by lighting, auto, and others,” EY adds.
In “Government measures to develop India as a global hub for electronics system design & manufacturing,” Dr. Prashant Prabhakar Deshpande discusses how India has been promoting and developing its electronics manufacturing cluster, which he says currently holds 3% share of global electronics production. The current groundswell can be traced back to the 1960s, when India’s newly formed Electronic Committee emphasized the importance of electronics, and the necessity of a robust domestic electronics component ecosystem for both strategic and economic reasons.
“The idea was carried forward when the government set up the department of electronics (DoE) in 1970,” Prabhakar Deshpande writes. Today, the Indian government has been pushing for domestic production, manufacturing electronics, electronic components and semiconductors for reasons of national security, and also to reduce India’s dependency on crude oil as its most vital import.
“Recognizing the need to reduce India’s dependence on imported semiconductors, the ministry of electronics and information technology has unveiled a $10 billion commitment towards the India semiconductor mission (ISM),” he adds, “which underscores government’s ambition to establish a presence in the semiconductor sector.”
