Make In India: With investments pouring in, India 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 mid-range 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 (COO) Lenovo Asia pacific & chairman Lenovo India.

Industry experts point out India never had the `ecosystem’ of component makers—chip makers or, say, 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 has contributed to changing sentiment and attracting investments. The initiative, kicked off in December 2014, seeks to focus on 25 sectors, including high-tech electronics, identify pain points and improve ease of doing business in these areas.

"We will make in India whatever we sell in India," Yang Yuanqing, CEO of Lenovo, told ET in a recent interview. 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.

Ease of Making
The government has looked at the pain points and is providing solutions. Says Babu, "small changes can have a cascading impact as the local market is big now.” Earlier congestion and paperwork claimed at least 48 hours to offload goods at ports. That is down to about 10 hours. Companies can now `self-declare’ goods instead of inspectors ripping open consignments.

Says Rajesh Agarwal, co-founder of Micromax, "It takes 12 days for a consignment to reach Mumbai from China. But from port to our factory in Rudrapur in Uttaranchal it used to take 30 days." It should take no more than 15 days for goods to move from China to Micromax’s Rudrapur unit. Still, things have improved and it now takes about 20 days, says Agarwal.

Other factors like cheaper power and states offering incentives are also attracting industries. In the first week of March Haryana is organizing 'Happening Haryana’, an investment jamboree to attract global manufacturers. Tamil Nadu, Kerala, Karnataka and Orissa have already held similar events.

MN Vidyashankar, president, India Electronics and Semiconductor Association met a delegation from China’s Guizhou district scouting for local manufacturing partners in Bangalore. "This was during China’s New Year when everything is shut there. This shows the importance India is gaining in manufacturing. We see more than just green shoots in high-tech manufacturing now," He says.

So far Rs 1.15 lakh crore has been committed to electronics manufacturing. 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 Sriperembadur near Chennai and Sri City in Andhra Pradesh. The company assembles Xiaomi’s Redmi 2 Prime smartphone at its Sri City plant.

"When Toyota came to India it made a difference to automobile manufacturing here. We see a similar change happening in electronics manufacturing with the likes of GE and Foxconn setting up factories here," adds Vidyashankar.

Adds Deepak Puri, founder-chairman,

Moser Baer founder Deepak Puri says despite drawbacks, India has a number of advantages such as a cost-effective workforce and large local market. "We need to ensure strong focus on R&D and strong brands to sell products on global scale,” says Puri.

Manufacturing 3.0
Micromax’s Agarwal sees this wave as the third phase of high-tech manufacturing. The first is assembly line, where factories here assemble imported components. Second is completely knocked down (CKD) and semi knocked down (SKD) 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.”