One of the top resistor manufacturing companies in India, Cermet Resistronics, is backed by a strong R&D team. Having distinguished itself in the field of resistors, the company is all set to diversify in special application areas like power electronics, lighting and the automobile industry to boost growth. Pradeep Khadilkar, chairman and managing director, Cermet Resistronics Pvt Ltd, who has 21 years of technical experience in taking the company forward, spoke to Richa Chakravarty of Electronics Bazaar about the company’s marketing strategies and expansion plans.
EB: How is the demand for resistors growing in India? Has the demand been impacted by the robust growth in the cellphone market?
The growth of the cellphone market in India does not really translate into any business for Indian manufacturers because all the components used are traded from various countries, and it’s basically the re-packaging that is done in India. Thus, the upsurge or boom in the cellphone market did not have any impact on the resistor industry in India. However, our shift towards power electronics, automotive and lighting industry will boost our growth.
EB: What has been the impact of the rising cost of materials on the resistor market in India?
The impact has been tremendous, especially for bulk volume resistors like carbon film, metal film or wire wound. The margins have been severely affected in the last four years, especially after 2009, when the global downturn started. Prices of copper, nickel chromium, aluminium, ruthenium, etc, became upto five times higher and affected the cost of manufacturing severely, and all this had to be absorbed by us or else we would have lost market share to imports.
So, we decided to move away from this market, which is quite competitive and price-centric due to the presence of cheap products from China, Taiwan and other Asian countries. We are now moving towards technologically advanced products with low volume demand. This is giving us major growth since the competition from Asian countries is not that serious in this sector. Also, our acceptance in foreign and domestic markets for replacement of special kinds of resistors, is really picking up.
EB: How is the resistor industry coping with the rising demand for miniaturisation of electronic devices?
Miniaturisation has been bad news for the industry, as most of the miniaturisation is happening on the SMD side, and there is a huge shift towards SMD in India. No SMD components are being manufactured in India. Moreover, manufacturing setups for SMD components require huge investments. Also, SMD volumes for the current Indian market do not at all justify setting up manufacturing plants. So, miniaturisation is a bane for the industry in the present scenario.
EB: Government on its parts needs to bring out a favourable policy for component manufacturing to take off. However, what roles can the components industry and associations play to help in this regard?
I do not see much initiative being taken by the associations to steer the industry forward. Industrial associations like ELCINA can be an intermediary and play a vital role in bringing foreign players by helping them locate the right partners. Associations can also conduct audits and ensure manufacturers conform to their working and accounting norms, so that through the association, foreign players can have trusted local partners.
Stiff price competition is something that’s killing the industry. Too many small players and lack of infrastructure are other problems faced by the industry. Rather than players having internal discords over profits and market share, I feel the industry should focus on Indian firms becoming outsourcing partners to various global companies and attain a global scale of operations. To churn good profits and quality products, Indian players should explore larger markets in foreign countries which are currently importing from other Asian countries.
The government can provid interest rate subsidies, specially where the manufacturers are technologically upgrading or have some export commitment. It would help scale up the operations to international levels, and that will increase the qualitative export to developed countries.
EB: How is Cermet competing with global players from China, Taiwan, Malaysia and Thailand?
Frankly speaking, other global companies are too big for us to compare ourselves with, but we are quite competitive. We are primarily focusing on exports, mainly to countries like Brazil, Russia, New Zealand, Germany, Dubai, Korea and Turkey. We are focusing on specialised areas, especially in the high voltage and non-inductive applications, and our exports have dramatically increased in the last four years. Two other initiatives undertaken by us are backward integration and forward integration, for instance, we were earlier importing raw material like lead wire (international quality). Now we are producing it on our own; so this brings down the cost of the raw material and inventory. This is how backward integration has helped us. On the other hand, we have just started an EMS company; here, we will be end users of our products, which is what I call forward integration. Through these approaches, we are competing with other players in the industry.
EB: R&D has been Cermet’s forte. What are the current R&D activities you are involved in?
We have a very strong R&D team which is dedicated to developing new technology and thus taking the industry forward. Presently, we are working on several projects simultaneously. All the technologies developed by us are by our home grown R&D team. We have developed resistors for traction applications, which are used in railways and wind energy applications. These applications require a resistor called the braking resistor. Parallel to this, we are working on developing aluminium resistors, a non-inductive high wattage high voltage series of resistors and voltage dividers. All these products are being developed keeping international technology norms in mind. Also, we recently executed a project in Qatar, where we developed a 3 MW load bank of resistors for testing generators on a dry dock. This is the first time the export for such a huge project has taken place from India. We are, in fact, the only manufacturer of thick film resistors in India. In most resistor ranges we are the only player in India today. Apart from thick film, other types that are commonly used include metal glaze resistors, power film and fusible film resistors—these are the four types exclusively developed by us.
EB: What is your company’s contribution in taking the electronics industry forward?
Our continuous R&D efforts in developing new technology have been our strength. By developing various types of resistors which were earlier imported, resulting in import substitution, we have made a small contribution towards the industry. By focusing on exports and international standards of quality, Cermet has paved the way for various other players to follow.
EB: What are your strategies to capture new markets in India and abroad?
Domestically, we are focusing on specific markets with specialised applications for sectors like the automobile industry, wind energy and defence. Backward and forward integration is another strategy that is helping us in coping with the stiff competition. On the global front, we are focusing on becoming an outsourcing partner with other global companies. Another approach is to have a marketing network and support in Europe by setting up a marketing office. We have recently inaugurated our marketing office in Italy and have started receiving good enquiries for our EMS activities here in India. We are trying to buy a small company in Europe. This will help us access a larger market and create a brand name for ourselves.
EB: What are the other plans for the future? Any expansions lined up?
Our major focus is to become a global player. Currently, we are planning to enter into a joint venture with a European company. We are bringing in a technological partner from Europe, which will add a full range of specialised resistors to our product range. In case this doesn’t happen, we will opt to buy technical know-how from different players, specifically from the US and Europe.