Industry Overview

As India solidifies its position as the second fastest-growing economy globally, the Government of India aims to rank among the top 2-3 electronics exporters worldwide by 2026. The Indian electronics manufacturing industry is projected to reach INR 43 Lakh Cr. by 2025, with the Electronics System Design and Manufacturing (ESDM) sector expected to generate INR 8,370 Cr. in economic value. Of the INR 43 Lakh Cr. in electronics manufacturing, INR 33 Lakh Cr. will be consumed domestically, while the remaining INR 10 Lakh Cr. will be exported.

The electronics design segment, which constituted 22% of the ESDM market in FY19, is forecasted to grow to 27% by FY25. Under the Production Linked Incentive (PLI) scheme, 32 companies have invested INR 8,282 Cr. in large-scale electronics manufacturing as of June. The total pledged investment stands at INR 11,324 Cr., with a projected production target of INR 10 Lakh Cr. by 2025. Among the approved companies, seven are greenfield ventures and 25 are brownfield projects.

Segment Split as per Domestic Production  

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Key Segments and Their Drivers

Mobile Phones

Mobile phones account for 43% of the Electronics System Design and Manufacturing (ESDM) sector in India, with a market size of INR 3 Lakh Cr. in 2023, projected to reach INR 7 Lakh Cr. by 2032. As the second-largest mobile phone manufacturer and market for smartphones, production rose from 6 crore units in 2015 to 31 crore units in 2022, achieving a CAGR of 26%. Driven by the Make in India initiative, which established over 200 manufacturing units and created about 7 lakh jobs. With 659 million smartphone users, the sector grew at a CAGR of 32% over two decades. India aims to produce 1 billion handsets, with 600 million units targeted for export.

Consumer Electronics

The Consumer Electronics Market, which accounted for 12% of the Indian electronics market production share, was valued at INR 6,763 Cr. in 2024. It is projected to reach INR 12,480 Cr. by 2033. This market includes products such as TVs, set-top boxes, refrigerators, washing machines, and electrical cooking appliances. In 2024, the market size in the Consumer Electronics market in India amounts to INR 5 Lakh Cr.

IT Hardware

The India IT Hardware Market, comprising 5% of the Indian Electronics market production, is valued at INR 1 Lakh Cr. in 2024 and is projected to reach INR 2 Lakh Cr. by 2029. The Production Linked Incentive (PLI) scheme targets laptops, tablets, all-in-one PCs, and servers. In September 2023, Samsung announced plans to produce laptops at its Greater Noida facility, aiming for an annual capacity of 60,000 to 70,000 units.

Strategic Electronics (Spacetech)

India's strategic electronics sector, which makes up 5% of the domestic electronics market, is projected to reach a market size of INR 5 Lakh Cr. in the next decade. This sector includes aerospace and defense, known for their complexity and specialization in electronics manufacturing. In the 2021 budget, the Department of Space was allocated INR 13,900 Cr., and NewSpace India Limited, received INR 700 Cr. Despite these investments, the Indian space industry, with a market size of nearly INR 800 Cr., still represents only 2% of the global space industry. The aim is to grow this sector to INR 5 Lakh Cr. in the next 10-12 years.

Medical Electronics

The Indian medical electronics market, accounting for 12% of the electronics market production, was valued at INR 1,625 Cr. in FY23 and is projected to reach INR 2,074 Cr. by FY26. The industry includes both large multinationals and SMEs. About 65% of Indian manufacturers are domestic, primarily serving local needs. Large multinationals lead the high-tech end. Rising medical tourism is expected to drive local production by 21% over the next five years.

Wearables & Hearables

The Indian wearable market grew by 34% year-over-year to 134.2 million units by the end of 2023. The average selling price (ASP) for wearables dropped by 20%, from INR 2,200 to INR 1,800. Despite the price decrease, this segment, which accounts for 0.3% of Indian electronics production, is expected to grow significantly in both volume and revenue over the next four years. In FY23, India manufactured wearables such as earphones and smartwatches worth INR 8,000 crore, boosted by implementing a phased manufacturing plan (PMP). The industry aims to double production to INR 15,000-17,000 crore in the near future.

PCB

Printed Circuit Boards (PCBs) are essential for electronic circuits, providing a foundation for connecting components without wires. The PCB market size is estimated at INR 6 Lakh Cr. in 2024 and is expected to reach INR 8 Lakh Cr. by 2029. PCBs are used across various industries, including automotive, medical, aerospace, electric vehicles, IoT, defence, lighting, solar, and broadcasting.

Auto Electronics

New Delhi: India's automotive electronics market is set for substantial growth, expanding from INR 50,225 Cr. in 2020 to over INR 1 Lakh Cr. by 2027, reflecting a robust compound annual growth rate (CAGR) of 17%. This sector, which constitutes 8% of the total Indian electronics market production share, is primarily driven by the burgeoning demand for passenger vehicles, expected to account for nearly two-thirds of the market.

Lighting and Solar

India allows 100% FDI in the renewable energy sector and plans to introduce a phased manufacturing plan for solar cells and panels under the 'Atmanirbhar Bharat' initiative. The India Lighting Market was valued at INR 28,480 Cr. in 2023 and is expected to reach INR 68,266 Cr. by the end of the forecast period, growing at a CAGR of 15.7%. To boost domestic production, customs duties have increased from 5% to 20% on solar inverters and 5% to 15% on solar lanterns. This sector accounts for 3% of the total Indian electronics market production share.

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Top Listed Players in the EMS Sector

Kaynes Technology

Kaynes Technology specialises in providing a comprehensive range of electronics manufacturing and design solutions. Its core offerings include Electronics Manufacturing Services (EMS), encompassing the design, manufacturing, testing, and distribution of electronic components and assemblies. The company caters to multiple industry verticals - automotive, aerospace and defence, industrial, railways, medical, and IT / IoT. And served 360+ customers in 28+ countries including marquee MNCs as of FY24. The company has a long-term relationship with over 1,700+ suppliers with multiple sources for a single component with specialised dealers for niche verticals.

The company has an EBITDA margin of 30%, which is considered excellent in the electronics sector, and a net profit margin of 9.8%.

Amber Enterprises

Amber Enterprises operates on a B2B model, deriving revenue primarily from manufacturing Room Air Conditioners (RACs) and components for OEM brands like Daikin, Hitachi, LG, Panasonic, Voltas, and Whirlpool. This integrated approach, spanning design to after-sales service, leverages 15 strategically located manufacturing facilities across India. Headquartered in Gurugram, Amber Enterprises employs over 1,646 individuals.

Amber Enterprises has demonstrated a robust revenue CAGR of ~20%+ over the past five years. The company has an EBITDA margin of 8.03% and a net profit margin of 2%in 2024.

Dixon Technologies

Dixon Technologies operates primarily on an Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) model, generating revenue by manufacturing electronics for prominent global and domestic brands. Key revenue streams include consumer electronics (LED TVs, washing machines), lighting products (LED bulbs, battens), mobile phones, and security systems (CCTV cameras). The company registered consolidated revenues for FY24 at INR 17,713 crores, a growth of 45% YoY. Dixon also established a capacity of 45 million smartphones and 40 million feature phones in FY24.

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Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.