India's electronics market is one of the world's largest in terms of consumption and is expected to grow owing to a surge in demand at a compound annual growth rate of close to 25% over the period. India's domestic electronics Industries production has already increased from $ 29 billion in 2014-15 to $ 67 billion in 2020-21. This article will explain to you about Electronic Industries which will be helpful in preparing Geography for the UPSC Civil service exam.

Electronic Industries in India

• Between FY12 and FY21, India's per capita disposable income and private consumption doubled, making it one of the world's largest markets for electronic products.
• The majority of the production occurs in India's final assembly units (last-mile industries).
• Therefore focusing on them would aid in the development of deep backward linkages, thereby inducing industrialization.

Segments of the Indian Electronic Industry

• The electronic devices industry is segmented as follows:
  • Consumer electronics
  • Industrial electronics
  • Communications and Broadcasting electronics
  • Strategic electronics
  • Computer hardware
  • Electronic components
  • LED products
• Domestic electronics production currently accounts for only 2.3 percent of India's GDP, with imports meeting half of the country's electronics demand.
• With its shifting policy structures and ever-increasing consumer base, India has the potential to reduce import dependency and become a manufacturing hub for both domestic and export-led electronics demand.

Nature Of Distribution

• The bipolar nature of India's electronics manufacturing landscape is characterized by many large indigenous and multinational companies on the one hand and a much larger number of smaller companies on the other.
• Small and informal units, like other manufacturing sectors in India, make up the majority of indigenous electronics manufacturers.
• They limit their production scale, value-added, and product complexity.
• The country's arcane and complex labor laws are one of the main reasons for this.

Government Initiatives

• The Production Linked Incentive Scheme (PLI) for Large-Scale Electronics Manufacturing proposes a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain, which includes mobile phones, electronic components, and ATMP units.
• On July 27, 2012, the Modified Special Incentive Package Scheme (M-SIPS) was notified in order to compensate for disability and attract investments in electronic manufacturing.
• The scheme is applicable to both new and existing projects.
• Electronic Manufacturing Clusters (EMCs) - This program helps companies build world-class infrastructure for their electronics manufacturing operations.
• The Visvesvaraya Ph.D. The scheme for Electronics and Information Technology was established by the Ministry of Electronics and Information Technology with the goal of increasing the number of PhDs in Electronics System Design and Manufacturing.
• To encourage domestic manufacturing, the government has provided various other tax and tariff breaks, investment subsidies, preferential market access in government procurement and export subsidies.

*To know more about this, click Push to Electronic Manufacturing in India

Challenges

• Missing Profits: Despite India's rapid growth in electronic manufacturing, the net value added by manufacturing units is still very low.
• Because most components are imported rather than locally sourced, the net value addition ranges between 5% and 15%.
• It means that local value addition accounts for only USD 7-10 billion of a USD 2.1 trillion global markets.
• Upstream Industries with Limited Indigenous Capability: Due to more complicated processes, value addition at the final stages of production is very low in the era of global supply chains, especially in electronics.
• Processors, display panels, memory chips, cameras, and other electronic components are among them.
• Currently, imports account for nearly 80% of these components, with China accounting for approximately 67 percent of all imports.
• Absence of Foundries: Due to a lack of foundries (semiconductor fabrication plants where microchips are made), India must rely on foreign contractors to manufacture microchips.
• There are approximately 170 commercial foundries worldwide, but none in India.
• Chipmakers such as Intel, TSMC, and Samsung have opted for other countries over India because of the country's uncertain domestic demand and low-cost efficiency.
• Challenges in Set-up of Foundries: To stay competitive, foundries are required to adopt newer technologies and processes almost every 18 months, resulting in high capital depreciation, which accounts for 50-60% of production costs.
• Domestic players have also shown little interest, owing to their inability to compete in R&D and investment with tech behemoths.
• As a result, plans to develop foundries in Gujarat and Uttar Pradesh were shelved in recent years.
• Many industry experts also point to the lack of a foundry as a factor in India's low R&D, which leads to poor talent retention and, eventually, 'brain drain.'
• The Indian Space Research Organisation (ISRO) and the Defence Research and Development Organisation (DRDO) both have foundries, but they are only used for space and defense systems, respectively.
• Considerations for National Security: and critical systems are imported.
• Backdoors could be programmed in chips during manufacturing, compromising networks and cyber-security, jeopardizing national security and sovereignty.
• A backdoor is any method by which authorized and unauthorized users can circumvent normal security measures and gain high-level user access to a computer system, network, or software application.
• The vast majority of chips and components used in India's communication and critical systems are imported.
• Backdoors could be programmed in chips during manufacturing, compromising networks and cyber-security, jeopardizing national security and sovereignty.
• A backdoor is any method by which authorized and unauthorized users can circumvent normal security measures and gain high-level user access to a computer system, network, or software application.
• Imports are on the rise.
• Electronics imports are expected to overtake crude oil as India's largest import commodity in the near future, reducing assembly units to little more than packaging units.

Way forward

• Hundreds of start-ups are making significant progress in this field, making India one of the upcoming hubs for microchip design.
• Some IITs, such as Shakti and Ajit, have created their own microchip designs.
• The government's initiatives to promote electronics manufacturing, combined with Prime Minister Narendra Modi's call for an "Atmanirbhar Bharat," have reignited hopes for a rise in India's indigenous electronics industry, allowing the country to become truly self-sufficient.
• Only by taking such steps can India hope to realize its dream of becoming a truly indigenous electronic ecosystem that encompasses all aspects of the industry.

