1.1. ESDM (Electronic System Design & Manufacturing)

Over the years, the demand for ESDM has increased exponentially thanks to increases in complexity and evolving markets, such as the Internet of Things (IOT) space. Electronics design, functionality, and component sizes have evolved rapidly. These innovations will have a direct effect on manufacturing techniques. The future will be driven by adaptive, flexible, scalable manufacturing with smaller production runs, robotic technology and artificial intelligence. The global electronics manufacturing industry is valued at US$1.75 trillion, is the largest and fastest growing manufacturing industry in the world, and according to the Indian Ministry of Communications and Information Technology, and the industry is expected to reach US$2.4 trillion by 2020.

The major driver for this industry are:

  • • The sharply increasing demand for electronic components and devices for smartphones and tablets.
  • • Accelerated data traffic volume leading to development of high speed communication network in developed economies.
  • • A rapid growth of consumer electronics in emerging economies as a result of a large youth population and burgeoning middle class is also driving the growth of overall electronics market.
  • • New Technologies such as Internet of Things (IOT), robotic technology and artificial intelligence.

1.1.1. Major Segments – ESDM

1.1.2. ESDM Market Trends

There is distinct shift of electronic manufacturing Segments towards India and China due to availability of affordable manpower.

1.2. Indian ESDM Sector Overview

The Indian electronics system design and manufacturing (ESDM) industry is one of the fastest growing sectors in the country.India’s electronics manufacturing industry is valued at US $94.2 billion; it grew at 9.68 percent year-on-year between 2011 and 2015. The semiconductor design industry alone has generated above US $12 billion in revenues in 2014, and it has grown 18 percent since 2009.

1.2.1. Strategic Advantage and Demand drivers of ESDM sector

1.2.2. Major segments of Indian ESDM industry

The ESDM industry in India comprises the following four key components

Electronic products

• Electronic products segment forms the biggest chunk of the ESDM market with an estimated 80% market share.

• The electronics market of India is one of the largest in the world and is anticipated to reach US$ 400 billion in 2022 from US$ 69.6 billion in 2012.

• The market is projected to grow at a compound annual growth rate (CAGR) of 24.4 per cent during 2012-2020.

• Total domestic manufacturing contributes only 35% of this demand and the remaining 65% is met through imported products

Electronic components

• The electronic components industry comprise of semiconductors and passive components.

• The communication and broadcasting equipment segment constituted 31 per cent, which is the highest share of total production of electronic goods in India in FY13, followed by consumer electronics at 23 per cent.

• The demand for the electronic components in India is largely met through Imports to the extent of about 60%.

Semiconductor design

• According to a report by NOVONOUS, the semiconductor industry is estimated to grow from US$ 10.02 billion in 2013 to US$ 52.58 billion in 2020 at a Compound Annual Growth Rate (CAGR) of 26.72 per cent.

Electronics manufacturing services

• The Indian EMS market clocked a revenue of $4.24 billion in 2013 and is expected to expand at a compound annual growth rate (CAGR) of 13.3% from 2013 to 2018 to reach a market size of $7.92 billion in 2018

1.2.3. ESDM Market Size

According to the India Electronics & Semiconductor Association, the Indian Electronic System Design and Manufacturing (ESDM) market will grow from US$ 76 billion in 2013 to US$ 400 billion by 2020.

1.2.4. Market Investment Opportunities – ESDM

1.2.5. Statutory Framework

1.2.6 Future Trends

The ESDM sector has been projected as the sunrise sector and the one to watch out, for a while now. The US$ 300 billion demand shortfall projected by 2020 presents a huge opportunity for foreign investors.

