A fresh lease of life

Updated: Nov 21 2005, 05:30am hrs
India might have been written off as a manufacturing destination but bright spots are beginning to emerge. And its not only the telecom manufacturers eyeing government contracts, but even PC assemblers are getting serious about making boxes locally and are confident of a spill-over effect on IT too. Contract manufacturing firms like Flextronics and Solectron are clearly leading the charge.

Even though most analysts believe India missed the manufacturing bus, potential suddenly seems to be emerging as a candidate for electronics manufacturing hub in South Asia. Global electronics manufacturing services major, Elcoteq marketing director, Henry Anderson Gilchrist sees a significant opportunity to develop a world class, competitive telecom hardware manufacturing industry in India. In an interview with Manufacturers Association for Information Technology (MAIT), he attributes his bullishness to proven capabilities of Indias software and hardware design industries and the break-neck speed at which the mobile and telecom services are expanding in the country.

Long before the telecom hardware manufacturing companies discovered Indian potential, multinationals as well as Indian PC vendors have set up their PC assembling units. And a healthy 17% growth rate and expectations of touching $6 billion by 2005 and $9.5 billion by 2008 is beginning to drive global PC majors to manufacture in India. Already, many are making plans to sourcing components locally.

Lenovos global supply chain head, Girish J Amin says, Our core competencies are in the sectors of R&D, marketing and assembling of boxes. We are not in component business where we have local and global partners. But as the component manufacturing by the global as well local players is gaining momentum, we will explore the opportunity of local sourcing in future.

HCL Infosystems marketing head, George Paul feels that it is just a matter of time before the country becomes a global PC hardware hub. Claiming to have pioneered manufacturing in India 25 years back, HCL today boasts of factories in Chennai and Pondicherry with a capacity of million units per annum. In round one, we are seeing the global contract manufacturers starting business for the mobile companies. In the second phase, we will see core technology companies like Intel, AMD and Seagates of the world setting up units here, says Mr Paul. India, with its quality manpower and design capabilities, can become the centre of hardware manufacturing for the entire South Asia region, adds Mr Amin.

Arrival of top global contract manufacturing companies is one of the most positive things in recent months, says MAIT executive director, Vinnie Mehta. Initially, they are attracted to the lure of high growth mobile market. Soon, these companies will start servicing the entire IT industry. After all, there is little to distinguish between IT and telecom hardware, Mr Mehta says. He is pinning his hopes on many government initiatives like efforts put into having a chip fabrication unit in the country and the high-powered IT committee and its roadmap for domestic IT in India.

Manufacturing in telecom sector is surely on a boom. The reasons are not hard to find government mandate and market growth. According to the latest Gartner report, in 2005, about 34 million mobile phone units will be sold compared to 21 million units last year. Some of the major contract manufacturer firms like Flextronics, Jabil and Solectron are already here, and the industry is pegging itself as the hub of electronics manufacturing for the South Asian market.

Worlds largest mobile vendor, Nokia has decided to set up their tenth mobile device manufacturing facilities in Sriperumbudur with an investment of between $100-150 million. Though Nokia has kept the nature of manufacturing under wraps, say industry sources, its proposed factory would have an assembling unit plus a hardware hub where global component manufacturers from whom Nokia sources its components will set up their shop.

And Nokia is not alone. Motorola, LG and Samsung are all taking of manufacturing locally. Telecom Equipment Manufacturers Association (TEMA) past president Goyal feels that given the governments ambitious growth plans to increase countrys teledensity, in the next few years will help grow telecom hardware market to around $13 billion.

A word of caution, however, comes from EMC manager - marketing, Abhrajit Bhattacharjee. Though the country has been able to attract companies like Flextronics and Solectron, it is still a long way to go before it can attract core technology companies. Logistics and infrastructural issues have to be sorted out before we can be anywhere near China and other countries in Asia-Pacific region, he says.