ELECTRONICS November 2010 ELECTRONICS November 2010

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Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

2 ADVANTAGE INDIA Electronics November 2010

Advantage India India has several research-oriented institutes such as the Indian Institute of Science (IISc) and the Indian Institutes of Technology (IITs), which focus on creating innovative products.

Strong India has a large pool of technically skilled Out of 579 SEZs in India, more research workforce driven by the presence of 15 than 60 per cent are devoted to support IITs, 20 National Institutes of Technology IT, semiconductors and Robust (NITs), and 2,872 engineering colleges. Large pool of electronic hardware sector. infrastructure skilled development — workforce SEZs Advantage India Growth in per Significant With an annual growth rate of 20 capita income export India exports around 20 per per cent in per capita income, the and corporate potential cent of its total electronics demand for electronics hardware is spending production. projected to increase to US$ 400 Conducive billion in 2020 from the present regulatory demand of US$ 45 billion. environment

India has investor-friendly and pro-investment norms for electronics manufacturing such as Export Promotion Capital Goods Scheme (zero duty to exporters of electronic products) and Duty Exemption and Remission Schemes.

Source: EY research; Ministry of Human Resource Development, GoI 2009–10 annual report; Indian Electronics industry – overview; www.mit.gov.in; ―SEZ Approvals granted under the SEZ Act, 2005‖, SEZ India website, http://sezindia.nic.in, accessed on 03 December 2010 SEZs: Special economic zones 3 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

4 MARKET OVERVIEW Electronics November 2010

Market overview … (1/4) • The electronics industry is categorised into the following segments:

• Consumer electronics

• Industrial electronics

• Computers

• Communication and broadcasting equipment

• Strategic electronics

• Electronic components

• Electronic hardware production in 2009–10 was US$ 22.90 billion as compared to US$ 20.26 billion in the previous year.

• Demand in consumer electronics and mobile segment has increased by 5 per cent in 2009–10 . With the increase in local production in this segment, the import have declined by 26 per cent.

• Increasing demands because of relatively higher growth rate in the Indian economy and increasing disposable income with middle class has given India a lucrative chance to increase its electronic hardware production. Source: Department of Information Technology (DIT) 2009–10 annual report.

5 MARKET OVERVIEW Electronics November 2010

Market overview … (2/4)

• The production of the electronic component Sales — segment-wise share (2008–09) (per cent) segment for 2009–10 is estimated to be US$ 2.78 billion with a growth rate of 11 per cent. Communication and Broadcasting sector 7 • 10 Consumer electronics The total production of consumer electronics in 28 2009–10 is estimated to be US$ 6.28 billion, indicating a growth of 18 per cent over the Computer industry previous year. Among consumer electronics, 21- 14 Control Instrumentation and inch colour TV continues to dominate the market Industrial sector with a 65 per cent share. 14 Electronic Components 27 Strategic Electronics

Sources: ―Indian Electronics industry – overview,‖ Electronic Industries Association of India website, www.elcina.com, Indian Electronics industry – overview; www.mit.gov.in

6 MARKET OVERVIEW Electronics November 2010

Market overview … (3/4)

During 2005–10, communications and broadcast has witnessed the highest growth.

Production growth rate per segment (CAGR 2005–10) (per cent)

Electronic components 8.7

Strategic electronics 18.4

Communication and broadcast sector 45.6

Computer industry 10.4

Control instrumention & industrial sector 10.4

Consumer electronics 12.4

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Sources: ―Indian Electronics industry – overview,‖ Electronic Industries Association of India website, www.elcina.com, Indian Electronics industry – overview; www.mit.gov.in

7 MARKET OVERVIEW Electronics November 2010

Market overview … (4/4)

The market has witnessed consistent growth over the past years.

Electronics industry production

25.00 22.90 20.26 20.00 CAGR: 17% 17.59

15.00 13.75 11.79 10.52

10.00 (in US$ US$ (inbillion)

5.00

- 2004-05 2005-06 2006-07 2007-08 2008-09 2009-2010

Source: Department of Information Technology (DIT) 2009–10 annual report.

8 MARKET OVERVIEW Electronics November 2010

Exports

• Exports from the electronics industry witnessed a CAGR of 31 per cent between 2004–05 and 2009–10.