  • • Mobile Devices is one of the key segments where India is expected to see more growth in terms of local value addition. The Make in India initiative and various schemes and policies in place, will make the country a preferred destination for electronics manufacturing.
  • • The Internet of Things (IoT) is a unique domain that brings the ESDM industry and the IT industry together. Studies indicate that by 2020, over 25 billion connected devices will be generating data, globally, with opportunities in abundance for data mining and data analytics. The total revenue generated from IoT industry would be USD 300 billion and India would have a share of 5-6% of the global IoT industry.
  • • Smart Living is another opportunity for ESDM Sector. Today our homes, vehicles and cities are increasingly sensors embedded for our personal and professional use. This requires extensive collaboration between various players spread across the ESDM-IT segments

The state has become a hub for the semiconductor industry with several major players having their offices and research and development (R&D) centres in Noida and Greater Noida. Noida and Greater Noida with its proximity to Delhi are amongst the most preferred investment destinations for ESDM sector in the country.

Noida-Greater Noida Development Authority Areas and Ghaziabad district are notified clusters in Uttar Pradesh for availing MSIPS scheme of Government of India.State Government has approved an incentive package of approx. INR 5000 Crore for ESDM sector. The State is home to prestigious companies in electronics sector like Samsung, LG Electronics, ST Microelectronics, VIVO Mobiles, OPPO Mobiles, Lava, Intex and many more.

Following is a brief snapshot of the ESDM sector in Uttar Pradesh

Manufacture of Computer, Electronic and Optical Products; Electrical Equipment
Number of Factories 196
Working Capital in INR Crore 4109
Invested Capital in INR Crore 6617
Fixed Capital in INR Crore 2971
Productive Capital in INR Crore 7081

Following are some of the key electronic manufacturing companies who have set up base in the state:

Key Investment Enablers

  • • Electronics Manufacturing Zones (EMZ) in Noida, Greater Noida and Yamuna Expressway region.
  • • Electronic Manufacturing Zones have seamless connectivity, state of the art infrastructure, Logistics hub, 24X7 water-power availability, Social Infrastructure, International Schools, hospitals & cut across through DMIC & EDFC corridors.
  • • EMZ like Noida and Greater Noida are also home to many prominent institutions which provide skilled manpower for the industry.
  • • Due to dense network of railways, roadways in the State, the cost of transportation of goods from one place to another is relatively cheaper than other states.

Educational and other institutes

  • • The State has 71 universities, which is second highest in the country. These include 6 central, 29 state, 28 private and 8 deemed universities.
  • • Uttar Pradesh has more than 4,300 colleges and has 168 diploma/polytechnic colleges which provide a large resource pool to choose from to the industry.
  • • Various incubation and innovation centers are present across the state including National Centre for Flexible Electronics (NCFlexE) coming up at IIT Kanpur.

Infrastructure

  • • The DMIC (Delhi Mumbai Industrial Corridor) and ADKIC (Amritsar-Delhi-Kolkata Industrial corridor) are ambitious projects which pass through UP and will benefit the industrial activity in the state.
  • • Uttar Pradesh has highest share of around 57% of EDFC (Eastern Dedicated Freight Corridors)facilitating uninterrupted transportation of goods to sea ports.
  • • 15% of DMIC falls in area across 12 districts of UP with investment of INR 27,400 Cr and creating 1.2 million jobs
  • • The length of national highway and railway track is highest in Uttar Pradesh in India.
  • • New international airports are proposed in Kushinagar and Jewar district.
  • • Industrial areas identified in the sector are in Aligarh, Amethi, Gautam Buddh Nagar, Barabanki, and Etah.

Key Investible Projects

Government of Uttar Pradesh is designing and establishing world class Electronic Manufacturing Clusters to make the state a hub for electronic manufacturing.

Yamuna Expressway Electronic Manufacturing Cluster

  • • 100 acres EMC is being established on Plot 6A, Sec-24, Yamuna Expressway.
  • • The EMC will provide employment to more than 1 Lac people & with more than US$ 375 million investment.
  • • 8 electronics manufacturing companies including the anchor unit ‘Lava International’ there are based in EMC.
  • • The Companies investing in the State are leading Producers of Mobile Phones and Mobile Phone Accessories, Thin-Film Transistor (TFT), LED & Telecom Products and Consumer Electronics.

