On the day his victory in 2024 was announced, Prime Minister Modi declared: “We made India the second largest manufacturer of smartphones. Now we will add work semiconductors and electronics.” In ten years, the Modi government turned a sclerotic electronics industry, plagued by funding problems, import dependence and limited infrastructure, into a sector capable of producing 310 million units in 2022 (PwC). State-led industrial stimulation made it possible.
Modi is now engaged in a new mission: to convert the mobile momentum to put India at the forefront of a global hardware revolution. Global supply chain diversification – the “China +1” strategy – has already seen US imports of mechanical machinery from China down 28% and up 70% from India (ASEAN). New PLI schemes have attracted $27.4 billion in FDI with Samsung, Pegatron, Rising Star and Wriston announcing investments – iPhone maker Foxconn announced a $2.7 billion factory in Bangalore. Following this, India’s aspiring, digitally literate and growing middle-income consumers will drive the domestic electronics market to $92 billion by 2032 (Morgan Stanley). Startups in the hardware space, long ignored by SaaS-focused capital, play a critical role in building this digital economy. Government incentives, a growing manufacturing base and a rapidly expanding set of use cases and consumers give these firms – and their investors – opportunities to become world leaders.
It is a world of hard technology
Take smart public transport – a core element of the Government of India’s Smart City Mission. The digitally integrated bus requires a GPS-enabled automatic vehicle location system for real-time tracking, route planning and traffic status reports. Automated fare collection requires an on-board near-field communication system. A temperature sensor can monitor and adjust on-board air conditioning or seat heaters, as South Korean buses do. In an electric bus, which according to Niti Aayog will be 40% of the Indian fleet by 2030, the vehicle would carry a large rechargeable battery and require smart charging infrastructure.
Hardware integration is driving connectivity and automation in every aspect of modern life. Digital consumers, 345 million in India alone, demand smaller, more affordable and more adaptable digital devices. In the Indian household, where device penetration is expected to reach 22% by 2028, 5G, cloud computing and increasingly smaller processors and graphics chips are enabling these advances. However, while promising, the consumer device market is also saturated. Today’s smart TVs, for example, can adapt sound to their environment, but won’t capture the benefits of WIFI connectivity or the 4K QLED display brought about in years past.
Opportunities for B2B hard technology innovation, on the other hand, are everywhere. Indian AgriTech, attracting $4.2 billion by 2022, is improving crop yields and conserving resources with weeding robots and remote sensors that track livestock. In retail spaces, automated PoS systems collect data on customer behavior and provide personalized recommendations and support. 58% of companies that embraced IoT in the workplace, from smart lighting to CCTV security tracking, experienced at least a 5% increase in revenue (McKinsey). However, we contend that the biggest opportunity and need for hardware startups is on the factory floor.
prediction
India’s industrial east creates a massive M&A market for hardware startups. New players are looking for local IP applications for which they have grown by 25% this year. Industry 4.0 investments reached 20% of manufacturing technology spending globally, as 86% of executives surveyed reported smart factory solutions as key drivers of competitiveness in the next five years (Deloitte). Autonomous mobile robot (AMR) companies like Bangalore-based Anscer and Accio Robotics attack supply chain inefficiencies through automated warehouse management and last-mile delivery. For expanding a factory’s digital infrastructure, Pantherun offers industrial ethernet switches with a real-time encryption approach. Corrosion Intelligence monitors corrosion in real-time through IoT sensors and analytics for oil, gas and chemical processing.
Of the 90 million new jobs created by India’s industrial push, 70% will fall under “blue collar” roles (McKinsey). On average, 3 of these workers die every day in Indian factories due to the lack of basic safety measures – a statistic that led India’s Parliament to introduce a strict labor code in 2019. Bolstered by the growing presence of MNCs industrial in India, connected Hardware devices that protect workers on the factory floor will be critical. Proxgy, for example, provides sensor-connected helmets for hazard communication to Indian construction firms. Seeteria uses CCTV and AI to make the use of industrial vehicles safe. XYMA Analytics uses wave sensors to monitor industrial parameters under the most extreme conditions.
Challenges exist. 70% of hard technology manufacturing applications do not make it past the pilot stage. The sector also faces an industrial skills gap that could grow to a shortage of 85 million people by 2030 (McKinsey). Regardless, we think solutions that make interoperability and accessible integration a priority are scalable.
Government support
The supporting ecosystem for these startups is developing rapidly. The industry-relevant research and development funding scheme supports academic and industrial research institutions, where early-stage hardware has access to non-equity grants. State-sponsored innovation incubators like T-Hub and IKP Knowledge Park in Hyderabad, or the Startup to Scaleup Accelerator by The GAIN in Bangalore, also create a promising development pipeline for hardware enterprises. Recently, the government has even recognized the vitality of the DeepTech sector by drafting the National DeepTech Startup Policy (NDTSP). The policy will strengthen R&D startups along the hardware supply chain. It disburses Rs 2 crore grants to startups at the proof-of-concept stage and INR 3 crore at the prototype stage.
In particular, defense and medical equipment, areas long dependent on imports, are a particular focus of government support. Domestic defense production has grown by $12 billion from $5.2 billion in 2014. Programs like Innovations for Defense Excellence (iDEX) support IdeaForge and New Space Research and Technologies, which supply the Army’s UAVs for aerial surveillance and transportation. Medical devices range from patient-centered vitals monitoring to lab-tech smart pipettes and digital microscopes. Relevant firms benefit from a long list of government schemes, including the National Policy for Research and Development and Innovation in the Pharmaceutical and Med-Tech Sector.
