New Delhi
The Government approved INR 30 billion (USD 360 million) collective investments by 27 major electronics manufacturers to encourage more domestic IT hardware production, may well have started to pay off and this first wave of successful investments will be followed by equally large ones in the coming months as India positions itself as an attractive market on the Asian continent, BMI Country Risk & Industry Research has forecast. Specifically, as a large addressable market of consumers and a trend of tech companies look to re-route their supply chains due to geopolitical risks, India’s consumer electronics market will outperform its regional peers, as per the Fitch Solutions company.
There are significant implications of this forecast. The electronics manufacturing companies investing in India is expected to find more risks to the upside over the coming year. The BMI research anticipates that the country’s IT market value will steadily grow until 2027, hitting USD 104 billion. The value of the IT hardware market is set to remain the dominant proportion of the total IT market, staying above 50 per cent between 2023 and 2027, growing at a 12.8 per cent compounded annual growth rate. The BMI study expects that the proportional value of India’s hardware market will decline to 53.5 per cent in 2027 as the software and digital services markets will grow their relative shares.
As the penetration among households of key hardware such as PCs and smartphones grows, there is expected to be slightly fewer organic growth opportunities for hardware manufacturers in India. However, the growing devices penetration is not likely to affect the inflows of new electronics manufacturers’ investments as digital transformation ambitions across South Asia will still offer room for revenue growth.
According to BMI estimates, India’s consumer electronics market had grown to USD 92.6 billion (up 16.8 per cent) at the end of 2022 and hardware device sales are expected to grow to USD104.1 billion (up 12.5 per cent y-o-y) by the end of 2023. The strong outlook is spurred by structural catalysts primarily a growing, wealthier population and corporate modernisation. Moreover, rural consumers will increasingly form a larger share of hardware demand leading to 2027. The recent investments approval from key electronics manufactures such as Dell and Foxconn will most likely attract subsequent rounds of investments from the same firms. Setting up production facilities in India will allow electronics manufacturers to service both the domestic market and the South Asian markets with rising disposable incomes.
Another key catalyst for BMI research to expect more hardware manufacturing investments in India are current geopolitical risks. Given the impact of US export controls on the technology industry, the research indicates more developed and emerging markets to explore partnerships with new markets to secure their supply chains. Given India’s above regional average Risk/Reward Index (RRI) profile, BMI believes more technology firms may choose the country as a partner to secure their supply chains to continue to service Asian digital transformation.