The Indian Computer Aided Design (CAD), Computer Aided Manufacturing (CAM,) and Computer Aided Engineering (CAE) – Manufacturing Software - market has undergone rapid transformation in the last decade. The rapid economic growth, coupled with the high disposable income of the Indian population have propelled the growth of the aerospace, automotive, manufacturing and infrastructure sectors. Furthermore, the availability of low cost and high quality labor is driving the engineering and services export market, thus, driving the growth of the Indian design/manufacturing software market. Additionally, the demand for design/manufacturing software in educational and engineering institutions and the booming Small and Medium Businesses (SMB) segment is aiding to this growth. Furthermore, the government's favorable policies for infrastructure development are driving the growth of this market in the architectural segment. The U.S. is a major player in India’s CAD/CAM/CAE market. All leading CAD/CAM/CAE suppliers are present in the market, and many smaller companies are collaborating with IT Software consultants to cater to the niche markets.
Market Demand In order to improve the quality of its manufactured goods in order to be globally competitive, India continues to invest in technological tools that help its businesses succeed. Since many overseas companies are outsourcing their design and manufacturing to India, it is essential that Indian entities be able to communicate designs quickly and easily. CAD/CAM/CAE software enables engineers and designers to develop products quickly and easily, and to communicate (designs) with other engineers located across geographies. The demand for engineering solutions in the Indian Small/Medium Business (SMB) segment is increasing rapidly. This is because globalization has forced the SMB(s) to implement stringent standards to face stiffer regional and global competition from large established players. Furthermore, many SMB(s) are a part of the supply chain of multi-national companies that compel them to adopt the latest technological tools, including CAD/CAM/CAE software for designing requirements/solutions. The booming SMB segment, coupled with its need to maintain a competitive advantage, is driving the growth of the CAD/CAM/CAE market. Indian firms have excelled in almost every field/industry, including manufacturing, services, and more specifically Information Technology (IT). The Indian engineering consultancy industry has effectively leveraged the CAD/CAM/CAE software design/development tools - that are mainly imported and/or developed by overseas firms who have established operations in India – to build on and design products for everyday use such. Today this industry has evolved as an industry with a US $85 million market share and growing at an annual rate of 25%. Thus, the potential for this market can only be realized from the fact that the manufacturing sector spends about US $700 million annually on the IT/engineering services, including engineering software. With such an environment for growth, this sector will see tremendous activities in the years to come.
Market Data The automotive segment spends an average of 3-5% of its annual revenues on R&D activities, of which engineering design forms a significant part. Total revenues earned over the last years by the top 10 auto manufacturers are estimated at $850 billion. Assuming that design accounts for half of an auto company's R&D spending, this would amount to an annual design expenditure over $12 billion for the industry. According to industry sources, the automotive design services delivered out of India is estimated to be around $1 billion in the next two years. To reach this level and sustain growth India’s automotive sector will have to invest a significant amount in design and R&D tools. Today, the automotive manufacturing development process is almost completely done using technologies virtually. Substantial initiatives for the standardization of CAD/CAM/CAE technologies has hence come from the automotive industry, like for neutral CAD data interfaces. The other vertical driving the CAD/CAM/CAE market is the aerospace sector, as this industry has a highly cyclical revenue pattern, high fixed operating costs and large capital expenditures. In addition, the offsets policy in India will ensure that an increasing number of private as well as public companies participate in the design work. The Indian 3D CAD/CAM/CAE market is estimated to be worth $85 million, with the CAD market alone estimated at $30 million. Until now, 2D players dominated the market. But recently there has been a definitive shift towards 3D. This shift is due to the long-term cost effectiveness, ease-of-use and powerful modeling capabilities of 3D software. There is tremendous reduction in product time-to-market cycles using 3D software. The industry has seen companies reducing their production cycles by almost 50%.
Best Prospects As per current industry estimates, automotive design forms the largest segment, accounting for 65-70% of the market, followed by aerospace at 15-16% and electric/electronic machinery design at 10-12%. Other key vertical segments considered good targets for outsourced engineering services include telecom, utilities, heavy engineering and pharmaceutical. Prospective Buyers The Automotive, aerospace and manufacturing sectors are the users of Engineering services and account for more than 85 percent of the CAD, CAD, CAE products and services. India has the expertise in leveraging 3D modeling and plant engineering solutions in sectors like aerospace, automotive and industrial machinery.
