Pankaj Mohindroo, Chairman, India Cellular & Electronics Association (ICEA), elaborates on how Indian cellphone industry catapulted itself to being the second largest in the world. He also discusses how the industry is planning its progress towards an ‘audacious’ target of US$ 110 billion of mobile phone exports from the current level of US$ 3.6 billion.
IBT: What key positive changes do you see in India’s electronics manufacturing ecosystem over the past 5-6 years? What role have government interventions under Digital India like M-SIPs, Electronic Manufacturing Clusters, etc. played in this regard?
Pankaj Mohindroo: Digital India started in July 2015 and Make in India started in September 2014. Essentially, the one segment of electronics manufacturing which has performed brilliantly is mobile phone manufacturing, where the production has gone up by 1,100%. The rest of the electronics sector has not performed that well. In fact, our imports have gone up substantially.
The success of the mobile phone industry in India is a combination of many factors. I think that the most important one of them was the role played by MeitY and ICEA in shaping the policies in a manner, which focuses on moving towards self-sufficiency and import substitution, while giving priority to exports and value addition. At the same time, they tried to make sure that they don’t create an industry which is dependent and uncompetitive. This step-by-step approach helped us to reach these humongous numbers.
IBT: There is a view in the academic circles that although there is a remarkable improvement in the exports of the final product, our imports of components still exceed those of the finished product in value terms. So, what is the approach towards ensuring that greater value addition takes place within India?
Pankaj Mohindroo: Currently, India manufactures over 1 lakh crore electronic components required to produce mobile phones. We are planning to increase the imports of components massively. If you look at the import of electronic components in China, it amounts to US$ 400 billion (INR 30 lakh crores). India has to import these components, add value and export them to the rest of the world.
IBT: How is India currently placed vis-à-vis competing nations as a hub for electronics manufacturing? What are the key benefits and drawbacks of the ecosystem?
Pankaj Mohindroo: In volume terms, we are the second largest producer in the world. The other leading producers in the world are China and Vietnam. Although our exports have grown very rapidly, currently they are worth US$ 3.6 billion (INR 28,000 crores); which is just about 1.5% of the world exports. So, that’s the major portion that we have to occupy and we are accelerating very rapidly.
IBT: What role will the recently announced Rs 50,000 crore package including PLI, SPECS and EMC 2.0 play in helping India emerge as an electronics export hub by 2025? How will these initiatives help India build a strong component manufacturing base and what more needs to be done in this regard?
Pankaj Mohindroo: We are not waiting till 2025 to increase; we have numbers to achieve till 2025 – US$ 110 billion of mobile phone exports from the current level of US$ 3.6 billion. It’s a very audacious target and we are determined to do it. After that, the overall electronics manufacturing target is around US$ 400 billion. So, bulk of it will be exports.
The recently announced trilogy of schemes – PLI, SPECS and EMC 2.0 – have laid the foundation for starting something big. It fulfills the Hon’ble Prime Minister’s vision for making India a global hub for manufacturing. The impact of the PLI scheme will be visible before the end of FY 2020-21. PLI is a very critical policy for the growth of our mobile phone exports. It is the engine of growth for the entire electronics industry.
IBT: How do you view the potential of India in terms of high end manufacturing and innovation-led growth in mobile handsets? What needs to be done to ensure that India stays in step with the curve in terms of quality and technology standards in this segment?
Pankaj Mohindroo: This is an area where we have to add very substantially. This is particularly important because we have a lot of global R&D and development happening there, but we have to build an ecosystem to build our domestic companies. Only then can the domestic companies become global champions.
We have to plan this strategically. Currently, India does not have in-house technology and R&D. Global lead firms (Samsung, Apple, Huawei, Oppo and Vivo) can bring in advanced and cutting-edge technology that may not only aid their production processes, but also that of domestic firms. Domestic companies can initially begin by becoming white label suppliers to some of the global lead firms and in turn, improve their production systems. With the right policy environment and stimulus, these Indian companies could reach global scale.
IBT: The industry is dominated by a number of SMEs. How is the government planning to help them become more competitive and scale up production?
Pankaj Mohindroo: The way the global electronics industry is structured, large companies lead the industry. The SMEs are second and third tier suppliers to these companies. So, the best thing for India to do is to build large global companies and automatically, SMEs will start getting built accordingly.
IBT: How has the COVID-19 crisis impacted the supply chain and business turnover for the industry?
Pankaj Mohindroo: The spread of COVID-19 and the subsequent lockdown of countries has brought economic activity to a standstill across the globe. As a result, supply chains stand disrupted globally.
In addition, the ongoing crisis has also highlighted the vulnerability of the domestic mobile phone manufacturing system, being heavily dependent on import of parts and components for undertaking manufacturing/assembly operations in India. This calls for proactively seeking investments through global lead firms and re-orienting supply chains from being import-led to domestic production.
However, it is also relevant to highlight the importance of exports in the creation of a domestic manufacturing ecosystem and the economic advantages it holds. The present crisis may provide a conducive environment for global firms to diversify supply chains and establish production capabilities in the country. India needs to move purposefully, approaching companies and supply chains in a targeted manner and address their particular concerns with alacrity
IBT: How is the industry planning its recovery, taking into account the overall economic scenario and consumer sentiment amid the COVID-19 pandemic?
Pankaj Mohindroo: The mobile manufacturing and components sector is ready to lead India’s post COVID-19 exit strategy. India shall pursue a three-stage strategy to compete with the best in the world. From May to July 2020, focus may be kept on restarting operations and reaching 100% capacity. From August to November 2020, India may aim to restore complete normalcy including supply chain, employee workforce, input imports, and normalise operations for both domestic supplies as well as export markets.
In the period from December 2020 till 2025 (i.e. for the next 5 years), India needs to chart its path towards becoming a leading exporter of mobile phones in the world, while pushing mobile exports as a top ranking Indian export from where it currently stands. The government may be required to co-operatively work with the industry in the second half of 2020 during the restart and restoration stage, wherein the industry might need additional help and reconsideration of targets, investments and other forms of stimulus till March 2021.
Production has restarted. We hope to hit 100% production by August. As the PLI scheme kicks in, we plan to ramp up global exports from India to reach our target of US$ 110 billion by 2025-26. There isn’t a moment left to waste.
Pankaj Mohindroo is Chairman, India Cellular & Electronics Association (ICEA), an apex industry body representing the entire electronics sector in India.