• Communication and broadcast sector constitute 39 per cent electronics exports, followed by electronic components.

• Exports in the electronics industry are estimated to grow from US$ 4.4 billion in 2009 to US$ 15 billion in 2014 and US$ 80 billion in 2020, at a CAGR of 33 per cent.

Electronics industry exports Segment-wise exports (2008–09) (per cent)

7.00 6.51 5 Communication and 8 6.00 broadcast sector 5.00 CAGR Electronic components 31% 14 39 4.00 Control instrumention & 3.00 industrial sector 1.67 (in US$ US$ (inbillion) 2.00 Consumer electronics 1.00 34 Computer industry 0.00 2004-05 2009-10

Source: Department of Information Technology (DIT) 2009–10 annual report. 9 MARKET OVERVIEW Electronics November 2010

Key players … (1/3)

The Government of India (GoI) established Bharat Electronics Ltd (BEL) in Bengaluru, India, under the Ministry of Defence in 1954 to meet the specialised electronic needs of the Indian defence services. BEL focusses on contract manufacturing, design and manufacturing Bharat Electronics Ltd services, semiconductor device packaging and software development and quality assurance facilities. The company’s turnover has increased from US$ 0.68 billion (INR 32.71 billion) in 2004–05 to US$ 1.06 billion (INR 50.93 billion) in 2009–2010. In 1985, through a technical collaboration with Japan’s Toshiba Corporation, Videocon International Ltd launched India's first world class colour TV. Today, Videocon International Ltd, Videocon Group’s flagship company, is India's leading manufacturer of consumer Videocon electronic products. Videocon is now a global player and the first Indian company to win the International Ltd prestigious Conformite Europeene (CE) approval for exporting colour TVs to Europe. Videocon also has a presence globally, with operations in the Middle East, Europe, Indonesia and South Africa. Established in 1997, LG Electronics India Limited is a wholly owned subsidiary of LG Electronics, South Korea. In India, LG is the market leader in consumer durables and is LG Electronics India recognised as a leading technology innovator in the IT and mobile communications business. Limited LG Electronics has two manufacturing units in India with the latest technologies at par with international standards. These facilities are among the most eco-friendly units within all LG manufacturing plants in the world.

10 MARKET OVERVIEW Electronics November 2010

Key players … (2/3)

HCL Infosystems Ltd manufactures and markets PCs, PC servers, storage solutions and display products, among other electronic products. HCL’s computer hardware manufacturing plants HCL Infosystems Ltd include four facilities spread across the country. In addition, the company offers IT consulting, technology integration services and software solutions. HCL’s revenue has grown from US$ 0.41 billion (INR 19.7 billion) in 2004–05 to US$ 2.52 billion (INR 121.14 billion) in 2009– 2010. Samsung India Electronics Ltd, a subsidiary of US$ 56 billion Samsung Electronics Co Ltd, has been operating in India since 1995. It is a leading provider of high-tech consumer electronics, Samsung India home appliances, IT and telecom products in the country. Samsung India has set up Electronics Ltd manufacturing facilities for color TVs, microwave ovens, washing machines, air conditioners, color monitors and, more recently, refrigerators. The company has a plant in Noida, Uttar Pradesh. Moser Baer India Ltd (MBIL) is the world's second-largest company in the optical storage media segment. MBIL supplies to a number of branded players such as Sony, Verbatim, TDK, Maxell, Imation and Samsung and has collaborative R&D programs as well as reciprocal training programmes with these companies. Further, Moser Baer also has a presence in the Moser Baer India Ltd photovoltaic and home entertainment segments. Moser Baer's products are manufactured at its three state-of-the-art manufacturing facilities. Its revenue has grown from US$ 0.29 billion (INR 14.21 billion) in 2004–05 to US$ 0.43 billion (INR 20.52 billion) in 2009–2010.

11 MARKET OVERVIEW Electronics November 2010

Key players … (3/3)

• Jabil has a 176,000 sq ft facility in Ranjangaon near Pune, Maharashtra. • The company offers printed circuit boards, enclosure integration, distribution and repair services with in-region design services support. • Jabil services the instrumentation, networking, peripherals and telecommunications Jabil industries. • The company acquired Celetronix — one of the largest electronic equipment manufacturers in India in 2006. The acquisition gave Jabil an additional 270,000 sq ft of manufacturing space.

