Imported components steal the show

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The Indian electronics market has been growing at a rapid pace. There are ample options available for the purchase of compo­nents, in terms of quality, pricing, after sales services, etc. Both indigenously manufactured as well as imported components are present in the market. Nevertheless, a majority of the compo­nents being sold in the market currently are not locally made but are imported from other countries as liberalisation of trade has made it easy for imported products to find their way into the country. “Overall, 85-90 per cent of the components are imported and only 10­15 per cent are locally made. However, 7-8 years ago, before liberalisation, only 20-30 per cent of the market’s components were imported,” says G S Sharma,director,ShriRamMarketing, a distributor of imported and indigenous electronics components.

By Saurabh Sharma

Wednesday, August 16, 2009: Where do imports score?

Imported components attract a 0 per cent import duty, one of the chief reasons for their popularity in the Indian electronics market, especially in the active components category, as they are easily available and offer more options, in terms of quality, pricing, etc.

Lack of components’ manufac­turing in India has proved to be extremely beneficial for foreign com panies as the huge Indian electronics market is almost exclusively theirs to exploit. Moreover, Indian manufactur­ers are finding it difficult to establish themselves in the active electronics components category as they have already entrenched themselves in the passive components domain.

There are some players who are manufacturing both active and pas­sive components in the country but the sale of the imported variety is far better than their’s, the reason being the price of the Indian components. “Indian components are expensive in comparison with their imported counterparts, owing to the high cost of manufacturing in the country. This is because we have to import most of the raw materials,” states Babu V Zacha­riah, sales manager, Naina Semicon­ductors, a manufacturer of resistors, diodes, thyristors, modules, etc. The price of Indian components is 20-25 per cent higher than imported ones. India’s infrastructure does not support domestic manufacturers as the cost of basic requirements like electricity is much higher in the country than in China or Taiwan, upping the cost of India made products.

Moreover, in the case of some electronics components like semicon­ductors, Indian components offer a limited range, compared to imported ones. “Imported products for semi­conductor lines are more advanced, in terms of technology and quality. Also, the domestic product range on offer for semiconductor lines is rather narrow,” comments R S Saini, partner, Sunrise Electronics, an importer and distributor of semiconductors.

In India, there is little in the name of component manufacturing in the field of semiconductors, which causes heavy dependency on import. Although Indian components are of better quality than the imported ones in the passive components segment, sadly, it is the active components mar­ket that is witnessing more demand. In the latter, Indian components clearly lag behind in semiconductor electronics, as this market is rife with foreign players like Analog Devices, Texas Instruments, National Semi­conductor Harris, Vishay, Fairchild, Hitachi, ST Microelectronics, etc. Most channel partners prefer to keep these reputed brands in their kitty to cater to the needs of their buyers.

Imported components offer vo­luminous margins of 15-25 per cent, a fact that attracts channel partners to them as broader margins provide channel partners with more room to negotiate with buyers. In some cases, indigenously made components also render good margins but imported components still win hands down. “Pricing is the main advantage im­ported components have over us. They offer a vast range of categories as well as good pricing, which brings them more customers,” shares Pra­kash Chandra Garg, proprietor, Garg Distributors Pvt Ltd, a distributor of India made and imported compo­nents.

In the matter of bulk qualities, too, imported components emerge as the stronger contender. “We can get imported components in bulk quantities but not the indigenous va­riety, as Indian manufacturers are not capable of delivering high quantities in a stipulated time frame,” remarks Sharma. Foreign companies enjoy the benefit of mass production and hence, can cater to the bulk needs of buyers. “Buyers usually opt for imported com­ponents when they want higher quan­tities and prefer Indian ones when the quantity requirement is medium or low,” informs Zachariah.

Limitations of imported components

Despite their immense popularity and widespread usage, imported compo­nents, too, come with a few encum­brances, like ISI marking, which is very difficult to acquire.

If one is sourcing components from a dealer and not the exporter himself, then one has little control over the quality because the au­thenticity of the product cannot be ascertained. “Counterfeit, reprinted and refurbished parts are the main problems one encounters in imported products, especially those imported from China,” says Sharma. If the com­ponents are brought to India through an illegitimate dealer, then it is likely that the components are spurious.

If the channel partner is not pro­viding after sales services directly, then imported components can some­times become a burden for buyers as they cannot go abroad every time they require after sales services, leaving them stranded with malfunctioning machinery. On the other hand, it is very easy to get services or replace­ments if the components are indig­enous as there are no geographical limitations involved.

Even lead time (time taken for de­livery) is a problem because transpor­tation of a product from one country to another requires a fair amount of time. Also, getting goods cleared by the custom department can be an extremely tedious procedure.

Although imported compo­nents are ruling the roost in the active components section, they are unable to compete with Indian passive components and the after sales services provided by Indian manufacturers. “Indian products are more reliable, especially elec­trolytic capacitors, transistors and diodes. We also have some world famous brands, like CDIL and Kel­tron,” asserts Saini.

The trend will go on

The world has become a global village, so Indian components will always have to combat foreign components, not only in India but across the world. They will have to boldly compete with the imported goods on parameters of quality, quantity, variety and cost in order to make buyers ask for “made in India” components. Only if the government takes seri­ous and active measure to alter tax policies and ameliorate the coun­try’s infrastructure can India made components dream of competing competently with imported ones. Also, local component manufac­turers will have to invest money and effort in strengthening their R&D bases in order to create more advanced and sophisticated prod­ucts. Till then, however, imported components will continue to rule the electronics components king­dom in India.

IMPORTED COMPONENTS

Benefits

  • 0 per cent import duty
  • Inexpensive in comparison with
  • indigenous components
  • Wide variety to choose from
  • Advanced technology and quality
  • Available in bulk
  • Offer broad margins

LIMITATIONS

  • Certifications like ISI marking are difficult to acquire
  • Authenticity and quality can not be ascertained if not bought directly from exporter
  • No after sales services
  • Long lead time due to geographi­cal constraints
  • Tedious custom procedures
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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