Market Entry Given the huge market potential for Computer-aided engineering services, U.S. firms should identify engineering consultancy firms and get into partnerships with them to cater to the engineering demands of the Indian industry. In addition, U.S. companies should evolve proper marketing strategies and should take active part in Trade Shows and Exhibitions that are being held in India from time to time.
Market Issues and Obstacles The Government of India's import policy allows for imports of Computer Engineering products and services. The GOI has simplified import procedures and has been reducing import duties to encourage imports of software production tools. Import liberalization is expected to continue to booster this sunrise industry. Software engineering packages (such as I-DEAS, AutoCAD, IMSL, SolidWorks, and WorkView) for software design and testing can be imported without levy of customs duties. However, computer hardware and engineering designs are subject to nominal custom duties of 10 percent.
Computers and Peripherals
Computers & peripherals
Imports from US
Statistical data are unofficial estimates from trade sources
*2006 figures are estimates
The Indian computer and peripherals market is expected to
continue to expand to meet local demands. High growth areas
like telecommunication, banking and financial services,
manufacturing, retail, and Business Process Outsourcing
(BPO)/IT-enabled services are the major consumers of
computers and peripherals. The price-sensitive computer
hardware market has responded positively to a drop in prices,
especially at the entry-level. Private sector firms, government
offices, small and medium-sized enterprises (SMEs), and small
office home office (SOHO) users also continued to
computerize their operations, contributing to the growth of the
computer hardware market.
India has more than 5 million internet customers today and
most of them are businesses of all sizes. The Indian
Information Technology industry is expected to continue its
high growth rates in the coming five years catering to both
domestic and export markets.
The domestic production of computers has seen a substantial
change with more than 150 small, medium and large firms
manufacturing computers in India during this period. Many
multi-national companies (MNCs) such as HP, IBM, Siemens,
Dell, and ACER already have a strong manufacturing presence
in India. Lesser-known companies assemble PCs and these
locally assembled PCs now compete with MNC products.
MNC brands account for 36 percent of the market while local
Indian brands have 28 percent and assembled PCS have a
share of about 36 percent.
In fiscal year 2005-06, the desktop PC market registered a
growth of 27 percent over the last year. Notebook sales
registered a record growth of 144 percent (430 thousand) over
the previous year. The high growth is attributed to the steep
drop in the notebook prices, as the prices are now even
comparable to many desktops in certain cases.
Server sales were also buoyant in 2005-2006, recording sales
of over 89,000 units (81 percent growth). The laser printer
market also grew 128 percent (320,000) and dot matrix printers
by 18 percent.
The gray market, an unofficial market in which new hardware is
bought and sold before it becomes legally available, is a
significant threat to the legitimate Indian computer hardware
industry. The gray market in India has seen significant
expansion in recent years. According to the Manufacturers
Association of Information Technology (MAIT), gray market
operations as a proportion of the total PC market in India, are
likely to be the highest in the world. Though statistics on this
issue are currently not scientific, the immense size of the gray
market the PC market is likely mirrored in most tech industries
in the country.
India has recently seen the emergence of mature channels of
distribution and support for products such as computer
hardware, software, and peripherals, ranging from commodity
products to high-end IT equipment. The typical distribution structure has been two-tiered with a distributor (for the entire
country) servicing dealers and retailers. Improvements in
packaging technology have also had a significant influence on
the models of distribution adopted by companies in India for
marketing perishable and processed food items.
The promising sub-sectors with the estimated market size for
the year 2007 are:
Estimated 2007 Market Size
(in US$ millions)
Source: National Association of Software and Service Companies
Significant opportunities exist for the U.S. companies to supply
high-end computers, servers, and peripherals to India. U.S.
companies such as HP, Dell, Cisco, GE, Lucent Technologies,
Hughes, and Motorola are already in India selling computers
and peripherals. Major Indian and U.S. software and services
companies such as Microsoft, Cisco, Cognizant Technologies,
IBM, GE, Oracle, Infosys, Wipro, and Texas Instruments import
and use high performance computer systems for their
development projects. In addition, opportunities exist in major
Indian and international banks, insurance companies, the
Indian stock markets, railways, and airlines where high
performance computers, including mainframes and mid-sized
computers are used.