India is the second largest consumer of silver in terms of industrial fabrications, next only to China. India consumes around 1900 tons of silver in a year, which is nearly 8% of world’s total mine production. For an ordinary citizen in India, silver means a precious metal, which can be used to make jewellery or silverware. According to Thomson Reuters/The Silver Institute figure, these two segments used to consume around 1900 tons of silver in 2002. The number has come down dramatically over the years and now these two segments are consuming around 900 tons on yearly basis.
Perhaps, it is difficult to believe how the total consumption level remains almost static today compared with 2002 (1900 tons yearly basis) despite drastic drop in jewellery and silverware fabrication. But, the mathematics is as simple as water is to life. The fall in consumption in jewellery and silverware is replaced by electrical and electronics, brazing alloys and soldiers segments. Together, they are consuming more than 700 tons at present. But, out of this, electrical and electronics segment has excelled with rise in Indian economy. This segment is alone consuming more than 500 tons today, according to Fig 1.
Background of Electronics Industry
Government of India has put electronics sector to ‘priority’ segment not only for economic imperative, but also for growing security threats to ICT dependent business process. Government has put a special emphasis on electronic hardware manufacturing up-to the Cheap level to counter the security threat. According to Department of Electronics and Information Technology, Government of India, India’s share to electronic hardware production is only 1.3% of global production, which currently stands at $1750 billion. So, there is enormous scope to excel in this segment considering the growing size of Indian economy. At the same time, the demand of domestically produced electronic goods, as per the Ministry’s estimate, would grow to $400 billion by 2020 at a CAGR of 22%. But, at current level, the industry could meet only demand of $100 billion by 2020.
So, there is hardly any doubt that electronics industry would continue to grow, or rather, the segment has to grow to keep pace with growing economy; demand for silver would continue to remain robust. As we have witnessed in case of China, India, too, has the potential to become a strong electronic hub, albeit primarily to meet domestic demand.
Consumer electronics is one segment which does not require any introduction. Indian economy has grown over 7% till 2009-10 and disposable income has also grown in line with economy. For example, demand for color televisions, or to be precise, LCD/LED panels has been growing exponentially. According to Department of Electronics and Information Technology estimate, the market of LCD/LED TVs has increased from about 4 million units in 2011 to approximately 5.5 million units in 2012. This year it is projected to increase to 7 million units. These panels use silver ‘electrode’ to produce low-level, energy efficient light.
Demand for personal computer (PC) has grown exponentially with rise of household income. PC market is expected to be driven by household segment by more than 50%, according to Department of Electronic and Information Technology estimate. Growing income level and awareness for having a personal computer in household as an educational device is driving the PC market. In 2012-13 itself, 12 million personal computers have been sold. The figure may be huge apparently, but considering the population of the country and demographic differences, the number is too small
Among all the metals, silver has the higher electrical conductivity. But, because of high cost, copper has taken a large part in electrical application. But, silver is unparallel when it comes to radio-frequencing engineering, particularly at VHF (Very High Frequency) or UHF (Ultra High Frequency). In this, silver plating is used to enhance the electrical conductivity of parts, including wires. FM and television broadcasting, land mobile stations are some of the common uses of VHF.
Figure 4 shows the exponential growth of communication and broadcasting equipments in value terms. As per Ministry figure, more than 180 million mobile handsets were sold in 2012-13, i.e. 9% higher than previous years; till September 2012, there were altogether 242 FM radio stations were in operation; registered TV channels as of September 2012 are 843; till Sept 2012, there were 50.91 million registered subscriber with 6 private DTH operators. This segment has been growing at fastest speed. This precisely the reason, and as reflected in Fig.4, the value of production has increased to $10263 million in 2012-13 against $8619 million in 2011-12. According to Telecom Regulatory Authority of India (TRAI), the demand for telecom equipment is estimated to grow to $31379 million in 2020.
In recent policy move, Government of India has allowed 100 percent FDI under automatic route in semiconductor fabrications (Semiconductors are the main components in electronic products). Not only that, the central government has also approved a proposal to aid financially to develop electronic manufacturing clusters (ECMs) to assist Electronic System Design and Manufacturing sector. The government is also keen to encourage local manufacturers in electronic sectors by providing special incentive package.
Coming to silver, the metal, as we already mentioned earlier, is the best conductor of electricity and it is used in many facets of semiconductor manufacturing. Semiconductor is the heart of any electronic product like telecom infrastructure equipments, wireless handsets, set-top boxes, notebooks, smart-cards and so on. So, in our estimate, if the price of silver remains competitive in the international, as we have been seeing today, we believe the demand of the metal will continue to increase in electronics industry in India. (The demand has grown at CAGR of 13.8% from 2002 to 2011, and with current initiatives like 100% FDI in semiconductor manufacturing undertaken by the Government, if it actually happens, we could assume that electronic industry would require more than 1000 tons of silver, from the current level of 550 odd tons in next ten years).