When was the last time you bought a fridge? A TV? What about a microwave or a washing machine? Or a mobile phone? Electronics have made their way into our day-to-day lives. And who doesn’t love having technology at their fingertips? All these devices have made our lives more convenient; they save time and effort.
The electronics market in India is growing at a rapid pace of 25% CAGR. In FY21, domestic production accounted for 74% of domestic consumption. By 2026, that number could grow to 94%. Compared to global peers, India’s consumption of electronics still ranks low. So, there’s plenty of room for growth, making electronics an electrifying theme!
What is ESDM?
When we watch a great film, we only see the final cut. We don’t know anything about what went on behind the scenes. Similarly, when it comes to electronics, ESDM is the behind-the-scenes magic. ESDM stands for Electronic System Design and Manufacturing. It encompasses design, sourcing, assembly, testing, manufacturing, delivery, and marketing.
When design leads manufacturing there are efficiency gains. Design is crucial in complex products. When design achieves scale, it can accommodate fast-changing technology and rationalise costs. For example, semiconductor chips go through simulated design before heading into production. The ESDM industry benefits OEMs who can now focus more on their core capabilities. And ODMs enjoy increased versatility and more cross-functional competency.
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An ESDM player can specialise in design, manufacturing, or after-sales service. There are two models in which ESDM players operate in India.
1. ODM – Original Design Manufacturer
An OEM (original equipment manufacturer) provides manufacturing specifications to an ODM. This style of operation accounts for 20% of the market in India. The ODM’s role includes the following:
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- Deciding what components to source from where
- Planning the fabrication of the end product
- Assembling the product
- Testing the product
- Arranging the logistics
- Creating a marketing plan
- Providing after-sales support
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2. EMS – Electronic Manufacturing Services
This is a more prevalent model accounting for 80% of the market. In this case, the OEM provides both the design and the specification to the ESDM company. The ESDM’s role is limited to execution. This involves sourcing components, manufacturing and assembly, and delivering the products to consumers.
ESDM: Downstream Impact
The ESDM industry is present everywhere. Its presence is keenly felt in home appliances, mobile phones, and the telecom sector. But it also serves industrial manufacturers. Just think of all the myriad components that go into making smart meters and machinery. That doesn’t happen without design and assembly! ESDM has deep roots in the automotive space. From the smart sensors that help you park your car to the virtual display for navigation, ESDM brings every bit of magic to your driving experience. Even public goods benefit from ESDM capabilities. Service, maintenance, and upgrades on metros and railways are possible with ESDM. As healthcare capabilities expand, the ESDM gap fills administrative and clinical demands.
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The Way Forward For ESDM
The Prime Minister declared that we are manufacturing quality products not just for India, but for the world. Several government initiatives support India’s dream of becoming a manufacturing hub for electronics. We are already leaders in design. With China + 1 gaining traction, India appears to be a cost-competitive alternative. In this decade, these factors contributed to making India an investment destination. The production-linked incentive scheme targets the electronics sector. The Make In India and Digital India initiatives create a positive feedback loop for localisation. Clearly, ESDM will be a key factor in India’s growth story.