Ecotech VI & VII, Greater Noida EMC

  • • The EMC is spread on gross area of 210 acres.
  • • It provides facilities like support complex test & Certification, Tool room; Design House Plastic moulding, sheet metal packaging, IT/Communication Centre, Common Training /Convention Centre, workers housing complex & related facilities.

NOIDA and Greater Noida – Hotspots for Electronics Manufacturing

  • • NOIDA and Greater NOIDA provide world class infrastructure supported by reliable power supply abundant water, outstanding residential educational and medical facilities and presence of highly skilled and semi-skilled workforce.
  • • The region is home to many renowned companies such as IBM, TCS, Adobe international, HCL, Nasscom, Birlasoft, Wipron, Polaries, Cadence, etc.

Besides there are special economic zones (SEZs) and software technology parks spread over an area of more than 1000 acres.

Electronics Manufacturing Policy, 2017

Fiscal incentives applicable to ESDM units

Capital subsidy

  • • A Capital Subsidy of 15% on fixed capital other than land subject to maximum of INR 5 Crore shall be provided
  • • Capital subsidy on case to case basis may be relaxed subject to max. INR 150 Crore for companies investing more than INR 200 Crore in the State

Interest subsidy

  • • An interest subsidy of 5% per annum for a period of 7 years on the rate of interest paid on the loans will be reimbursed up to max. Of INR 1 crore per annum per unit

Stamp Duty

  • • 100% exemption of stamp duty on purchase/lease of land for establishment of single ESDM units under EMCs
  • • 100% exemption of stamp duty on first transaction and 50% exemption on second transaction, for purchase/lease of land for EMCs/ESDM parks (for development/SPV.

Incentives for filing patents

  • • 100%reimbursementof actual filing subject to maximum of INR 5 Crore for domestic and INR 10 Crore for international

State GST Reimbursement

  • • 100% reimbursement of State GST subject to a maximum of 100% of fixed capital investment other than land (such as building, plant, machinery, testing equipment etc.) for a period of 10 years.

Provision of land

  • • Rebate of 25% on the prevailing sector rates will be provided either to EMC SPV/ESDM Parks and individual ESDM units, establishing inside EMZ on purchase of land from state Agencies
  • • Floor Area Ratio of 3.0 + 1.0 (purchasable )will be allowed for units
  • • Up to 30% of the total Floor Area Ratio (FAR) in minimum 50 acre of land size as "Industrial Land Use" will be allowed for welfare activities like dormitories for workers, canteen, dispensary etc.

Special Incentives

Incentives on case to case basis for investment greater than INR 200 Crore will be made available under either of the options:

Option 1.

  • • ESDM units investing in bracket of INR 200 Crores to INR 300 Crores and creating minimum 1000 jobs in the state, special incentives like relaxation of capital subsidy and interest subsidy, the max. limit will be provided on recommendation
  • • ESDM units investing more than INR 300 Crores and creating 1500 jobs will be given additional special incentives like EPF,ESI rebate, electricity duty, training subsidy, land, power incentive or some other incentives which would be decided by empowered committee

Option 2.

  • • ESDM units investing more than INR 200 Crores and creating minimum 1000 jobs will get 80% reimbursement on SGST subject to a maximum of 200% of fixed capital investment other than land ( such as building, plant, machinery, testing equipment etc.) for a period of 10 years, whichever is earlier.

Semiconductor fabrication plant which manufactures devices such as Integrated Circuits (IC) chips will be given special fiscal and non-fiscal incentives.

EMC Infrastructure Facilities

  • • For development of recycling of e-waste and infrastructure facilities like road, power, water etc., the state will provide a subsidy equivalent to 50% of the grant provided by the Central government under National Policy on Electronics, 2012.

Other benefits -:

  • • Reimbursement of up to 5% of Fixed Capital Investment (other than land) for ESDM units on Training Cost incurred for High Skilled Technology Training, subject to max of INR 25 Cr. per unit on completion of six months of employment for their UP Domicile workers, establishing inside EMZ.
    *This incentive will be made on case to case basis and is eligible for the companies investing more than INR 300 Crores in the state
  • • Permission to have 24X7 operations and employment of women in all three shifts.

