Strate­gic elec­tron­ics:

Op­por­tu­ni­ties and chal­lenges

Electronics Bazaar - - Contents - By Sudeshna Das

Emerg­ing tech­nolo­gies are go­ing to re­shape mod­ern war­fare by har­ness­ing the power of elec­tron­ics. This, in turn, will make the In­dian strate­gic elec­tron­ics (SE) sec­tor, mainly com­pris­ing aerospace and de­fence, a vi­brant in­dus­try over the next 10 years.

In­dia is the sev­enth largest aerospace and de­fence (A&D) mar­ket glob­ally. The coun­try’s de­fence bud­get is size­able and cov­ers the re­quire­ments of the army, navy and air force. In­dia needs to mod­ernise its A&D cap­i­tal equip­ment base by

ad­dress­ing ob­so­les­cence as well as build­ing ad­di­tional ca­pa­bil­i­ties through new cap­i­tal ac­qui­si­tion. There have also been ad­di­tional bud­getary al­lo­ca­tions from the Min­istry

of Home Af­fairs for para­mil­i­tary and state po­lice force re­quire­ments. All of this has re­sulted in In­dia be­com­ing quite at­trac­tive as an A&D elec­tron­ics mar­ket.

Con­sid­er­ing the im­por­tance of the in­dus­try in the elec­tronic sys­tem de­sign and man­u­fac­tur­ing (ESDM) ecosys­tem, the Septem­ber 2016 is­sue of Elec­tron­ics Bazaar pub­lished an ar­ti­cle ti­tled, ‘Spurring de­mand in Strate­gic Elec­tron­ics’. How­ever, the de­fence elec­tron­ics in­dus­try ecosys­tem has evolved sig­nif­i­cantly in the last cou­ple of months, with re­spect to the im­ple­men­ta­tion and amend­ment of gov­ern­ment poli­cies re­lated to de­fence pro­cure­ment, as well as the for­eign di­rect in­vest­ment climate. Hence, we de­cided to take a fresh look at the in­dus­try to un­der­stand the op­por­tu­ni­ties and chal­lenges.

Mar­ket op­por­tu­ni­ties

The panel of ex­perts that con­tributed to this re­port unan­i­mously agreed that the strate­gic elec­tron­ics in­dus­try is poised for growth in this fi­nan­cial year. Of them, 90 per cent (Fig­ure 1) feel that the in­dus­try will see a slow but steady growth. Ex­perts feel large scale moderni­sa­tion of In­dia’s de­fence forces is on the anvil, and the next decade is likely to see an ex­po­nen­tial growth in com­bat sys­tems as well as non-plat­form based pro­grammes that fa­cil­i­tate the smart bat­tal­ion. There­fore, the op­por­tu­ni­ties in In­dian elec­tron­ics are in both stand­alone sys­tems (as part of plat­forms) as well as at a sub-sys­tem level for other sys­tems. Ac­cord­ing to the ex­perts, the key fac­tors that will in­flu­ence growth are:

• Moderni­sa­tion of weapon plat­forms

In­duc­tion of state-of-art weapons by the three armed forces Im­pact of in­di­geni­sa­tion and the Make in In­dia ini­tia­tive Elec­tron­ics is at the heart of each mod­ern war­fare sys­tem and cur­rently, the coun­try is at­tempt­ing to reign in its alarm­ing elec­tron­ics im­port bill, which is soon ex­pected to sur­pass In­dia’s oil im­port bill. This presents vast op­por­tu­ni­ties to In­dian com­pa­nies. Their prospects for growth will also be driven by the new De­fence Pro­cure­ment Pol­icy (DPP), the off­set poli­cies, the Make in In­dia ini­tia­tive and other key pro­grammes.

Ac­cord­ing to a re­port from con­sul­tancy firm, Roland Berger, in part­ner­ship with two in­dus­try as­so­ci­a­tions, the Na­tional As­so­ci­a­tion of Soft­ware & Ser­vices Com­pa­nies (NASS­COM) and In­dia Elec­tron­ics and Semi­con­duc­tor As­so­ci­a­tion (IESA), In­dia’s aerospace and de­fence in­dus­try is ex­pected to con­sume elec­tron­ics worth US$ 70-72 bil­lion in the next decade, as the coun­try rapidly mod­ernises its mil­i­tary by em­brac­ing new tech­nolo­gies. The same re­port also in­di­cates that about US$ 53-54 bil­lion will be for elec­tron­ics ac­quired as part of plat­forms (i.e., at the Tier 1 and Tier 2 lev­els).

De­mand for elec­tron­ics worth US$ 17-18 bil­lion is ex­pected from projects that are tra­di­tion­ally called sys­tem-of-sys­tems (non-plat­form based) ap­pli­ca­tions.

While the above mar­ket pro­jec­tions are for the next 10-12 years, there could be ad­di­tional mo­men­tum with other new pro­grammes be­ing an­nounced in the in­terim. An­other growth op­por­tu­nity is the po­ten­tial to in­te­grate into global value chains of OEMs (ini­tially lever­ag­ing the off­set route and, sub­se­quently, based on prod­uct qual­ity, service de­liv­ery ad­van­tages and cost ar­bi­trage).

Iden­ti­fy­ing ar­eas where de­mand will grow

In spite of huge op­por­tu­ni­ties, there is a de­mand-sup­ply gap with re­spect to the avail­abil­ity of indige­nous com­po­nents, prod­ucts and so­lu­tions, most of which are still im­ported. In­dian com­pa­nies are not able to cater to re­quire­ments that in­volve low vol­umes, high technology and high in­vest­ments.

How­ever, the elec­tronic prod­ucts and so­lu­tions re­quired in large vol­umes will be in the ar­eas of:

• EMS, build to print (which in the con­text of de­fence pro­duc­tion, in­cludes firmware up­dates, test-jig de­vel­op­ment, man­u­fac­tur­ing soft­ware de­vel­op­ment, com­po­nent pro­cure­ment, sys­tems in­te­gra­tion, soft­ware up­grades/en­hance­ment, ver­i­fi­ca­tion and val­i­da­tion, sys­tem de­ploy­ment, HW qual­i­fi­ca­tion, ESS (En­vi­ron­men­tal Stress Screen­ing), main­te­nance sup­port, etc), line re­place­able units for In­dian

Fig­ure 1: Fore­cast of the growth pat­tern of the SE sec­tor in In­dia

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