Bengaluru & Chennai: The next big manufacturing destinations?

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A number of projects have been planned in these cities to encourage hardware manufacturing

According to a McKinsey report released in 2011, South India continues to be among the top contributors to the national gross domestic product (GDP). The report pointed out that Karnataka and Tamil Nadu along with other southern states contribute 22 per cent of the national GDP and generate 28 per cent of the national employment. While Karnataka is a leading contributor to India’s GDP with 8.7 per cent, Tamil Nadu’s share is 7.4 per cent.

Over the years, Bengaluru in Karnataka and Chennai in Tamil Nadu have emerged as the leading industrial hubs of India. Chennai, known as the ‘Detroit of Asia’, boasts of the presence of world class automotive manufacturers, an impressive export performance, the availability of technocrats, educated entrepreneurs and a strong network of educational institutions to support this sector. Chennai is also home to one of India’s most successful electronics SEZ, which is located in Sriperumbudur. The success of 12 such operational SEZs continues to attract a lot of investments in the electronics and related industries of the city.

Bengaluru is called the Silicon Valley of India because of the large number of information technology companies located in the city. However, with the new government policies in place, Bengaluru is also set to emerge as the hardware capital of India. It has a big market for components like microcontrollers, semiconductors and programmable logic controllers (PLCs).

Rakesh Aggarwal, country head, Lattice Semiconductor

Last year, the Karnataka government rolled out its Electronics Hardware Policy which identified three corridors for the setting up of electronics hardware manufacturing hubs and has allocated different sections of hardware to each corridor. For example, the Bengaluru-Tumkur corridor will concentrate on semiconductors; the Hubli-Dharwar corridor will focus on automotive electronics; and the Mysore-Nanjangud corridor will cater to medical electronics.

Advantages offered

Chennai is home to several electronics hardware SEZs with a total area of about 1200 acres, which makes it a favourable destination for the electronics hardware industry. Nokia, Samsung, Foxconn, Sanmina-SCI, Flextronics, and more than 30 components suppliers are located in Chennai.

One of the factors that help the city score over other centres is its favourable industrial climate and the several government initiatives that promote industrialisation. Tamil Nadu is No 1 in India in terms of availability of skilled manpower with over 750 technical institutions within the state. The city churns out a large number of engineers every year. Says Vijaykumar, general manager, Qmax Test Equipments Pvt Ltd, “Chennai boasts of a disciplined and professional workforce, skilled technicians and talented engineers, good logistics connectivity, excellent mechanical engineering support, professional finance and banking

Vijaykumar, general manager, Qmax Test Equipments Pvt Ltd

support and excellent engineering colleges and polytechnics.” This stable and cost efficient workforce, as well as the availability of other resources are some of the factors that make the city a favoured destination for manufacturers.

Also, the government has extended strong support in terms of framing an ICT policy, e-waste policies, and its land record e-service have proved attractive to investors.

With regard to Bengaluru, the city is known as a knowledge hub with the maximum number of R&D centres in the country. Companies like Intel, Unilever, Dell, Texas Instruments, IBM, Boeing, Rolls Royce, General Motors, Daimler Chrysler, Oracle, Philips, Nokia, General Electric and others, have set up their R&D centres in the city.

A 360 degree infrastructure programme for the city has led to the construction of mega projects like the Bengaluru Metro, plans for a mono rail, the PRIDe corridor and eight lane highways around the city. Bengaluru is well connected to six neighbouring states, and other parts of India through 14 national highways.

What do these cities lack?

Shares Vijaykumar, “Increasing traffic and inadequate infrastructure to support the industry is one of the biggest problems Chennai is facing. Besides, the city lacks quality component and sub-assembly suppliers and a proper mould and die industry to support the electronics industry.”

Since Chennai lacks a market for electronic components, the industry is forced to reach out to components dealers located in other states, which adds on to their costs.

Like Chennai, Bengaluru too lacks proper infrastructure. Shares Rakesh Aggarwal, country head, Lattice Semiconductor, “The bad condition of the roads and traffic jams leading to long commuting hours is one of the biggest issues we face in Bengaluru. This needs to be checked.”

Besides this, Rakesh Aggarwal points out that despite producing a large number of engineers every year, the employability rate in Bengaluru remains low because these engineers who are fresh graduates lack the required skillsets. Therefore, many companies in the electronics sector are forced to approach professional training institutions to train the engineers in various skills.

Also, Karnataka’s Information Communication Technology (ICT) Policy has not helped the manufacturing sector in Bengaluru to grow to the extent anticipated, says Rakesh Aggarwal. The main reason is that Indian vendors are not given preference over foreign vendors in some segments. He adds, “In the case of outdoor displays, they are imported from China and Taiwan. Instead, the government should tap the domestic potential and encourage local companies to manufacture these displays by providing them the required ecosystem.”

New projects

While unveiling the electronics hardware policy last year, chief minister of Karnataka, DV Sadananda Gowda, announced that the government is taking steps to acquire land near Bengaluru airport to establish a software park, an electronics hardware park, and an aerospace park to harness the vast potential in this sector.

Also, Bengaluru is set to have the country’s first Information Technology Investment Region (ITIR) for knowledge based industries, including software and hardware firms, along with the entire supply chain. The ITIR is projected to attract global investments to the tune of Rs 2 trillion and create a million direct jobs over the next 10 years.

Another mega project, the Taiwan Hardware Technology Park will tap the opportunities offered by the Information and Telecommunication (ITC) manufacturing sector, once it gets implemented. A group of Taiwan based companies have expressed interest in setting up ICT hardware manufacturing units near Bengaluru in the form of an integrated township. The park would be devoted exclusively for setting up manufacturing units to make semiconductor chips, LEDs, computer hardware and telecommunications equipment.

Similarly, a consortium comprising top Japanese corporate finance providers has proposed to develop a manufacturing zone near Chennai. This will attract an additional investment of Rs 150 billion with an employment potential of about 40,000. Automobiles and its ancillaries, home appliances, electronics, food, logistics and infrastructure are some of the key industries that are expected to come up in the zone.

Recently, Chinese telecom major Huawei Telecommunications (India) Ltd has set up a manufacturing facility near Chennai to manufacture its range of ICT products, including switches, routers, etc.

By Nitasha Chawla

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