Hardware Sector Needs More Attention

The last ten years have been software-centric. If India is today recognized
as an IT superpower, it is because of the stellar role played by the software
industry. So much so that one-fifth of India's export constitutes of software.

At the same time, the hardware sector has just about kept its head above
water. This sector has been deprived of the attention and concessions that
software got. As a result, it is stagnating, whereas it could have emerged
another success story by becoming the hub for hardware outsourcing.

Key structural trends of the international industry are resulting in
increased outsourcing of parts of the manufacturing value-chain. The size of the
contract manufacturing industry is expected to be over $ 500 billion by 2010, up
from $ 103 billion in 2000.

Technology evolution is resulting in rapid convergence, giving rise to
products that have a host of technologies contributing to that convergence.
Increasing computing power and advances in communications and Internet
technologies have paved the way for a new market for embedded system products
with specific or multiple applications. The increasing popularity of mobile
applications also presents a great opportunity for developing innovative
products.

Sometime back, Ernst & Young had come out with a study-India: The
Hardware Opportunity-which rightly pointed out that the growth in domestic
demand for these products provides the necessary critical mass for making
manufacturers globally competitive. Such a base will also be a stabilizing
factor for companies targeting the international market.

The study revealed that the Indian hardware industry could attain a turnover
of $62 billion by 2010. The major export opportunities are in the area of
innovative new products, contract manufacturing (OEM and ODM) and design
services. Export of components offers an opportunity of $ 5 billion while that
of designs and related services in embedded systems and wireless telecom systems
of $ 7 billion by 2010.

In the area of contract manufacturing, India can aim to corner a share of 2.2
percent of the global electronics contract manufacturing market by 2010, an $ 11
billion opportunity with the size of the global contract manufacturing market
crossing $ 500 billion. Potential areas for contract manufacturing are PCB
assembly, cable harness assembly, product assembly and testing, power supplies
and semiconductor assembly.

All this can happen only if the Government actively undertakes the role of a
facilitator. Getting the policy framework right is of crucial importance as also
the infrastructure and technology position. Besides focusing on technology, the
industry also needs to look beyond the short term and think global.

Asim Raina