Has India done enough in the past to boost electronics hardware manufacturing?


I had mixed feelings on reading a press release on the recommendations from the Task Force set up by the Ministry of Communications & IT, Government of India in August 2009 to suggest measures to stimulate the growth of IT, ITeS and electronics hardware manufacturing in the country. However, I was quite surprised to see a news suggesting an amendment of the Indian semiconductor policy!

First, the Task Force’s recommendations. I’ll only focus on the electronics manufacturing bit! For electronics system design and manufacturing — it suggests the following:

* Establishing a ‘National Electronics Mission’ -– a nodal agency for the electronics Industry within DIT and with direct interface to the Prime Minister’s Office (PMO). The nodal agency would help in the synchronized functioning of the Industry through effective coordination across Ministries and Government Departments in the Centre and the States and would enhance the ease of doing business.
* Nurturing established electronics manufacturing clusters and develop them into centres of excellence, while encouraging new ones.

Isn’t this old wine in new bottles?
Also, have we really done enough in  the past to even boost electronics hardware manufacturing in the country? If yes, then where are the mini Hsinchus and Shenzhens within India? Even N. Vittal had said something similar (such as developing mini Hong Kongs and Singapores) some years ago!

India already has an Electronics Hardware Technology Park (EHTP) scheme. The business of establishing key electronics manufacturing clusters and developing them into centres of excellence — while encouraging new ones — should have been taken care of much, much earlier! By much. much earlier — at least 10-15 years ago!

By the time the Task Force’s recommendations are acted upon, a year or two more would have easily passed! That stretches the manufacturing gap even further!

Let me ask one question: how well is India known globally for its local telecom manufacturing companies, or, even hardware manufacturing companies? Why am I asking this question? Well, when the National Telecom Policy was announced back in 1994. Many would recall there were a lot of astronomical bids — especially the ones from Himachal Futuristic. What many overlook is the fact that the period actually presented a brilliant opportunity before India to become a leader in telecom and electronics hardware manufacturing! However, that hasn’t and never quite happened!

The Indian electronic components story is more or less the same! India’s electronic components and accessories ecosystem industry is currently moderate. It used to be 15 percent and has now grown to 35 percent. This should be grown even further! Are we backing the electronic components segment enough?

What sort of guidance or hand holding will be provided to those firms who look to develop India-based product companies? For that matter, how many great software products have been conceptualized, designed and developed in India that are worth mentioning?

Further, an interesting fact brought up time and again within the Indian industry is the requirement of a robust entrepreneurial spirit, and the need for much more sources of funding for semiconductor product companies. Who all are helping the Indian semicon startups?

And then, there’s this news that suggests amending the existing Indian semiconductor policy! It is sheer bad luck that silicon IC fabs haven’t happened in India, as yet! Although HSMC and SemIndia started off with good intentions, things got sidetracked due to various reasons. Now, solar PV has attracted several players. It was also part of the semicon policy, isn’t it? So, where is the question of amending the policy?

Yes, there is definitely a need to develop strong entrepreneurial spirit within the country and encourage local product development, rather than remain contented with a services-oriented mindset and industry.

Last July, during the ISA Excite, there was an announcement that Karnataka would have its semicon policy soon. It hasn’t happened yet, but I hope it will!

Nevertheless, here’s what I wrote last year on what India brings to the semicon world (and Japan), as I attempted to answer this question from a friend:

What are India’s strengths?
The clear strengths of the Indian semiconductor industry are embedded and design services! We are NOT YET into product development, but one sincerely hopes that it gathers pace.

The market drivers in India are mobile phone services, IT services/BPO, automobiles and IT hardware. India is also very strong in design tools, system architecture and VLSI design, has quite strong IP protection laws, and is reasonably strong in concept/innovation in semiconductors.

Testing and packaging are in a nascent stage. India will certainly have more of ATMP facilities. Nearly every single semicon giant has an India presence! That should indicate the amount of interest the outside world has on India. In fact, I am told, some key decisions are now made out of the Bangalore based outfits!

I had also suggested a 10-point program for the Karnataka semicon policy — in another blog post — on June 29, 2008. The points were:

1. A long-term semiconductor policy running 20-25 years or so.
2. Core team of top Indian leaders from Indian firms and MNCs, as well as technology institutes in Karnataka to oversee policy implementation.
3. Incentives such as government support, including stake in investments, and tax holidays.
4. Strong infrastructure availability and management.
5. Focus on having solar/PV fabs in the state.
6. Consider having 150/180/200mm fabs that tackle local problems via indigenous applications.
7. Develop companies in the assembly testing, verification and packaging (ATMP) space.
8. Attract companies in fields such as RFID, to address local problems and develop local applications.
9. Pursue companies in PDP, OLED/LED space to set up manufacturing units.
10. Promote and set up more fabless units.

There should be some steps to create specific zones for setting up such units — for fabs, fabless, ATMP, manufacturing, etc., all spread equally across the state.

