Price Pressure Challenge for Capacitor Manufacturers

0
184

By Himanshu Yadav

India is a preferred destination for global companies to expand their business due to the country’s immense growth in the fields of telecommunication, informa­tion technology and electronics. Many big players, especially in the arena of computer manufacturing, have set up their bases in the subcontinent to partake in the growth process of one of the fastest growing economies of the world. However, the same prosperity and upsurge is not taking place in the electronics hardware manufactur­ing zone. Despite the huge demand in this segment, there hasn’t been much growth in terms of local manufacturing. Majority of the demand for components is fed by exports from countries like China, Singa­pore and Taiwan. The capacitor happens to be one such component. Although there are MNCs like EPCOS, Vishay Components India Pvt Ltd and Havell’s India Pvt Ltd, which are manufacturing in this segment, the competition that local manufacturers are facing from cheap and easily available foreign products is a difficult one.
Factors that hamper growth
There are several factors that are hampering local growth, chief among them is price. Ac­cording to Vinod Sharma, managing director, Deki Electronics Ltd, “Companies are facing the biggest challenge of pricing.” As ca­pacitors enjoy zero custom duty, importing proves to be a more economical option for local traders and buyers. The recent impo­sition of the safeguard duty on aluminium foils has added to the dismay of domestic manufacturers. As aluminium foil is one of the chief raw materials required in capacitor production, imposition of this duty will lead to increased costs, thereby thwarting the business performance of local players.

Meghnad Sudhirchandra Shah, manag­ing director, Frontline Electronics, one of the leading buyers of capacitors in India, says, “India needs a strong component sector and imposing duty on raw material will only mar the growth prospects of domestic players. Rather than burdening and disempowering local players, the government should start offering at least 10 per cent duty structure over imported products and levy no duty on raw materials. This way, Indian companies will get a 10 per cent incentive as customers will buy from local players.”

The same solution is suggested by Sharma, “Removing anti-dumping duty on Film>9.8u film and removing the safe­guard duty on aluminium foils will certainly bring relief to Indian manufacturers.”

Recession may not have had much of an impact on the Indian market but fluctuation in the dollar/rupee price in the past few months is certainly affecting many small and big players. According to Santosh Nirali, senior marketing executive, Alcon Electron­ics Pvt Ltd, “Due to the fluctuation in dollar prices over the past six months, our prices are also getting higher. Last year, the dollar to rupees conversion rate was Rs 39 and now it has touched Rs 51. As most of our raw materials are imported, this hike has obviously lead to increased prices in our finished products. We are in a very unenvi­able position as we cannot lower our rates or we’ll run losses, and the increased rates are also reducing our profits as customers aren’t happy. We feel trapped from both sides. In order to appease customers, we are trying to absorb upto 20 per cent of the elevated prices and letting them bear only 10-12 per cent of the increased prices.
The Indian market faces stiff competition from China. The policies adopted by the Chinese government are very encouraging and supportive to companies. K N Krishna­murthy, president, sales and marketing, EPCOS India, says, “We can do little to curb the copious import of cheap foreign goods as India falls under the world trade organisa­tion (WTO), hence, it can’t ban import of components from foreign nations in order to protect indigenous manufacturing.”

Technologically backward
Supplementary to pricing, technological advancements and compliance with in­ternational standards are issues that need immediate consideration of manufacturers. While manufacturers and buyers feel that in terms of quality, Indian goods outdo their foreign counterparts, in terms of techno­logical advancements, the former are still lagging far behind in the world market.

Shah feels, “Indian manufacturers like Deki have superb quality but lack the latest machineries. India desperately need stoinvest in R&D in order to move forward in technol­ogy.” He further adds, “All important capaci­torsaboveRs 25are imported from China and Europe. Only the small capacitors are madein India—a very big tragedy indeed.”
Subhash Goyal, Digital Circuits Pvt Ltd, another major buyer of capacitors, shares, “In terms of technology, Indian products are backward, hence, there is low demand for them. Due to faint demand, volumes are not high, as a result of which, the scale of manufacturing is low as well, making them expensive. There are many new technologi­cal advancements and new machinery req­uisite for the manufacturing of capacitors, which companies need to invest in, if they really want to succeed in the long run.” The Central Power Research Institute (CPRI), Bengaluru, which is playing a pri­mary role in promoting applied research in the field of power capacitors, feels that from the quality and reliability point-of-view, Indian capacitors are reasonably sound compared to the imported ones. However, there is a wide technical gap in the field of raw materials as few are available here and hence, are being imported by most Indian capacitor manufacturers. Also, environment is a major factor to be considered. Krishnamurthy says, “Produc­ing capacitors which adhere to the norms of the EMI suppression, such as x2, y2 capacitors, is important for the industry. To keep up with global standards, companies should adhere to these norms in order to save power and cost.”

