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India's fast-growing electronics manufacturing sector is creating new opportunities for auto-component companies, allowing them to leverage their expertise in precision manufacturing and global technology partnerships, according to Jefferies.
Traditionally focused on supplying parts to automakers, these companies are now venturing into electronics, a move that could significantly boost their growth and market valuation. India's electronics sector has experienced rapid growth in recent years, with production increasing at a compound annual growth rate (CAGR) of 15 per cent from FY16 to FY24, reaching USD 115 billion. Recognizing its economic and strategic importance, the Indian government has set an ambitious target to quadruple this figure to USD 500 billion by FY31. Despite this impressive growth, the level of local value addition remains low at 18-20 per cent, primarily due to reliance on imported components. The expansion of auto-component manufacturers into electronics is not without precedent. India's automotive industry has been one of the country's most remarkable manufacturing success stories. These suppliers have not only met the demands of Indian automakers but have also established a significant presence in global markets. In FY24 alone, India's auto-component exports reached USD 21 billion, demonstrating their ability to compete on a global scale. The government aims to increase this figure to 35 per cent by 2030 by promoting domestic manufacturing and attracting global investments. India has a strong talent pool in semiconductor chip design, and its electronics assembly sector is growing. However, there is significant scope for further development in high-value component manufacturing. As India's electronics industry expands, auto-component manufacturers are well-positioned to diversify into this sector. For Indian auto-component firms, the natural entry point into electronics manufacturing is the production of non-semiconductor components and assembly services. Given their expertise in high-precision manufacturing and managing complex global supply chains, these companies can play a crucial role in strengthening India's electronics ecosystem. Expansion into electronics manufacturing not only offers a strong new revenue stream but also has the potential to improve valuation multiples for these firms. With global supply chains shifting and India positioning itself as a key player in electronics manufacturing, the country's auto-component companies are set to benefit from this transformation. The government's push for domestic production, along with increasing global interest in India as an alternative to China, presents a unique opportunity for these firms to expand beyond their traditional markets. If more Indian auto-component manufacturers embrace electronics production, it could mark the beginning of a major industrial shift, further strengthening India's position in the global electronics supply chain. (ANI)
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