Connect with us

Headlines Of The Day

In electronics, India aims to become a ‘factory for the world’

China is losing its luster as a place for cheap, reliable manufacturing of high-technology goods. But what other country can match it in both price and scale? The answer might be India.

Despite a population of nearly 1.4 billion, including a well-educated and trained workforce, India hasn’t been viewed as a global hub for electronics manufacturing. Only recently has that perception begun to change.

A fully built out technology manufacturing base requires three distinct capabilities: access to raw materials, product design, and final assembly. India currently doesn’t offer all three in equal measure, according to Bharat Kapoor, partner in the strategic operations practice of Kearney.

The electronics “value chain” can be further broken into two stages: submodule production and final assembly. India is rapidly maturing in the latter, Kapoor says. Big contractor manufacturers such as Foxconn Technology Group and Megatron Asia Pacific Ltd. have either set up in India or announced plans to do so. “From that angle,” says Kapoor, “I don’t think there’s anything that can’t be made in India.”

The country is less advanced when it comes to building out an ecosystem of submodule producers, including wafer fabrication, which are essential to a complete manufacturing environment. The Indian government is undertaking extensive efforts in that area, Kapoor notes.

Also lacking is a full range of easily accessible raw materials. Up to 80% of the value of a tech manufacturing supply chain lies in the production of “active” materials such as microprocessors, memory, ancillary chips, power management and CPUs. “None of that is manufactured in India,” Kapoor says. For such components, producers still must turn to Taiwan, China, South Korea, Europe and the U.S. A similar shortfall exists with “passive” raw materials, consisting of “nuts and bolts” such as resistors and capacitors, which Kapoor calls “poor cousins of active materials — but without them, you cannot make product.”

Finally, there are electromechanical components, such as specialty motors, vacuum pumps, wire harnesses and other types of precision equipment, which can be expensive to produce. Motors and connectors exist to some extent in India, Kapoor says, “but the capability isn’t completely there. It’s a gap to be closed.”

To have a truly sustainable manufacturing base in tech, India much have all of those elements either within its geographic boundaries or sphere of influence, Kapoor says, adding that memory, storage and processors are the components most likely to be transitioned to India in the short term.

As evidence of its potential for electronics manufacturing, India can point to its success in making mobile phones. Six years ago, the country launched a “master plan” based on its status as the largest single market for phones in the world. Major manufacturers such as Samsung Group set up operations to meet domestic demand, but with the help of government incentives soon expanded their efforts to include phones for export. In the process, they created a global supply chain that wasn’t dependent on China.

India’s government might not have thought at the time that the mobile phone initiative could serve as a blueprint for other types of electronics production, but that seems to be the case now. Nevertheless, a substantial amount of investment by the big contract manufacturers, along with extensive government support, is still required for India to fulfill its ambition as a global production hub for electronics. And there remain some obstacles to overcome.

One is bureaucracy. Despite government lip service to promoting increased manufacturing for the world, “the business environment in India hasn’t been that conducive,” Kapoor says. India still must prove its capabilities to the point where it exerts “a gravitational pull” away from China and South Asia, which have dominated the electronics sector for years.

As the world’s largest democracy, India also lacks a centralized, authoritarian government that can dictate policy and see it swiftly enacted. But Kapoor says that has been less of a concern over the past five years, with a stable government pursuing policies focused on growth.

“A high-tech ecosystem is going to help from several different angles, including jobs and the economy, so I don’t see another government coming to power and saying that we don’t want all this stuff,” Kapoor says. “It’s not a hot-button issue.”

Labor remains relatively cheap, with India boasting one of the world’s youngest populations, a large number of whom are schooled in science and technology disciplines. In addition, the country has a massive middle class that can create the kind of demand that turned the domestic mobile-phone industry into an international supplier.

The U.S. trade war, coupled with the coronavirus pandemic, have prompted many businesses manufacturing in China to reconsider their sourcing strategies. But for India to become a solid producer of high-tech products, it must offer something more than a temporary alternative. “Companies are looking for real supply-chain resiliency,” says Kapoor. “They need an alternate ecosystem.”

When that happens is anyone’s guess at this point, with success depending on the willingness of all elements of the electronics industry to locate operations within India’s borders. Says Kapoor: “It’s at least a three- to five-year plan for India, to claim that we can be a factory for the world.” Supply Chain Brain

Click to comment

Notice: Undefined variable: user_ID in /home/cloudpanel/htdocs/www.tvj.co.in/wp-content/themes/zox-news/comments.php on line 49

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2021 TV Veopar Journal

error: Content is protected !!