• Flextronics ventured into India in 2001. • The company offers high-value, high-margin design services for mobile phones and Flextronics telecom/networking software. • Flextronics has a 692,457 sq ft manufacturing facility in Chennai.

• Inaugurated in 2005, Elcoteq Bengaluru’s main businesses in India include wireless communication terminal products, wireless communications, network equipment and after- sales services.

• The Bengaluru plant is one of Elcoteq’s four volume manufacturing plants in the Asia-Pacific Elcoteq region and the first in India.

• The company’s plant (100,000 sq ft) in Bengaluru is equipped with the latest manufacturing technologies, including surface mount technology (SMT), testing and electrostatic discharge (ESD) control to support its modernised manufacturing process.

12 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

13 INDUSTRY INFRASTRUCTURE Electronics November 2010

Industry infrastructure — SEZs … (1/4)

Developer Type Size in hectares

Andhra Pradesh Industrial Infrastructure Corporation Ltd (APIIC) Electronic hardware 111.00

Stargaze Properties Private Ltd (Andhra Pradesh) Electronic hardware, IT/ITeS 68.96

S2tech.com India Private Ltd (Andhra Pradesh) Electronic hardware, IT/ITeS 10.12

Chandigarh administration Electronic hardware, IT/ITeS 31.49

Gujarat Industrial Development Corporation (GIDC) Electronic products 28.00

Mexus Corporation private Ltd (Gujarat) Electronic hardware, IT/ITeS 11.11

Ireo Investment Holding III Ltd (Haryana) Electronic hardware, IT/ITeS 40.00

GP Realtors Pvt Ltd Phase II (Haryana) Electronic hardware, IT/ITeS 11.03

GP Realtors Pvt Ltd Phase III (Haryana) Electronic hardware, IT/ITeS 17.18

Sohna Buildcon Private Ltd (Haryana) Electronic hardware, IT/ITeS 10.00

Wellgrow Buildcon Private Ltd (Haryana) Electronic hardware, IT/ITeS 24.29

Progressive Buildestate Private Ltd (Haryana) Electronic hardware, IT/ITeS 34.41

Note: This is an indicative list.

14 INDUSTRY INFRASTRUCTURE Electronics November 2010

Industry infrastructure — SEZs … (2/4)

Developer Type Size in hectares

Mikado Realtors Private Ltd (Haryana) Electronic hardware, IT/ITeS 11.02

Ittina Properties Private Ltd (Karnataka) Electronic hardware, IT/ITeS 15.73

Opto Circuits India Ltd (Karnataka) Electronic hardware park 12.23

Opto Infrastructure Ltd (Karnataka) Electronic hardware, IT/ITeS 100.00

Karnataka State Electronics Development Corporation Ltd(KEONICS) Electronic hardware, IT/ITeS 14.5

Gopalan E-Park Electronic hardware, IT/ITeS 11.35

Kerala Industrial Infrastructure Development Corporation (Kerala) Electronic industries 12.14

Magarpatta Township Development and Construction Co Ltd (Maharashtra) Electronic hardware, IT/ITeS 11.98

Kumar Builders Township Ventures Private Ltd (Maharashtra) Electronic hardware, IT/ITeS 49.10

City Parks Private Ltd (Maharashtra) Electronic hardware, IT/ITeS 30.00

Siddhivinayak Knowledge City Developers Private Ltd (Maharashtra) Electronic hardware, IT/ITeS 12.14

Pride Infrastructure & SEZ private Ltd (Maharashtra) Electronic hardware, IT/ITeS 12.34

Note: This is an indicative list.

