Current trends in EMS sector in India

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India is considered one of the fastest growing destinations for original equipment manufacturers (OEMs) and electronics manufacturing services (EMS). However, despite the immense opportunities for India to grow as a manufacturing hub, it lags far behind many countries when it comes to its share of the EMS market. Today, the Chinese have the major chunk of the global EMS pie and India doesn’t even stand close to them. The industry needs to play smart, and adopt mass production strategies to capture a good share of this pie by taking advantage of its strengths—low labour costs, a large base of technical manpower, a massive workforce, English speaking capabilities, and so on. With the final National Policy on Electronics, 2011, expected by the year end, the EMS sector is once again in the spotlight. Let’s see what the current trends in this domain are.

By EB Bureau

Monday, December12. 2011: New entrants expected

The Draft Policy on Electronics aims to turn India into a globally competitive electronics design and manufacturing industry to meet the country’s needs and serve the international market. It also aims to promote indigenous manufacturing across the entire value chain of electronics system design and manufacturing (ESDM) for India’s overall economic development. So a significant number of domestic firms and MNCs are expected to venture into the EMS

Lt Col Sharath Bhat, vice president, business development, Kaynes Technology India Pvt Ltd

domain, and make extensive investments in different sectors to capitalise on the country’s progressive economic environment and vast talent base. This trend has already started, with the BSE listed Smartlink Network Systems looking at the contract manufacturing of smartphones and tablet computers for multinational players in India. “We are expanding our manufacturing capabilities by adding more surface mount technology lines (in Goa). With this, we will have the capability to manufacture smartphones as well as tablets. We would be open to contract manufacturing of electronic and IT products,” says KR Naik, executive chairman, Smartlink. This trend is sure to build healthy competition among domestic and MNC EMS players, who will try to woo customers through various innovative services.

Cashing in on China’s limitations

Though China commands a prominent position in the global EMS industry, OEMs and global players now seem to be looking for another manufacturing destination in Asia, and India could be the answer. EMS players in India are, therefore, trying to cash in on the challenges and limitations that China faces. The rising cost of labour and the quality issues that China faces have worked in favour of India. Global players are today eyeing India as the next preferred destination for manufacturing. However, for this to happen, industry experts feel that the mindset of the Indian players has to change. “No matter how machine dependent we become, the man behind the machine is still the brain behind smart production processes. So humans have to work equally hard and sharpen

Vivek Sharma, regional VP, Greater China, South Asia and India operations STMicroelectronics

their skills. If we have to become a globally preferred production hub, we have to adapt to the new trends and adopt all new technologies. Also, from China we need to learn how to do mass production. EMS players cannot just deliver on the basis of government subsidies. The industry, along with the government, has to take the initiative in implementing standards and methodologies to undertake large scale production,” says Shailendra Mathur, general manager, India, Asys Group Asia Pte Ltd, a key global supplier of equipment for printed circuit board (PCB) and semiconductor assembly.

Opines Lt Col Sharath Bhat, vice president, business development, Kaynes Technology India Pvt Ltd, an EMS provider, “The biggest advantage India has is its own local market. If any global company wants to introduce electronic products or expand its market in India, it has to start manufacturing in India. So there are immense opportunities in the years to come. However, for this, India needs to adopt the proper skillsets. Awareness about the latest technology is not enough; being able to deliver that technology is what will count in taking the industry ahead.”

More than production

With an increasing number of global electronics OEMs now outsourcing their manufacturing operations (ranging from conceptualisation, design, selection, manufacturing, testing, assembly and distribution of electronic products) to EMS companies, the latter continue to embrace outsourced models like original design manufacturing (ODM) and offer innovative services. Today, electronics equipment producers not only subcontract production, but also the design and

BN Shukla, head, quality and Lean six Sigma, Jabil Circuit India Pvt

engineering as well as the provision of product approvals and the purchase of components. As a result, EMS providers are now getting involved in product design, purchasing decisions and logistics. Companies that have gone up in the technology value chain definitely have more of a chance to survive and do well. “By aligning our strategies to this need, we can reduce and even eliminate our dependence on imports in the coming decade,” opines Sukhvinder Kumar, general manager, Elcoteq Electronics India Pvt Ltd.

Adoption of lean manufacturing

EMS companies manage to survive in tough times by employing lean manufacturing principles. Lean is an overall methodology that focuses on minimising the resources required for production by eliminating waste (non-value added activities) that inflates costs, lead times, and inventory requirements. Lean emphasises preventive maintenance, quality improvement programmes, pull systems, and flexible workforces and production facilities. Anything that does not add value to the final product or service is eliminated, and this is a trend that is evolving in India. Lean manufacturing is a natural fit for EMS companies, which have high product mix environments and need to make a profit on every job, no matter what the volume is. Jabil Circuit India’s adoption of lean manufacturing maintained the company’s viability and helped it in cost cutting.

Shailendra Mathur, general manager, India, Asys Group Asia Pte Ltd

“Manufacturing at the lowest cost with the highest quality is the only sustainable competitive advantage in the manufacturing world today. Toyota has shown us that lean concepts, when applied together as one cohesive strategy, will deliver that competitive advantage in the market place. Our team embarked on its lean journey with simple tools like Kaizen and Lean Six Sigma. These tools represent the first steps towards building a culture of continuous improvement and waste elimination,” says BN Shukla, head, quality and Lean Six Sigma, Jabil Circuit India Pvt Ltd.

Quality awareness

Today, EMS providers are aware of the importance of having certification like ISO 9001 (production) and ISO 13485 (medical devices). These have helped EMS providers produce better products. However, unless these ISO guidelines are put into practice, their quality results may vary. Within the ISO standard, a wide range of shop floor control methods can be used. Some EMS providers track the assembly of the products through each phase of manufacturing to isolate any problems and improve quality. No matter which method is applied, the key is to keep an eye on the quality process, and EMS companies have realised the necessity of this step.

Targeting niche markets

Sukhvinder Kumar, general manager, Elcoteq Electronics India Pvt Ltd

EMS providers offer services to a variety of industries. The major sectors driving this growth in India are telecom, consumer electronics, automotive, defence and medical electronics. However, EMS companies are also trying to cater to niche market segments like industrial, medical and renewable energy. This can help them build good track records and improve their chances when they want to target specific international market segments. “Newer markets like medical electronics will help EMS revenue to increase by CAGR of 12 per cent over the next five years,” informs Sukhvinder Kumar.

Consumer electronics constitutes more than 60 per cent of the electronics market in India. With major players like LG, Philips, etc, outsourcing their PCBs assembly, MNCs are looking at outsourcing original design manufacturing (ODM) as well. Demand for set top boxes (STB) has further triggered the growth of the EMS market. “The volumes in the Indian STB market are expected to grow at a CAGR of more than 25 per cent for the next five years,” informs Vivek Sharma, regional vice president, Greater China, South Asia and India operations, STMicroelectronics and director, India Design Centre.

Also, the demand for services required by both the big OEMs as well as the small players is creating opportunities for EMS companies. Multinationals like LG, Samsung, Nokia, Philips and Haier may have their own manufacturing facilities in India, but they require many other manufacturing services at low costs. Also, with the growing number of design houses in India that opt for various services, EMS companies have a diverse clientele, ranging from multinationals to small manufacturers and design firms.

Focus on value added manufacturing

Production for new segments like medical and industrial electronics is more complicated. Such complex manufacturing processes include highly specialised techniques and high performance electronics systems. Hence, EMS companies are focusing on flexibility and speed to enable shorter production cycles for different clients and product types.

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

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