Make In India: India finally logs into hi-tech manufacturing
Neither Thailand nor Vietnam were on the radar of high-tech manufacturers even a decade ago.
Today, Thailand is the world’s largest producer of hard disks and Vietnam boasts of Asia’s most modern fabs or chip-making factories. For much longer than that India has been trying to attract high-tech manufacturers, without success.
What passed of as sophisticated plants at best produced low- to midrange mobile phones, computers or plastic casings, they were essentially assembly line operations with parts procured from factories in China, Taiwan and put together in India — like flat screen TVs, laptops, desktop computers and so on.
“India was always a software story, high-tech manufacturing was never a priority,” says Amar Babu, chief operating officer, Lenovo Asia-Pacific and chairman Lenovo India.
Industry experts point out India never had the ‘ecosystem’ of component makers — chip makers, or specialists making displays for medical equipment, TVs or smartphones. Road and port connectivity was poor. Global and local manufacturers grumbled that sometimes parts from ports took two months to reach their factories.
There was too much paper work and too many bureaucratic bottlenecks. Importing smartphones, medical equipment and smart TVs was far easier than trying to make in India.
That seems to be changing, thanks to the government acting as a catalyst, kindling hope that high-tech gadgets will be made in India. “Technology is seen as an enabler for governance and better life,” says Babu. And about time too. The market for electronics promises to be $400 billion by 2020. Without local supply India will be importing three-fourths of that, easily exceeding oil imports in value.
With a market of more than a billion consumers with increasing purchasing power, local manufacturing is a compelling idea. The ‘Make In India’ drive, which has identified hitech electronics as a focus sector, has contributed to changing sentiment and attracting investments.
Lenovo, the $46-billion Chinese gadget-maker already has two factories in India. Others, including global giants such as GE, Siemens, HTC, Toshiba, and Boeing, are lining up to set up factories in India. Even local players like Micromax which till 2012, imported phones they sold in India are now preparing to produce locally.
Rajesh Agarwal, co-founder, Micromax, sees this wave as the third phase of high-tech manufacturing. The first is assembly line, where factories here assemble imported components.
Second is CKD kits being imported and sold in India. “Now, in the third phase we are moving to local sourcing of components as the components ecosystem is getting ready,” says Agarwal. A Japanese and South Korean consortium is setting up a fab in Madhya Pradesh at an investment of $1.2 billion. Foxconn, which makes iPhones for Apple, plans to set up seven factories in India, two are ready at Sriperumbudur near Chennai and Sri City in Andhra Pradesh. Foxconn assembles Xiaomi’s Redmi 2 Prime smartphone at its Sri City plant.
The government has looked at the pain points and is providing solutions. “In the next two years more components will be locally available. And in five years (Micro max) will be 100% made in India,” says Agarwal.