4G stack-like success possible in electronics, says HCL co-founder

As India is pushing for local electronics and hardware manufacturing, HCL co-founder Ajai Chowdhry has said the government should replicate telecom 4G stack-like success in both sectors by introducing special incentives for designing products in India.

Introduction of design elements in all the incentive schemes and bringing in startups together for that would increase the scope for domestic manufacturing of such components also, thereby creating more value addition of local products, Chowdhry said.

“One particular policy, which has a design element, is the telecom manufacturing policy. If you look at the 4G stack, 16 companies, including startups, worked together to form the complete stack. So, this particular benefit of creating design capability in India within PLI, is actually going to result in things like this happening,” Chowdhry told FE in an interaction.

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“Everywhere in the telecom area, the government has looked at value addition. They have not looked at any other area for value addition,” Chowdhry said, adding that the introduction of additional incentive for companies in the new IT Hardware PLI for using local components in manufacturing is a welcome step.

Value addition is where domestic component is high when a made-in-India product is sold. 

“When you design the products in India, you look for Indian components also. You buy more Indian components and Indian software, all those things make value addition higher,” Chowdhry explained.

With regard to use of Indian components in electronics products, only 4-8% of domestic value addition is there at present.

Chowdhry, who is currently heading EPIC Foundation, is also an adviser to various government committees, including on electronics and semiconductors.

Apart from making the hardware PLI scheme more lucrative with a Rs 17,000-crore outlay, the ministry of electronics and IT (MeitY) has recently formed a task force to identify products that can be designed and made in India.

“To make this whole programme successful, it is essential to see what they did with 4G. They did not give that order to a global company. They gave it to an Indian company. What does that do for that company? It will give it scale, ability to buy components at the lowest price, so that it can compete with Nokia and Ericsson tomorrow,” Chowdhry said, adding that the government must aggregate the demand and use that opportunity to create companies in India.

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On domestic smartphone industry, Chowdhry said the government should focus deeply on companies like Lava and Micromax. “It is not fair to give Chinese smartphone players business in the country. We should give them trouble economically for attacking us at the border.”

Apart from electronics and hardware, the government is also targeting to attract global players in semiconductor manufacturing through its Rs 76,000-crore incentive scheme. Both the central and the state governments are incentivising over 70% of the total cost in setting up semiconductor manufacturing facilities.

“We are entering the semiconductor business at a very difficult time as the demand for semiconductor manufacturing is going through the roof and every country wants to be self-sufficient,” Chowdhry said, adding that while getting investments seems tough but India’s incentives and market are lucrative enough.

The government is currently assessing the proposals for chip manufacturing in the country. The International Semiconductor Consortium (ISMC), IGSS Ventures and a Vedanta-Foxconn joint venture have submitted their investment proposals worth $13.6 billion seeking the government’s support of $5.6 billion under the semiconductor PLI scheme.

On the delay in approval of proposals for semiconductor manufacturing, Chowdhry said, “The decision becomes more difficult as the government needs to be sure that it is giving 70% incentives, it better be careful with regard to assessment of the proposals. Because those approved proposals must be successful.”

Initially, the country needs investments in silicon, compound semiconductors and a few companies in memory manufacturing.

When asked about any concern of these companies in making investments in semiconductors, Chowdhry said, “There are no real concerns that they have in terms of investing. The concerns they have is will the government policy be long-term or not? All companies want a consistent long-term plan and it should not have any connection to elections or change in the government.”

On exploring collaboration with other countries, Chowdhry said the government should seriously look at exploring relations with Taiwan, which is the manufacturing hub for semiconductors.

“If we have a special programme or arrangement with Taiwan, a lot of their companies would come here because India has a large market,” Chowdhry said.

Currently, Taiwanese companies have about $4 billion in India investments, which is very less, according to Chowdhry.