Vivid prospects for T&M equipment market in India

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The Indian test and measurement (T&M) market has been fairly resilient and is growing steadily compared to its progress in Western markets, where growth rates have hit a plateau. “The size of the Indian T&M instruments market is estimated to be Rs 10,000 million, including the imported range and domestic manufacturing industry,” informs Joey Joseph, CEO and MD, TTL Technologies.

By Jesus Milton Rousseau S.

Sunday, August 28, 2011: “This has largely been due to the formidable growth registered by the key industry segments like automobiles, electronics, pharmaceuticals, life sciences and telecommunications. Sectors like defence, backed by government investments, have also been instrumental in driving growth. Increasing research and development (R&D) activities across various industries are expected to further augment the growth of the Indian T&M market,” says SK Jain, CEO and MD, Sumitron Exports.

SR Sabapathi, chairman and MD, Qmax Test Equipments, adds, “T&M is a growing market with a vast potential and is all set to move at a fast pace if the government responds to the hardware manufacturers’ suggestions on taxation and policy.”

There are various opinions on the role the telecom sector plays in the T&M market. Yatish Mohan, MD, Rohde & Schwarz India, believes, “Since the onset of the recession, there has been a decline in investment in R&D, therefore, the number of testing projects carried out in India has also plunged. Thus, business from the telecom sector has seen a steep slump since the recession.” On the other hand, Naresh Narasimhan, country marketing manager, Tektronix India, says, “We can’t say the Indian T&M market is affected by the recession as the Indian telecom T&M market has registered a robust growth rate of 23.01 per cent in 2008-09 over the previous year. However, this marks a 3 per cent decline in growth compared to 26 per cent growth in 2007-08. In fact, India has been witnessing a rapid growth of overall investments in T&M over the last few years.”

Jain adds, “The T&M market has slowly but steadily worked towards rebuilding itself and is now projected to grow due to the emerging application areas in communications such as satellite based personal networks, home automation networks, wireless local area networks (WLANs) and wireless Internet. New broadband wireless technologies will drive spending on wireless LAN equipment in double digits over the next five years.”

Taxation problem affects growth

Most T&M products attract zero customs duty if the product is imported and companies only pay the countervailing duty (CVD). Whereas, if the same product is manufactured in India, raw materials such as electronic components and mechanical parts that need to be imported, attract customs duty ranging from 5 to 10 per cent, apart from the CVD. Though the CVD is a modified value-added tax claimable, customs duty is not. Thus local manufacturers lose the cost advantage, despite trimming the foreign exchange outflow and providing local employment. “Also, the interest rates on bank loans are higher now at 13-14 per cent, compared to the 2-5 per cent across southeast Asia,” reveals Sabapathi.

What’s driving the growth

New advancements in technology give rise to new testing challenges, which in turn create requirements for T&M instruments.

According to Frost & Sullivan, with the escalation of security concerns in India, the government has increased the Budget allocation for the defence sector, opening up a huge potential market for GP test equipment.

Also, factors like cost advantages, availability of skilled professionals (with the English language advantage), and India’s low cost of living have transformed the country into an R&D hub for various industries. These features have resulted in numerous international telecom majors setting up their R&D and testing facilities in India.

Expansion of communication networks across the country also requires GP test equipment such as spectrum analysers and network analysers.

India is a major hub for electronic manufacturing services (EMS), and the growing demand from this sector will add further impetus to the country’s T&M equipment market.

“With defence and educational sectors becoming increasingly complex, they directly influence the growth of the T&M equipment market in India,” says Hitesh Mehta, director, Adtron Technologies.

Trends in T&M

According to Viraj Pradhan, communication sales manager, Asia Pacific, Tektronix, one of the recent trends in T&M pertaining to the telecom domain, is an increased demand for protocol analysis based network optimisation solutions. This trend springs from the new radio access network environment, including cell breathing and power management in universal mobile telecommunication systems (UMTS) and with the introduction of multi-input, multi-output (MIMO) and beamforming that need continuous monitoring approach in order to capture the rapid variances in the network.

“However, the T&M equipment manufactured in India need to adapt to the new standard requirements (data speed, encryption, dynamic resource allocation, etc) of modern systems,” says Joseph.

There is a surge in instances of testing moving from the bench to onsite locations—be it cell towers, power substation yards or network control racks. “Full-featured, compact and rugged T&M tools are therefore the current rage,” states Joseph.

The latest advancements in T&M are mostly pertinent to protocol testing, Wi-Fi test systems, subscriber identity module (SIM) card tests and network testers. “We have solutions for wireless radio communication sets, which are used in the defence sector, and feature encryption and frequency hopping to facilitate secure communications. We are now focusing on testers for Wi-Fi testing,” claims Sabapathi.

Today, more than 90 per cent of all commercial wideband code division multiple access (W-CDMA) networks globally support high-speed downlink packet access (HSDPA) and many are being upgraded to high-speed uplink packet access (HSUPA). Mobile data traffic is escalating and network operators will soon have to upgrade their 3G/high-speed packet access (HSPA) networks to either HSPA+LTE or both.

