IESA urges government to insist on “all-in India” products for strategic needs

The India Electronics and Semiconductor Association (IESA), has urged the government to enable R&D through provisioning separate budget to fund projects of national interest in the Electronics & Semiconductor domain and enable collaborative R&D among PSUs, Indian SMEs and start-ups. Rajesh Ram Mishra, President at India Electronics and Semiconductor Association IESA, outlines the key expectations and recommendations in the Union Budget:

The draft electronics policy released by the Ministry of Electronics and IT sets an ambitious target of creating a USD 400 billion electronics manufacturing industry by 2025, primarily focusing on the consumer segment with mobile phone devices segment contributing to around 50% of the production. We are excited that NPE also aims at supporting “make for the world” initiative as over 54% of the mobile phones manufactured in India would be exported by 2025. However, Consumer segment will constitute less than 20% of the total ESDM market in India. IESA believes there is a big opportunity of design led manufacturing to make India a global hub in intelligent electronics. We would like to appeal to the government to address specific issues that will help promote a thriving ESDM ecosystem across all segments in the country:

1. Address industry concerns on disincentive for domestic manufacturing and products designed in India due to differential duty structure in multiple segments.

2. Unlike software products, R&D for electronic products and semiconductors require higher investments. As rightly captured in the draft NEP, R&D for electronic products may need roughly USD 10-15 Million and R&D for Semiconductors (chips, ICs) requires USD 40-50 Million per product. Start ups in Electronics and Semiconductor space primarily depend on Angel and self funding as very few VCs in India are investing is ESDM companies. Angel tax and the current policy of getting the start up valuation done by a merchant banker is hitting the ESDM start ups very hard.

· We recommend government to abolish the Angel Tax for ESDM start ups.

· Government should create a seed fund of 1000 Crore which can be matched by industry and VCs to provide seed funding to build 1000 start ups ESDM space.

· Additionally we urge the government to enable R&D through provisioning separate budget to fund projects of national interest in the Electronics & Semiconductor domain and enable collaborative R&D among PSUs, Indian SMEs and start-ups.

3. Electronics is key enabler in creating an ‘intelligent’ economy – whether its smart homes, smart transportation, smart cities, smart manufacturing, smart governance, smart health care, smart communication and smart industry etc. We want the government to provide support to create 50 Intelligent Electronics Incubators collaborating with industry in various technology and industry verticals in Mission Mode, similar to Atal Innovation Mission.

4. For scaling small and mid size companies in ESDM space to become large MNCs like Huawei & ZTE government must ensure domestic market access through stricter implementation of PMA, global market access through linkage of Indian government grant to developing countries with export from Indian ESDM companies and reduction in half the cost of financing for both R&D and manufacturing.

4. Building secured digital infrastructure in India is critical considering the vulnerabilities arising due to geo-political uncertainties. Hence, govt should insist on “all-in India” products for strategic needs where every component used is designed and manufactured in India, a practice being followed in China today. Telecom Service Providers who are one of the biggest consumer of electronics products & systems and today provide the back bone of our voice and data networks should be encouraged through policy to use “all-in India” products.

5. Despite MSIP, large manufacturing set up in semiconductor and electronics have still not come up. The new incentive scheme could focus on guaranteed market for certain percentage of production from these large ESDM manufacturers instead of purely focusing on early subsidy, similar to BOT model that is working well in construction of road, airports etc in the country.