Well, can’t all of this be extended across the country, rather than Karnataka alone? It sure can! What wasn’t done earlier, should be done now. Better late than never!

There’s also a lack of funding for certain semicon and hardware manufacturing areas/projects. This is another aspect that needs to be looked into.

As I’ve mentioned time and again to some friends within the Indian semiconductor industry and solar /PV industry — the semicon policy (earlier), and the National Solar Mission (now), are meant to help you guys! It is up to you — the industry folks — to make things happen! If you don’t, who will?

I am sure that the Task Force’s recommendations are very well thought out and quite robust. I don’t have the luxury of reading a copy, barring the release, and so there’s nothing for me to add. Best wishes to the Indian electronics hardware manufacturing industry and may it succeed greatly in future.

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  1. Nirav A. Desai
    December 15, 2009 at 8:39 am | #1

    Dear Pradeep,

    While a sound government policy is necessary for development of manufacturing, a second more important factor is the presence of quality human capital, which India doesn’t have.

    We boast of core competencies in manufacturing but can’t manufacture the latest technology wind turbines ( they are imported from Vestas in Denmark ). We are pushing to increase our nuclear power generation capacity but can’t manufacture our own reactors. GE and other American companies will be building the next gen nuclear reactors in India. We don’t even have people capable of building our own roads. We need to get the Malaysians and Koreans to help us set up next generation industrial corridors ( such as the DMIC ). In the absence of such quality human capital, do you think government policy will make any difference ?

    What we need cutting edge universities that compete with Stanford and MIT in their research output. We need cutting edge technical institutes that can train and educate the Indians to take on the challenges that India is facing. We boast of the ITTs and IIMs, but how many publications do we see from these universities at international conferences ?

    The problem lies in our technical institutes that are not equipped to provide the education and training needed to bring the next gen technology to India our even solve our basic technology needs. Till this problem is solved, government policies are not going to make any difference.

  2. Pradeep Chakraborty
    December 15, 2009 at 8:46 am | #2

    Thanks for the comments, Nirav. I hope the issues of human capital and cutting edge universities are noted by those concerned and seriously looked into.

  3. Nirav A. Desai
    December 16, 2009 at 9:58 am | #3

    Hi Pradeep. The solution to this problem is very simple. Setting up quality research and training universities in India just requires more investments from the government in terms of salaries of the teachers, research infrastructure and massive funding for research projects that will make Indian Universities a hub for innovation.

    Here is an article on how the US Government spent close to 3% of its GDP on R&D during the Cold War years to develop the most successful innovation economy in the history of this world.

    newsweek.com/id/222836/page/1

  4. awakeindian
    December 16, 2009 at 2:37 pm | #4

    I do not completely agree that India lacks quality human capital in the field of electronics manufacturing. I have few friends who are working in the similar field in India, mainly in Banglore, however all of them work for MNCs. Indian companies like C-DOT, ITI, HFCL have been dragging their feet on obsolete technologies and spending more money on perks then R&D.

    A friend of mine who used to work for an Indian telecom hardware company left it after 2 years because he was still working on technology of 1995 when other global vendors were preparing for 2002!

    Regarding setting up the cutting edge universities, I am sure we know how many of IIT batch every year ends up in MIT or other american universities. I am sure India have the capabilities to convert CDOT/ITI into China’s Datang/Huawei. Many of the foreign companies like TI, AMD, Cadence in this sector have set up their India offices to tap the potential of human capital and grow their market in South Asia.

  5. Nirav A. Desai
    December 17, 2009 at 11:33 am | #5

    You see you talk of IITians doing well in MIT not in IIT. I ask – Would they have achieved the same level of technological excellence in India ? The answer is clearly no. It’s the system we have in India where innovation is not given sufficient encouragement that leads to this lag.

    Just a few month’s back IIT professors called a strike demanding pay hikes. If the leading innovators in India are not satisfied with their pays, is that not an area of concern?

    We all saw the CAT debacle and what struck me more was not that CAT failed but that we had an American company – Prometric to conduct CAT when we have world players like Infosys in India.

    So even if we have quality human capital, it doesn’t work in India in spite of supportive government policy. When will we break out of the shackled mind set and start making true innovation ? The answer to this question clearly lies in the changing the minds of the people not eh government policy.

  6. Prof. R. P. Kapur
    January 1, 2010 at 11:08 am | #6

    We do not need Indian Government as collaborator, but we need Indians as users. Unfortunately, today Government acts like a parasite that wants to feed on the technological applications by the regime of taxes, a plethora of different taxes which kill the golden goose. See what is the penetration of Internet and its afford. New technologies should be unshackled from Government control, and that can happen only if Government mandarins are kept at bay. Let market acceptance or rejection be the criteria. This is true for airlines, banking, education, telecom, and so on to every other sphere of legitimate business. Semiconductor industries need any different treatment!!!

  7. Pradeep Chakraborty
    January 1, 2010 at 2:02 pm | #7

    Thanks for your comment Prof. Kapur and wish you a very happy new year. Where are you based? Can I get in touch with you over email?

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