India’s Race For The Next Global Electronics Export Hub

Today, we have everything at the click of a button. From ordering food to watching our favorite movies, we don't have to wait for anything.

A simple command, ‘Hey Siri, make a reservation at Wasabi by Morimoto for 7 PM’ and the AI software will oblige.

To top it up, the youth is spending more on discretionary items such as dining, entertainment and vacations compared to non-discretionary items.

All of this has changed the spending patterns of India's young demographic.

And as a result, India's potential for future consumption is huge and with India's median population age being 28 years, this trend is likely to continue for a long time.

Let us understand this better by taking a closer look at one of the booming sectors in India…and understand what it means for the markets.

Here’s how the sector has evolved in recent years…

The electronics segment in India has become the fastest growing export market so far for the financial year ending March 2023.

The government's production linked incentive (PLI) scheme has helped India become the fastest-growing export market for electronics. Have a look:

Electronics Exports Top the Charts

Now, the big spurt seen above in electronics exports was due to India’s growing share of mobile devices.

Have a look at the below stats shared by Statista:

Smartphone Users In India (2010 to 2020) With Estimates Until 2040

Let’s take a closer look into this…

In 2016, around 20% of the total population in India were using smartphones.

Skip forward to 2020 and this reached around 50%. And it’s expected to go up to 96% by 2040! Imagine the number going up to 96% of the population and the opportunity it presents for mobile manufacturing companies.

This significant surge in smartphone exports for FY23 is mainly credited to Apple's three contracted manufacturers - Foxconn, Pegatron, and Wistron.

Together, they accounted for almost 46% of the overall smartphone exports. After all, Apple is one of the biggest tech companies in the world…and also the largest company in the entire global market if sorted by market capitalisation.

Foxconn and Wistron have already established factories in India in recent years.

Amazon and Samsung are other prominent names joining the list.

So, there are companies looking to setup their electronic factories in India.

The reason behind this is also interesting…

India has the world's second-largest smartphone market and a young, growing population that is increasingly getting online, making it an attractive destination for tech companies.

I think about the opportunities for Indian smartphone manufacturing companies!

Consider this example: Back in 2009, Redington entered the smartphone market as a distributor. This move proved to be highly successful, as within just three years, Redington's profits shot up from a languishing decade of underperformance.

So, there’s a massive growth opportunity. To top it up, the Indian government has set an ambitious goal for the export of electronics, with a target of achieving a staggering $120 billion by FY26.

This target represents a substantial increase from the current export figures, which are approximately one-sixth of the desired amount.

This could be seen as a strategic move to enhance the country's economic growth and global competitiveness.

However, the successful accomplishment of this goal will require the implementation of various policies and initiatives., It will enhance productivity, and create a favorable environment for businesses to thrive.

Because India knows that it’s becoming the new factory of the world.

The country’s younger generation has witnessed a surge in literacy rates, with nearly 90% of them possessing the ability to read and write. This has led to a digitally aware populace, especially with the widespread usage of social media and internet connectivity.

Furthermore, to unlock the full potential of consumption in rural India, the government has emphasized improving both physical and digital connectivity.

So, as digitization picks pace, be sure to check out the Nifty Digital Index which tracks the performance of companies that represent the digital India theme.

And since we’re talking about digitalization, do check out the below video where we discuss the upcoming IPO of Tata Technologies Ltd. which is one of world’s leading ERD companies.

Tune in here: https://www.youtube.com/watch?v=_gBagou3Ac8

Until next time… Happy Investing!