Conclusion

Many global electronics companies are considering other manufacturing destinations and diversifying their supply chains due to rising labor costs in China, the geopolitical trade and security climate, and the Covid-19 pandemic. India is a strong contender for global electronics companies looking for alternative solutions. The electronics sector has the potential to become one of India's top exports in the next 3-5 years. Electronics exports have the potential to make a significant contribution to the Indian economy in terms of foreign exchange profits and job creation.

FAQs

Question: What are electronic industries?

Question: What are the main components of the electronic industry?

Question: How do electronic industries contribute to the economy?

Question: What are the environmental impacts of electronic industries?

Question: Which countries are leading in the electronic industry?

MCQs

1. Which of the following is a major component of the electronic industry?

a) Agriculture

b) Pharmaceuticals

c) Semiconductors

d) Textile manufacturing

2. Which country is known as the "world’s factory" for electronic manufacturing?

a) Japan

b) China

c) South Korea

d) India

3. What is a major environmental issue associated with electronic industries?

a) Air pollution from factories

b) E-waste disposal and pollution

c) Overuse of water resources

d) Deforestation for factories

4. Which of the following is a key area of the electronic industry?

a) Textile production

b) Consumer electronics

c) Mineral extraction

d) Food processing

5. Which country is a global leader in semiconductor production?

a) India

b) Japan

c) Taiwan

d) Brazil

GS Mains Questions and Model Answers

Q1: Discuss the role of the electronic industry in the economic development of a country.

Answer: The electronic industry plays a vital role in the economic development of a country by contributing to technological advancements, driving innovation, and creating jobs. The sector is responsible for producing goods that are integral to modern economies, such as semiconductors, computers, and mobile phones. The growth of the electronic industry fosters other sectors, such as healthcare, education, and communication, by providing the necessary technologies that improve productivity and efficiency. It also contributes to export earnings, as electronic products are in high demand worldwide. Additionally, the industry supports research and development, leading to new technological breakthroughs that have far-reaching impacts on industries and society. By fostering innovation and driving technological progress, the electronic industry is a key engine for economic growth and national competitiveness.

Q2: What are the environmental challenges posed by the electronic industry, and how can they be addressed?

Answer: The electronic industry faces several environmental challenges, primarily related to resource extraction, manufacturing processes, and the disposal of electronic waste (e-waste). The extraction of raw materials for electronics, such as metals and rare earth elements, can lead to environmental degradation and pollution. The manufacturing processes are energy-intensive and often result in the release of pollutants into the environment. Moreover, e-waste, when improperly disposed of, can lead to soil and water contamination due to hazardous substances like lead, mercury, and cadmium. To address these challenges, the industry must adopt more sustainable practices, including the use of recyclable materials, energy-efficient manufacturing processes, and better management of e-waste through proper recycling and disposal mechanisms. Governments can also implement stricter regulations on e-waste disposal and promote circular economies that emphasize the reuse and refurbishment of electronic devices.

Q3: Evaluate the impact of electronic industries on global trade and international relations.

Answer: Electronic industries have a profound impact on global trade and international relations. The production and export of electronic goods, particularly semiconductors and consumer electronics, are critical drivers of global trade. Countries like China, South Korea, and Taiwan have become major players in the global electronics supply chain, while companies like Apple, Samsung, and Intel have established a significant global market presence. The competitive nature of the industry has led to technological and economic interdependence, with countries relying on each other for raw materials, manufacturing, and high-end technology. However, this dependence also brings challenges in the form of trade imbalances, intellectual property disputes, and geopolitical tensions, especially over issues like technology control and cybersecurity. The importance of electronic industries has led to international agreements and collaborations, such as trade deals, supply chain agreements, and intellectual property protections. At the same time, trade wars and disputes over tariffs on electronic goods have become a significant part of international relations, highlighting the strategic importance of the electronic industry in the global economy.

Previous Year Questions on  Electronic Industries

1. UPSC CSE 2020

Question: "Evaluate the role of the electronic industry in shaping modern global economies."

Answer: The electronic industry has played a transformative role in shaping modern global economies by driving innovation, technological progress, and economic growth. As a key sector, it has revolutionized communication, healthcare, education, and entertainment, creating new markets and opportunities worldwide. The production of electronic goods such as smartphones, computers, and semiconductors has become a major driver of international trade, contributing to the economic development of countries that specialize in manufacturing and export. Moreover, the sector has fostered the growth of other industries by providing the technological foundation for automation, data analysis, and digital services. As a result, the electronic industry has been instrumental in increasing global productivity, reducing costs, and improving quality of life. However, the rapid growth of the sector also presents challenges, such as environmental degradation, data privacy concerns, and the digital divide, which require careful management and international cooperation.

2. UPSC CSE 2019

Question: "Discuss the environmental challenges posed by the growth of the electronic industry and suggest measures to address them."

Answer: The growth of the electronic industry presents several environmental challenges, including the depletion of natural resources, pollution from manufacturing processes, and the disposal of electronic waste (e-waste). The extraction of raw materials for electronic devices, such as metals and rare earth elements, can lead to environmental degradation and habitat loss. The manufacturing of electronic goods is energy-intensive and often produces toxic waste, contributing to air, water, and soil pollution. Additionally, e-waste, if not properly managed, poses serious environmental and health risks, as it contains hazardous materials like lead, mercury, and cadmium. To address these challenges, the electronic industry must adopt more sustainable practices, such as using renewable resources, improving energy efficiency, and promoting the recycling and reuse of electronic products. Governments and international organizations can play a crucial role by enforcing strict environmental regulations, supporting eco-friendly technologies, and fostering global cooperation on e-waste management. By prioritizing sustainability, the electronic industry can continue to drive technological progress without compromising environmental health.