Relief can come
The capacitor, being a power electronics product, is a significant component in the electronics industry. Hence, while the major­ity say that the product has immense poten­tial for growth, the reality is that in order to harness its popularity, more players need to join the market. Bharat Khandal, manager, RS Components & Controls Ltd, says, “Even though the product has good prospects, its manufacturing is negligible as of now.” Manish Srivastava, assistant manager, Disha Electronics, agrees, “In India, about seven years back, there were three to four very good manufacturers but now the scenario has changed. Overseas’ products are doing better, both in terms of quality and price.”
Companies are frugal about investing money in India as they are apprehensive about government policies and regulations, in terms of custom duties and tax structure while stocking. Companies have become chary of investing or even stocking their products in India.

The industry, which comprises manu­facturers, buyers and traders, strongly feels that the government needs to act to uphold this sector. Khandal opines, “Although the government has provided relief through reduction of excise and countervailing duty, which has been brought down from 14 to 8 per cent, the decrease is still not significant enough for people to come and join the market. The day big companies start manufacturing inIndia,thesmall players will automatically join in.”
Provision of customisation and good service support are aspects that can benefit Indian capacitor manufacturers. While there are a few like Deki and Alcon that are providing good service support and customisation of products as per customer requirements, more players need to incor­porate these strategies. There should be more exertion on part of the Indian government to reduce trade barriers by offering an uncomplicated structure for custom and excise. Adequate infrastructure, transportation and power supply should be facilitated to give a boost to the industry. Satish Shenoy, executive director, Neotroniks, says, “The govern­ment should favour local manufacturers by offering good fiscal incentives and reduced duty and tax structures.”

Indian manufacturers, too, need to take matters in their hands by upgrading themselves through augmentation of their production capacities, improving their tech­nologies, introducing modern management systems and utilising the maximum of their production capacities.
“The growth of capacitors is directly connected with the growth of generation of power, industrialisation and power reforms enforced by transco’s on end users,” says Sunil Sikka, president, Havells India Ltd. The key to success in this market is to produce high-quality products and fully utilise the range of one’s production facility. “Factors like low interest rate, infrastructure, trans­portation, power, facilitation of strong R&D, need to be looked at by the government, whereas cost-effectiveness, utilisation of 99.5 per cent of the production capacity, improved quality, innovation in manage­ment and manufacturing processes are the issues that the industry needs to take care of by itself,” states K Srinivasan, additional secretary, ELCINA.

Trends of the market
There is maximum de­mand for metallized polypropylene capacitors (MPP) in the market as they are compact, cheap and more popular than conventional oil impreg­nated PP film capacitors. Also, utilities are looking for reliable capacitors having losses less than
0.2 watts per kvar for HT and 0.5 watts per kvar for LT applications. Havell’s, which is a manufacturer of MPP type capacitors, states that these have self-healing properties and can work even if there is a puncture in the dielectric due to excess voltage. Also, there is minimum leakage loss in this type of capacitor. SMT and miniaturisa­tion are new trends that are ruling the current mar­ket. The size of capacitors is getting smaller to derive maximum efficiency. As per Havells India Pvt Ltd, “Worldwide research is in progress to identify new dielectric materials, which improve performance and reduce size, eventually reducing costs.”

BUYERS’ VOICE
Manufacturers should…
• Join capacitor manufacturing in larger numbers
• Invest more in technology and R&D
• Offer service support and customisation of products
• Give checking time of at least two-six months to test the product
• Adhere to norms of EMI suppression to save power and cost
• Introduce modern management systems
• Utilise maximum production capacity
• Amplify production capacity
• Strive to make cost-effective products

MANUFACTURERS’ PLEAS
Government should…
• Offer at least 10 per cent duty structure over imported products
• Not levy any duty on raw materials
• Remove anti-dumping duty on Film>9.8u film
• Provide adequate infrastructure, transportation and power supply
• Offer mitigated duty and tax structures

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Are you human? *