Synopsis
New government rules may soon require companies under the Electronic Component Manufacturing Scheme to invest in design capabilities. Currently, many firms only assemble products. The government wants them to develop high-value design work locally. This initiative aims to boost India's electronics sector. Companies not investing in design may be removed from the scheme.Listen to this article in summarized format
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Many companies in India’s electronics sector only assemble products. The government now wants them to get into the high-value design work, too.
For this, the ministry of electronics and information technology (MeitY) expects ECMS participants to formally submit the number of designing talent they will employ as a share of their overall employee base, as well as proposed investments in raising designing capabilities over the project construction period and the first two years afterwards, the officials said.
"The government has been focussed on moving from assembling in India to localising more of the design process, across the manufacturing sector," one of the officials said. “Electronics offers an opportunity for India to capture a large part of the value of any product that is manufactured here. For that, specific minimum ambitions needs to be set for the scheme (ECMS) participants. Once firms let us know of their capacity to invest in designing, the formal parameters of the scheme can be updated to accommodate these ambitions.”
The push towards designing locally began about a month ago, after electronics and information technology minister Ashwini Vaishnaw cautioned that ECMS participants not investing in designing capabilities will be “weeded out” from the scheme and disbursals for the Rs 40,000 crore scheme will be stopped by changing its guidelines.
On March 31, Vaishnaw had called for firms to submit concrete plans that included intended investments in designing across the value chain, including conceptual, engineering and manufacturing designs, as well as general arrangement drawings.
The minister had sought inputs from the industry within 15 days on a structured mechanism to set up regular buyer-seller meetings, establish global six sigma standards and boost workforce training.
However, while discussions with industry bodies have taken place, the government is yet to receive concrete pledges for capital expenditure on designing capabilities, the officials said.
"There are no fixed expectations on designing from electronics firms. We want to understand their position. There is already a lot of willingness among the industry to improve capabilities. More discussions will take place," said another official.
Aimed at building a domestic electronic component manufacturing ecosystem from scratch, the ECMS has so far seen investment proposals worth Rs 61,671 crore being approved across four tranches. These target overall production worth Rs 4.51 lakh crore and are projected to create more than 65,000 direct jobs.
According to official figures, India’s electronics sector employs 2.5 million people, of which 1.4-1.5 million are in mobile phone manufacturing.
The crackdown on electronics firms is part of a larger focus on designing across MeitY's domains. Case in point, the ministry has targeted capability to design and manufacture chips required for 70–75% of domestic applications by 2029. This is expected to be achieved through plans to enable at least 50 fabless semiconductor companies in the country in the next phase of the design-linked incentive (DLI) scheme.
