That the electronics industry is of strategic importance for India’s security and development is not new. That understanding has existed since the 1950s. Yet, despite periodic policy push, the electronics industry in India remains lacklustre.
The size of the domestic electronics industry (both end-products and components) was about $47 billion in FY 2017, according to the Electronic Industry Association of India (ELCINA). However, according to ELCINA, electronics imports totaled approximately $86 billion in FY 2017. That is almost twice the size of the domestic electronics industry.
That is in contrast to the Indian auto industry, which has a reasonable capacity and a domestic auto and auto component industry comparable to that of other countries. Imports in auto components is about 50% of the domestic industry; in auto it is probably less than 10% of domestic industry. According to the Auto Component Manufacturers Association of India (ACMA), the size of the domestic auto component industry in FY 2017 was approximately $44 billion. The Society of Indian Automobile Manufacturers (SIAM) estimates that the size of the Indian auto industry in terms of new vehicles was approximately $68 billion in FY 2017.) The success of the auto industry can be ascribed in part to government policies that have encouraged domestic manufacturing.
Hence, why has the domestic electronics industry remained stagnant despite policies that purportedly aimed to foster a robust domestic industry? An overview of the government’s policies on electronics over the years provides some insights.
Realizing a strategic requirement India’s growing ambitions in harnessing nuclear energy from the late 1950s and the war with China in 1962 reiterated the strategic importance of electronics to India’s security and development. In the 1960s, a committee on electronics was set up under the leadership of Homi J Bhabha. The committee’s report reiterated the importance of electronics and need for a strong domestic electronics component base for both strategic and economic reasons. Given India’s policy of self-reliance in that era, the focus was on developing an indigenous electronics components and products industry.
When the government established the Department of Electronics (DoE) in 1970, this policy was carried forward. Through the 1970s, India’s policies were firmly rooted in import substitution, forex conservation, and license-raj due to the prevailing geopolitical context and the fact that the leadership of these specialist organizations came from India’s nuclear science and defense organizations controlled by the government. The demand projections made by the government were taken as the basis for volume licences. The Department of Energy also allocated specific parts to the small and medium business sectors based on what they thought was the level of technological sophistication required for their production. Like in other industry segments, duties were kept high to discourage imports of electronics components.
The elite research universities, laboratories, and public sector companies that were established to serve strategic sectors rather than translate into consumer electronics products were the focus of the electronics research. This was in antithesis to the global electronics industry of that era where the focus was on technology innovation, which translated to shorter technology and product life cycles, and manufacturing at scale. At a time when novice companies like Samsung Electronics were making strides in ramping up manufacturing and transforming to a global consumer electronics company, Indian electronics companies were fighting for survival.
In the 1980s, a series of policies were implemented that reduced import duties on electronic components and finished goods. The government realised that indigenous production was not keeping up with the demand for electronics and this was an acknowledgement that electronics is a fundamental technology in multiple user domains—from entertainment to healthcare and information technology.
This easing of restrictions in electronics and other sectors culminated in the liberalisation of the Indian economy in 1991 when license-raj was finally removed.
However, Indian companies attempted electronics. The policy environment did not prevent Indian companies from taking a shot at electronics. In fact, India’s two well-known IT services companies today, HCL and Wipro, started as electronic calculator and computer manufacturer, and computer manufacturer, respectively.
It was getting increasingly difficult for domestic players in the computer industry to compete against the price of imported products even if they had a good product. Their pivot in the late 1980s and early 1990s to focus on IT services export is an indictment of the unattractiveness of the domestic electronics industry.
The resilience of Indians in operating in this tough industry domain is exemplified in the stories of those who, against all odds, tried hard to lift Indian electronics to the next level. Their stories throw light on the capabilities required for success in the electronics industry in India.
Let’s take a look at two of these tales. The first story is TVS Electronics that showed electronics product management and manufacturing in India and for India was possible. The second story is the Simputer experiment. If this had succeeded, it would have provided a springboard for India in the design and manufacturing of hand-held devices, which eventually evolved into smartphones.
Gopal Srinivasan founded TVS Electronics as a startup in the mid-1980s. It was funded by his illustrious family who belonged to the TVS Group, known for their auto components, logistics, and financial services business. The business case was based on a simple premise. The market for computer peripherals and components would grow in India along with adoption of PC clones which were becoming more affordable. The TVS Group understood this type of an “ancillary” business thanks to their presence in the auto components industry.
TVS Electronics signed a collaboration with Citizen of Japan for technology to manufacture dot matrix printers. The reason why dot matrix printer is an electronics product is because there’s an electronic logic board at its heart that controls the operations of the printer. It consists of a central processing unit, memory units, driver units, and connectors. Gopal leveraged his professional relationships in HMT—which already had a technical collaboration with Citizen for watches—to get an introduction with Citizen.
TVS Electronics in this era also benefited from a flow of talent from the Indian public sector companies like BEL and HAL. This demonstrates the significance of utilizing professional networks and crossing boundaries. Indian companies needed to find the right technology partners because, like many other industries, electronics technology was concentrated with a few global players. In the 1990s, TVS Electronics introduced a designed in, designed for and made in India Maha series dot matrix printers. Their product design and product management took into account uniquely Indian use contexts. For example, Indians had a tendency to hold on to the rotating knob that moved the paper when the printer was in operation. This would often lead to the knob getting detached. Therefore, the knob had to endure that. The Maha series had a system that ensured smooth operation in the dusty environments of India, and would work under a wide range of voltage from 90 volts to 300 volts that was common in India in that era. Needless to add, the TVS printers were preferred over MNC models. Many of us who attended college in the 1990s will recall having our assignments typed in the college lab or at one of the nearby desktop publishing shops. They were typically printed using a TVS dot matrix printer connected to a PC clone and typed on a TVS keyboard. At the end of the 1990s, TVS Electronics started doing contract manufacturing. They made set top boxes for Indian Direct to Home (DTH) companies. Some of us will fondly remember the PCOs (Public Call Offices) of this era where one could make a telephone call. TVS Electronics contract manufactured one of the snazziest PCO instruments, the Zip Fone, that had an LCD screen display that showed call details and an advertisement. It was also an instrument where the customer could pay with a smart card.
The Indian electronics market in the 1990s was a hard macro-environment where global scale of manufacturing effects ruled. In an interview with itihaasa Gopal mentioned, “The volatility of pricing, that you see in any (electronics) product is not because of a rational decision at every individual sale that takes place. It is a macro-phenomenon when two million electronic products are produced and only half a million remain. Products’ global price movements are influenced by the incentive to dispose of the half million. Additionally, you are the recipient of it when it arrives in the form of zero percent duty! In other words, the prices of imported products would vary based upon the demand-supply position elsewhere… And that’s the time we started taking a more conscious call on what we wanted to do.”
TVS Electronics started a new division to focus on aftermarket services and provide warranty services to the electronics products that were being imported into India. They are still one of the leaders in the Indian dot matrix market but have completely exited the contract manufacturing business. Inkjet printers—the largest printer sub-segment—have no domestic competitors, which is not surprising. Let’s take a look at the Simputer experiment, which I wrote a more in-depth essay about in Founding Fuel a few years ago. Apple launched the iPhone in 2007 with a 3-axis accelerometer—the first time an accelerometer was incorporated in a phone. One of the basic applications of accelerometers in smartphones is that the screen is always displayed upright, whichever way you turn the phone. The
