Electronics Industry Growth

By now, it is a well-accepted fact that India is in the throes of an economic slowdown. Decreased consumer spending and consumption are causing the manufacturing sector to experience decelerated growth, which in turn reduces employment, leading to decreased purchasing power and decreased spending — a vicious cycle. But among the many stories of slowdown, one industry appears to have escaped the slump: electronics. In this story, Clean India Journal dives deep into industry growth, purchasing trends, manufacturing forecasts and more, to showcase how the electronics industry — with its superlative requirements and standards for cleaning — is growing against all odds. As the industry grows, so will the demand for cleaning chemicals and equipment.

Present Scenario

At the moment, India’s electronics production is evaluated at INR4.58 lakh crore (US$ 63.62 billion), after growing at a compound annual growth rate (CAGR) of around 25% over the most recent four years. The biggest contributors to this business boom are mobile phones.

In FY 14-15, 5.8 crore handsets were manufactured with a value of INR 18,900 crore; in FY 19-20, this figure is expected to reach 29 crore handsets with a worth of a whopping INR 1.81 lakh crore. A fast-spreading electricity network and reliable data coverage have taken this phenomenon to Tier II and Tier III cities, as well as rural areas.

These figures are for devices manufactured in India. Five years ago, India imported 80% of its mobile phones; now, 94% of all devices used in India are made-in-India. Mobile exports grew over eight-fold to INR 11,200 crore in 2018-19, and exceeded imports for the first time ever. In the first quarter of this financial year alone, handset exports reached around INR 7,000 crore, well on target for total exports of INR25,000 crore this financial year. According to the Indian Cellular and Electronics Association, there has been 800% year-on-year growth in exports during FY 18-19 over FY 17-18 figures.

​ [box type=”shadow” ] Mobile exports grew over eightfold to INR 11,200 crore in 2018-19, and exceeded imports for the first time ever. [/box]

Cell phones are not the only electronics in demand; digital camera sales are up 250-300% since last year, and headphones sales have shot up by 30- 40%. With many consumers upgrading from small to midand- large TV screens, sales of televisions above 32-inch screen size have grown by 10% in the offline market and 90% in the online market in the first part of this year, as compared to the same period last year.

The proliferation of affordable streaming platforms and our nation’s cricket-craze have driven up sales of smart televisions (38% offline, 164% e-commerce) and ultra-high definition televisions (85% offline, 116% e-commerce) in 2019. Clearly, the recession has not had much effect on consumer behaviour when it comes to the electronics segment.

Diwali Dhamaka

The festive season — from Onam in Kerala to Navratri- Durga Puja-Dussehra, Karva Chauth, Dhanteras and Diwali — is the biggest shopping period in the country, accounting for almost 35- 40% of annual sales of most consumer-facing companies. There were concerns that this year, the slowdown would overshadow festive sales, gravely cutting into the profits of electronics companies. But this year, the season saw demand grow for white goods and home appliances in the range of 20-35%.

Aggressive marketing and discounts – as much as 40-50% during Diwali sales — helped the industry see historic growth. Availing of the EMI option to purchase products also made them affordable to a wider spectrum of consumers; 50% of all appliances and one out of three smartphones bought by customers from Amazon were on EMIs.

As expected, the most selling items were mobile phones. Purchases from e-commerce platforms in this period will lead to an addition of six million new 4G smartphones to the user base in India. Many of these customers were existing mobile users who upgraded to smartphones. The sales figures are impressive too. For example, OnePlus recorded INR 1,500 crore in sales from Navratri to Dhanteras alone. Xiaomi sold more than 500,000 smart televisions in the same period.

Brick-and-mortar stores too saw a fillip to their bottom line. Croma saw a growth of over 20% compared to the same period last year, while Reliance Digital’s same-store sales went up in double digits. While footfalls were lesser or equal to last year, each consumer’s shopping budget was more this year, adding to an increase in overall sales. Premium appliances such as frost-free refrigerators and fully automatic washing machines drove up sales of appliances by over 25%.

Recent Developments

Apple aims to make India one of its key global production hubs. This will include assembly of the latest flagship iPhones in sync with worldwide release schedules, as part of its strategy to prevent a bulk of its production from being dependent on China. The company has recently started commercial production of the iPhone XR at the Foxconn facility near Chennai, following which it plans to start making the latest iPhone 11 series. Apple’s global suppliers have already set up base in India and are manufacturing parts and accessories such as chargers and battery packs locally. Apple is also preparing to set up company-owned retail stores and start direct online sales in India.

​ [box type=”shadow” ] The Indian appliance and consumer electronics market is expected to increase at a 9% CAGR to reach INR 3.15 trillion (US$ 48.37 billion) by 2022. [/box]

The Future

The government has set a target of ‘Net Zero Imports’ in electronics by 2020, under the Digital India roadmap released in 2014. The National Policy on Electronics 2019 has set the target of making 100 crore mobile handsets domestically by 2025, with a value of around INR 13 lakh crore. It also intends to ramp up local assembling of devices in the whole electronics worth chain to accomplish a turnover of INR 26 lakh crore (USD 400 billion) by 2025. The government’s boost for the production of mobile chargers itself will lead to the setting up of over 350 factories.

Of the above target of 100 crore mobile handsets, 60 crore units will be for exports with an estimated value of around INR 7 lakh crore. Unlike most other consumer segments where weak sentiment is pushing Indians towards value-for-money buying decisions, in mobile phones, there is a clear trend towards choosing premium products. Average sales price for smartphones in India is expected to rise from $140 three years ago to $200 early next year.

Companies too are injecting funds to scale up their India operations. Micromax plans to invest US$ 89.25 million by 2020 for transforming itself into a consumer electronics company, Haier recently announced an investment of $415.80 million as it aims for a two-fold increase in its revenue by 2020, while Samsung India in the process of investing INR4,915 crore to double capacity in its Noida facility, from 68 million units a year to 120 million units a year by 2020.

The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design & Manufacturing sector. The limit for FDI in single-brand retail has been increased from 51% to 100%, and the government is planning to hike FDI in multi-brand retail to 51%. This will encourage international electronic giants to set up production facilities in India.

The bottom line is this: the Indian appliance and consumer electronics market is expected to increase at a 9% CAGR to reach INR3.15 trillion (US$ 48.37 billion) by 2022. Domestic production facilities will increase manifold, and their stringent SOPs for cleanliness will drive up the demand for cleaning products too.

Compiled by Mrigank Warrier