“To meet the operators’ production plans for HSPA+ and LTE, all major chipset, mobile and infrastructure manufacturers currently have projects in operation. Rohde & Schwarz has extended its entire existing HSPA portfolio to support HSPA+ and to offer a market leading portfolio for LTE frequency-division duplex (FDD) and time division duplex (TDD),” says Mohan.

Tektronix Communications has also created a new monitoring solution in order to meet the challenges faced by the manufacturers through the LTE access network architecture. “A new probe for protocol analysis at the air interface has been developed, allowing seamless monitoring and testing of all wireless and wireline LTE network interfaces,” discloses Pradhan.

Why manufacturing is not happening?

Despite tremendous opportunities for T&M instruments in India in various domains, it is unfortunate that domestic manufacturing is still not picking up. “Majority of the companies, even those based in India, are not manufacturing within the country but just importing them. No proper infrastructure and R&D support is available for manufacturing. As the demand for cost-effective solutions is more in general market, it is advantageous for Indian sellers and users to import the products from China, Taiwan or Korea,” says Manish Kwatra, CEO, Metro Electronic Products.

Factors affecting T&M manufacturing

Labour costs, government policies and cost of components are hindering the growth of T&M manufacturing in India. Ashutosh Agarwal, export manager, Omega Electronics, says, “High labour costs in comparison to China, stringent and complicated government policies and raw material costs are factors affecting T&M manufacturing in India.”

Rajeswar Peddisetti, director–technical, PGP Electronics, adds, “We do not have many component manufacturers in India and hence have to import the components. If these are manufactured locally then the final product cost can be reduced.”

Infrastructure problems also affect the market. Swabhanu MV, proprietor, Mithra Electronics, says, “The economies of scale and poor infrastructure are also affecting manufacturing.”

Chinese unbranded products are also posing a challenge. “Low-cost Chinese products by unorganised players have flooded the Indian market, creating a road block for the growth of this industry,” says Sunil H Motwane, MD, Motwane Manufacturing Company. Says Ambrish Kela, director, Scientech Technologies, “Desperate pricing by some new entrants, who buy from non-reputed Chinese manufacturers, is also hampering the market growth.”

PS Deodhar, chairman, Aplab, sums up, “Ever-increasing labour costs, non-availability of locally manufactured key vital components, total dependence on imports of such components, inadequate infrastructure and bureaucratic delays add to the overall cost of manufacturing.”

Vikram Bhansali, director, Metravi Instruments, states, “The quantity we manufacture in India is too low compared to Chinese manufacturers, hence the cost of raw materials in India is very high. The Chinese manufacture in millions so they can cut down on the cost. Other factors that are posing challenges are high price of machines and non-availability of the required infrastructure. All manufacturers cannot afford expensive SMT lines. The R&D setup is also poor in India and no innovation is happening.”

Efforts to enhance manufacturing

The industry is, however, waking up to these problems and is making efforts to enhance T&M manufacturing in India. “PGP Electronics is practicing world-class manufacturing and lean manufacturing techniques to reduce the production costs so that the benefits can be passed on to the end-user,” says Peddisetti.

While Swabhanu feels that infrastructure should be immediately improved, Motwane stresses on the need to improve the situation. He also says that T&M instruments from countries like China and Taiwan should be restricted.

Agarwal says the government should change its policies and automation should be considered. Sabapathi adds, “Components and sub-systems required for manufacturing of chassis and power supply modules, should be available at zero duty. Excise duty and sales tax for electronic test equipment (presently 8.24 and 12.5 per cent, respectively) should be brought down. More manufacturing units from support industries like plastic moulding units for quality cabinet design and manufacturing are needed.”

Kela suggests, “We feel that in order to beat low-cost imports, special consideration should be given to ‘made in India’ products.”

Bhansali concludes, “We need to make T&M products that are a step ahead of the Chinese products with more accuracy, range and applications. We should also increase our quantity to such an extent that our manufacturing costs get reduced.”

What lies ahead

The demand for T&M equipment will continue as long as there is development. Awareness about best practices in preventive maintenance is increasing in India, and there is a huge CAPEX in preventive maintenance rather than the breakdown.

“The future of wireless will be riding on 3G deployment and value-added services. On the other hand, wireline broadband is another key segment which is helping the T&M business grow. The explosive growth of the infotainment industry is another area that will influence growth in the T&M business. The T&M market is also benefiting from the growing focus on mobile phones, broadcasting and chipset design and manufacturing,” says Jain.

Sabapathi adds, “As the market is picking up after the slowdown, the future is promising, and within the next three to five years the T&M market will be worth over Rs 5,000 million.”

Now, it is to be seen how the manufacturers take the opportunity of this promising situation and improve their products and increase production capacity to meet the needs of the buyers.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine


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