exports: “Supply chain problems play a troubling role in the export of electronic equipment”
Sandeep Narula, Chairman of the Electronic and Computer Products Export Promotion Council (ESC). Edited excerpts from the interview:
ET Digital (ET): How are the exports of electronics and software going?
Sandeep Narula (SN): The pandemic has impacted all aspects of business, and electronics and software are no exception. However, during the past fiscal year, we found that it had not been very seriously impacted. Exports of electronic equipment fell slightly, while exports of software remained stagnant. We haven’t seen the growth we expected. This year, we were very optimistic at the start. But with the second wave taking the damage to new levels, we have a revised estimate of electronics exports. It is now between 10.5 and 11 billion dollars. We estimate software exports at nearly $ 145 million.
ET: Why are hardware exports not performing well?
NS: Supply chain issues are a spoiler for electronics exports. The components industry in India has not reached its maturity. Our supply chain requirement is highly dependent on neighboring countries. Much on China. Material means the physical movement of goods and delays and supply chain constraints affect us.
ET: We all know that countries all over the world are highly dependent on China. How does this become a problem for India? What can we do to make India a hub for the export of electronics?
NS: India has been trying for a long time to excel in the electronic hardware segment, as we have done in the software area. From 2014, the government started to focus on strengthening India into a global hub. For this, a step-by-step methodology must be followed. India has launched PLI (Production Incentive) programs for various sectors and we have developed a phased manufacturing plan. In this, we will see low products that could be developed for manufacturing here, and later we can start manufacturing semiconductors as well. This, of course, will take some time to come into effect.
ET: Where did we miss out on electronics and how did China get ahead of us?
NS: It requires serious soul-searching. But the fact remains that government policies were not conducive to the localization of electronic equipment. This was followed by the fact that our industry has not invested heavily in research and development. So we gave what we could have had.
ET: Making semiconductors is not easy because you need a lot of infrastructure. How are we moving along this path?
NS: There are very few companies that have semiconductor factories in the world, and these companies cater to the whole world. When Covid started in 2020, most factories laid off their workers and shut down. They believed this drop in demand from the pandemic would last a long time, especially in the auto industry – the world’s biggest consumer of semiconductors. But several sectors – including consumer electronics, automotive – have seen new leaps in numbers, causing a serious supply constraint across the world. Now we have a serious issue on our hands as factories have been booked for a long time and delivery time has increased by over 52 weeks for critical components. Unfortunately, we don’t have a fab in India, and we are absolutely dependent on Taiwan, Korea, and other places for it.
ESC has come up with a semiconductor study paper – which will be released shortly – where we talk about a solution the government can consider. I’m sure the government is also working to encourage the semiconductor factory vertical. It will be a long-term process, but we need to deal with it urgently.
With the PLI program, India is now a net exporter of mobile phones: Sandeep Narula of ESC
Long dependent on imports, Indian electronics manufacturing may well turn the page. The government’s production-linked incentive program (PLI) could show the first signs of success, as the country has now shifted from a net importer of cellphones to a net exporter, said Sandeep Narula, chairman of the Board of promotion of exports of electronic and computer software (ESC).
ET: What will be the role of PLI in national manufacturing?
NS: One example that stands out is that of the mobile industry, of which we were the net importers. Imports of electronics would have exceeded the bill for oil imports into our country. This shows how great the potential of electronics is in India. With the establishment of the PLI, we have become a net exporter of mobile phones. We started with the assembly, then we can move on to the step-by-step manufacturing of LCD screens and plastic molds, power supplies and some components. The whole supply chain process for the cell phone and electronics industry will take a long time to put in place, but it will help us in the future.
ET: How do we position ourselves in the development of machine learning and artificial intelligence in the software segment?
NS: We have put a lot of emphasis on quantum technologies, especially AI and the Internet of Things (IoT). In fact, ESC recently did an IoT show on a virtual platform. We got a very good response not only from Indian exhibitors who developed technologies and solutions based on advanced technologies, but also from buyers all over the world. I see that the number of products and solutions in advanced technologies is increasing, and this is a value-added segment for our country. We can’t compete with China or Vietnam at this point, but we’re in a very good position.
“One example that stands out is that of the mobile industry, where we were the net importers. With the establishment of the PLI, we have become a net exporter of mobile phones ”
ET: There is a lot of geopolitical pressure, especially when it comes to importing electronics and software. What are your opinions on this subject?
NS: A trade war is underway between China and the United States. The world realized that they couldn’t put all the eggs in one basket. This is an opportunity for India and we can become the right global sourcing center for electronics as long as the industry starts looking at the global market instead of just focusing on India.
ET: What kind of incentives would you like from the government to boost exports?
NS: India has been a late starter as far as the hardware sector is concerned. We are very strong in the software segment. I think the biggest support we need right now is liquidity. The government is trying to do something but it is not enough. This will help us to excel in exports. The government can give us some relaxation on income tax, including IGST (Integrated Goods and Services Tax) which is a problem for exporters. Then we have outstanding issues with MEIS (Merchandise Exports from India Scheme), which has been replaced by RoDTEP (Remission of Duties and Taxes on Export Products). These issues need to be resolved as soon as possible so that exports can do better in the times to come.
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