Private ESDM parks

Investors who wish to set a unit in ESDM parks will be given following incentives

  • • 25% rebate allowed on land purchased from state agencies at prevailing sector rates of land
  • • Developer getting infrastructure facilities from authorities
  • • Single window clearance from concerned authority and nomination of nodal officer for every park
  • • Maximum 60% subsidy on annual interest for 7 years, subject to maximum 10 crore per annum for development of general facilities (road, electricity, water, dormitories, etc.) subject to ceiling of 50 Crores
  • • 100% exemption on Stamp Duty for purchase/lease of land on first transaction and 50% on second transaction

Ease of Doing Business

For facilitating investments into the state the Uttar Pradesh government has setup Udyog Bandhu – a dedicated single window body, Nivesh Mitra – an online single window for granting various clearances and licenses across various departments in time bound manner (with clearly defined timelines) through a Common Application Form and UPIGRS – Online Grievance Redressal. The various key initiatives implemented for enabling doing business with ease in State are:

  • • Udyog Bandhu –

    Dedicated single window body: Udyog Bandhu is an IS/ISO 9001:2008 certified 3-tier (District level, Divisional level & State Level) dedicated body of the Government of Uttar Pradesh acting as a single window system since 1st January 1999. It provides 360 degree services for the purpose of setting up of businesses in the state and covers all industrial approvals.

  • • Nivesh Mitra –

    Online single window: Implemented in 2009, the online single window system of the state Nivesh Mitra – has been ranked as one of the best in India according to the erstwhile Planning Commission report (March 2014). The portal has a monitoring dashboard with colour coding for officials to monitor progress. Nivesh Mitra also updates investors about the progress of their application through SMS.

  • • UPIGRS –

    Online Grievance Redressal: UPIGRS is an online platform for the entrepreneurs to submit their grievances to Udyog Bandhu. It also provides a grievance monitoring mechanism across Uttar Pradesh. The issues lodged through this portal are forwarded to the dedicated Grievance Cell at Udyog Bandhu who in turn forwards the grievances to the nodal officer of the relevant department for necessary action by specifying a possible resolve time (15 Days). UPIGRS provides a Unique Token Number (UTN) to the complainant which can be used to track the status of his/ her complaint.

  • • Common Application Form:

    Entrepreneurs can apply for all the approvals/ clearances required for starting a business in Uttar Pradesh through a Common Application Form (CAF) available actives Mitra – the online single window system of the state. The CAF considerably reduces the time and hassle faced by businesses/ investors in filling multiple applications by eliminating the need of filling up repetitive information in the forms.

  • • Timelines of Services under Online Single Window System:

    Nivesh Mitra – the online single window portal of the state ensures that the services are delivered within the prescribed time limit as suggested by various acts, GOs, charters etc.

  • • Time bound service delivery:

    Uttar Pradesh Legislature had passed the Uttar Pradesh Janhit Guarantee Act 2011 on 3rd March 2011. Through the Act, the Government made it mandatory for departments to ensure time bound service delivery. Multiple industrial services across various departments have been brought under the ambit of this. The key departments providing services under the Uttar Pradesh Janhit Guarantee Act 2011 include Departments of Electrical Safety, Pollution Control Board, Directorate of Factories, Small scale Industries, Labour, Registration, Forest, Public Works Department, Commercial Tax Department, Housing and Urban Planning, Entertainment Tax and Power Department.

Investment Opportunities

  • • Setting up of Electronics Manufacturing Clusters (EMCs)
  • • Semiconductor Wafer Fabrication (FAB)
  • • Electronic Components
  • • Strategic electronics
  • • Semiconductor Design
  • • Electronics Manufacturing Services (EMS)
  • • Telecom Products
  • • Industrial/Consumer Electronics
  • • Manufacturing of Medical, Defense, Automotive and Power electronics items
  • • Manufacturing of Networking equipment