15 INDUSTRY INFRASTRUCTURE Electronics November 2010

Industry infrastructure — SEZs … (3/4)

Developer Type Size in hectares Modern India Property Developers Ltd (Maharashtra) Electronic hardware, IT/ITeS 14.77 Benchmark Realty Private Ltd (Maharashtra) Electronic hardware, IT/ITeS 10.0 Lark Projects Private Ltd (Punjab) Electronic hardware, IT/ITeS 10.9

Somani Worsted Ltd (Rajasthan) Electronic hardware, IT/ITeS 20.0

Flextronics Technology India Private Ltd (Tamil Nadu) Electronic hardware and related services 101.0

Arun Excello IT SEZ Private Ltd (Tamil Nadu) Electronic hardware, IT/ITeS 10.9

State Industries Promotion Corporation of Tamil Nadu Ltd Electronics hardware 140.7

Foxconn India Developers Ltd (Tamil Nadu) Electronic hardware 11.0

Coimbatore Hi-tech Infrastructure Private Ltd (Tamil Nadu) Electronic hardware, IT/ITeS 60.7

KPR Developers (Tamil Nadu) Electronic hardware, IT/ITeS 20.5

True Developers Private Ltd (Tamil Nadu) Electronic hardware, IT/ITeS 11.6

Best and Crompton Engineering Ltd (Tamil Nadu) Electronic hardware, IT/ITeS 10.8

Note: This is an indicative list.

16 INDUSTRY INFRASTRUCTURE Electronics November 2010

Industry infrastructure — SEZs … (4/4)

Size in SEZs — sector composition (2009–10) (per cent) Developer Type hectares IT/ITES/Electronics Hall Marc Techno Park Electronic 11.6 Hardware/Semiconductors Private Ltd (Tamil Nadu) hardware, IT/ITeS 22 Pharma Uppals IT Projects Private Electronic 30.8 Ltd (Uttar Pradesh) hardware, IT/ITeS Textile 4 Uppal Housing Ltd Electronic (Hyderabad, Andhra 10.5 4 Multi Product hardware, IT/ITeS 3 63 Pradesh) 4 Biotech Sarv-Mangal Realtech Electronic Private Ltd (Noida, Uttar 10.0 hardware, IT/ITeS Others Pradesh) Oval Developers Private Electronic 12.1 Ltd (West Bengal) hardware, IT/ITeS Note: According to SEZ Act, 2005. Source: www.sezindia.nic.in Videocon Realty and Infrastructure Electronic 10.0 Development Private Ltd hardware, IT/ITeS (West Bengal)

Note: This is an indicative list.

17 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

18 INVESTMENTS Electronics November 2010

Investment … (1/2)

Cumulative FDI inflows Foreign technology transfers (FTTs)

April 2000 to August 2010 August 1991 to December 2009 Amount of FDI Sector Number (US$ million) Sector

Electronics 826.1 Total number of FTTs 8,106

Computer software Electrical equipment, including 10,330.5 1,263 and hardware computer software and electronics

Source: ―Fact Sheet – August 2010 on Foreign Direct Investment (FDI),‖ Department of Industrial Policy and Promotion website, www.dipp.nic.in, accessed on 28 November 2010

19 INVESTMENTS Electronics November 2010

Investment … (2/2) Key deals (2010) Deal value (US$ Deal date Target name Acquirer million) September 28, 2010 Tyco Electronics Ltd-Energy Business Raychem RPG Ltd NA September 21, 2010 Citigroup Inc-Datacenter Buederich Wipro Technologies NA August 26, 2010 Venture Infotek Global Pvt Ltd Atos Origin SA NA September 20, 2010 Micromax Informatics Ltd Investor Group 43.8 October 14, 2010 A Little World Pvt Ltd SBI 18.1 July 9, 2010 In2Soft GmbH KPIT Cummins Infosystems Ltd 3.8 October 18, 2010 El Corp Ltd Yam Keong Chee 1.0 June 30, 2010 MMG India Pvt Ltd Delta Magnets Ltd NA April 12, 2010 Dynamic Test Solutions Inc Tessolve Services Pvt Ltd NA March 5, 2010 Undisclosed Electronic Security Co Schneider Electric India Pvt Ltd NA Zicom Electronic Security Systems Ltd- March 1, 2010 Schneider Electric SA 48.89 Electronic Security System Home Solutions Retail(India) Ltd- February 24, 2010 Pantaloon Retail(India)Ltd NA Consumer Durable,Furniture Business February 24, 2010 Wavetel Mobiles Sangeetha Mobiles Pvt Ltd 2.81 February 22, 2010 TexTech International Pvt Ltd Jouve 5.41 February 17, 2010 SEI Cable Accessories(India)P vt Ltd Sumitomo Electric Industries Ltd 0.13 January 21, 2010 MIC Electronics Ltd Investor Group NA January 21, 2010 Global Access Spice Retail Ltd NA January 13, 2010 BA Systems India Private Ltd OneAccess Networks SA NA January 12, 2010 Micromax Informatics Ltd TA Associates Inc 45.00

Source: Thomson ONE Banker 20 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

21 POLICY AND REGULATORY FRAMEWORK Electronics November 2010

Policy and regulatory framework

Key policy initiatives

• There is no customs duty on ITA-1 items (217 items).