CONCLUSION
In India, it has never been easier to build and sell useful gadgets. With easy prototyping, strong government support and a growing demand for bus-to-factory integration, now is the time for investors to take notice. The Modi 3.0 era is the era of Indian hardware.
By: Esha Arya, Board Advisor and Partner, 8X Ventures
Modi is now engaged in a new mission: to convert the mobile momentum to put India at the forefront of a global hardware revolution. Global supply chain diversification – the “China +1” strategy – has already seen US imports of mechanical machinery from China down 28% and up 70% from India (ASEAN). New PLI schemes have attracted $27.4 billion in FDI with Samsung, Pegatron, Rising Star and Wriston announcing investments – iPhone maker Foxconn announced a $2.7 billion factory in Bangalore. Following this, India’s aspiring, digitally literate and growing middle-income consumers will drive the domestic electronics market to $92 billion by 2032 (Morgan Stanley). Startups in the hardware space, long ignored by SaaS-focused capital, play a critical role in building this digital economy. Government incentives, a growing manufacturing base and a rapidly expanding set of use cases and consumers give these firms – and their investors – opportunities to become world leaders.
It is a world of hard technology
Take smart public transport – a core element of the Government of India’s Smart City Mission. The digitally integrated bus requires a GPS-enabled automatic vehicle location system for real-time tracking, route planning and traffic status reports. Automated fare collection requires an on-board near-field communication system. A temperature sensor can monitor and adjust on-board air conditioning or seat heaters, as South Korean buses do. In an electric bus, which according to Niti Aayog will be 40% of the Indian fleet by 2030, the vehicle would carry a large rechargeable battery and require smart charging infrastructure.
Hardware integration is driving connectivity and automation in every aspect of modern life. Digital consumers, 345 million in India alone, demand smaller, more affordable and more adaptable digital devices. In the Indian household, where device penetration is expected to reach 22% by 2028, 5G, cloud computing and increasingly smaller processors and graphics chips are enabling these advances. However, while promising, the consumer device market is also saturated. Today’s smart TVs, for example, can adapt sound to their environment, but won’t capture the benefits of WIFI connectivity or the 4K QLED display brought about in years past.
Opportunities for B2B hard technology innovation, on the other hand, are everywhere. Indian AgriTech, attracting $4.2 billion by 2022, is improving crop yields and conserving resources with weeding robots and remote sensors that track livestock. In retail spaces, automated PoS systems collect data on customer behavior and provide personalized recommendations and support. 58% of companies that embraced IoT in the workplace, from smart lighting to CCTV security tracking, experienced at least a 5% increase in revenue (McKinsey). However, we contend that the biggest opportunity and need for hardware startups is on the factory floor.
prediction
India’s industrial east creates a massive M&A market for hardware startups. New players are looking for local IP applications for which they have grown by 25% this year. Industry 4.0 investments reached 20% of manufacturing technology spending globally, as 86% of executives surveyed reported smart factory solutions as key drivers of competitiveness in the next five years (Deloitte). Autonomous mobile robot (AMR) companies like Bangalore-based Anscer and Accio Robotics attack supply chain inefficiencies through automated warehouse management and last-mile delivery. For expanding a factory’s digital infrastructure, Pantherun offers industrial ethernet switches with a real-time encryption approach. Corrosion Intelligence monitors corrosion in real-time through IoT sensors and analytics for oil, gas and chemical processing.
Of the 90 million new jobs created by India’s industrial push, 70% will fall under “blue collar” roles (McKinsey). On average, 3 of these workers die every day in Indian factories due to the lack of basic safety measures – a statistic that led India’s Parliament to introduce a strict labor code in 2019. Bolstered by the growing presence of MNCs industrial in India, connected Hardware devices that protect workers on the factory floor will be critical. Proxgy, for example, provides sensor-connected helmets for hazard communication to Indian construction firms. Seeteria uses CCTV and AI to make the use of industrial vehicles safe. XYMA Analytics uses wave sensors to monitor industrial parameters under the most extreme conditions.
Challenges exist. 70% of hard technology manufacturing applications do not make it past the pilot stage. The sector also faces an industrial skills gap that could grow to a shortage of 85 million people by 2030 (McKinsey). Regardless, we think solutions that make interoperability and accessible integration a priority are scalable.
Government support
The supporting ecosystem for these startups is developing rapidly. The industry-relevant research and development funding scheme supports academic and industrial research institutions, where early-stage hardware has access to non-equity grants. State-sponsored innovation incubators like T-Hub and IKP Knowledge Park in Hyderabad, or the Startup to Scaleup Accelerator by The GAIN in Bangalore, also create a promising development pipeline for hardware enterprises. Recently, the government has even recognized the vitality of the DeepTech sector by drafting the National DeepTech Startup Policy (NDTSP). The policy will strengthen R&D startups along the hardware supply chain. It disburses Rs 2 crore grants to startups at the proof-of-concept stage and INR 3 crore at the prototype stage.
In particular, defense and medical equipment, areas long dependent on imports, are a particular focus of government support. Domestic defense production has grown by $12 billion from $5.2 billion in 2014. Programs like Innovations for Defense Excellence (iDEX) support IdeaForge and New Space Research and Technologies, which supply the Army’s UAVs for aerial surveillance and transportation. Medical devices range from patient-centered vitals monitoring to lab-tech smart pipettes and digital microscopes. Relevant firms benefit from a long list of government schemes, including the National Policy for Research and Development and Innovation in the Pharmaceutical and Med-Tech Sector.
CONCLUSION
In India, it has never been easier to build and sell useful gadgets. With easy prototyping, strong government support and a growing demand for bus-to-factory integration, now is the time for investors to take notice. The Modi 3.0 era is the era of Indian hardware.
By: Esha Arya, Board Advisor and Partner, 8X Ventures