• Excise duty on computers has been removed. Microprocessors, hard disc drives, floppy disc drives and CD ROM drives are exempt from excise duty.

• Foreign equity participation of upto100 per cent is permissible.

• The GoI has decided to set up Information Technology Investment Regions (ITIRs) to provide superior infrastructure support.

• Units undertaking the export of their complete range of goods and services may be set up under the EHTP scheme.

Source: Indian Electronics industry – overview; www.mit.gov.in ITA-1: Information Technology Agreement

22 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

23 OPPORTUNITIES Electronics November 2010

Opportunities … (1/2)

• Domestic consumption is expected to grow at a CAGR of 22 per cent for the period 2009–2020. Projected growth in On the other hand, domestic production comprises less than 45 per cent of the total consumption. domestic Thus, domestic manufacturing companies have the opportunity to expand the production to US$ consumption 100 billion by 2014 and US$ 400 billion by 2020, and in return significantly increase the contribution to GDP by 2020.

• Electronics facilitates e-governance, developmental schemes and initiatives launched by the government, such as Sarva Shiksha Abhiyaan (SSA), Restructured-Accelerated Power Development E-governance and Reform Programme (R-APDRP) and Mahatma Gandhi Rural Employment Guarantee Act (MGREGA).

• The GoI has proposed a minimum investment of US$ 555 million for semiconductor manufacturing plants and US$ 222 million for ecosystem units. This is considered a major step toward attracting GoI investments foreign companies to set up manufacturing facilities in India. The policy covers wafer fabs and ecosystem units such as LCDs, storage devices, plasmas, photovoltaics, solar cells and nanotechnology products, and also includes the assembly and testing of such products.

Source: Department of Information Technology (DIT) 2009–10 annual report; EY Research

24 OPPORTUNITIES Electronics November 2010

Opportunities … (2/2)

Electronic • With growth engines such as strong demand, availability of skilled labor and increase in GoI spending components in related verticals, electronic component segment production is expected to reach US$ 2.6 billion in 2014 and US$ 3.4 billion in 2020.

• Low penetration levels in most consumer durables provides an opportunity to manufacturers to Low penetration in increase demand by reaching for untapped market . According to the National Council for Applied consumer durables Economic Research (NCAER), in 2008 penetration levels for white goods stood at 31.9%, refrigerators at 16.1%, PCs at 0.08% and colour TVs at 21.3%.

Source: Department of Information Technology (DIT) 2009–10 annual report; EY Research

25 ELECTRONICS November 2010

Contents

 Advantage India

 Market overview

 Industry Infrastructure

 Investments

 Policy and regulatory framework

 Opportunities

 Industry associations

26 INDUSTRY ASSOCIATIONS Electronics November 2010

Industry associations Electronics Industries Association of India (ELCINA) ELCINA House, 422 Okhla Industrial Estate, New Delhi – 110 020, India Phone: 91 11 26924597,26928053 Fax: 91 11 26923440 E-mail: [email protected] Website: www.elcina.com/

Telecom Equipment Manufacturers Association (TEMA) 4th Floor, PHD House, Opp. Asian Village, New Delhi – 110 016, India Tel: 91 11 26859621 Fax: 91 11 26859620 E-mail: [email protected] Website: http://www.tfci.com/cni/tema.htm

Manufacturers Association for Information Technology (MAIT) 4th Floor, PHD House, Opp. Asian Games Village, New Delhi 110 016, India Tel: 91 11 26855487 Fax: 91 11 26851321 E-mail: [email protected] Website: www.mait.com/ 27 NOTE Electronics November 2010

Note

Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Conversion rate used: US$ 1= INR 48.

28 ELECTRONICS November 2010

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