Ground Zero: Contract Electronics Manufacturing Now Vs 1989 in India

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  • This story is based on the experience of an EMS professional who started his career in 1989
  • In 1989, despite technological roadblocks, EMS services were a big booming business in India
  • Though the technology had advanced, productivity has not evolved proportionally
  • Indians working in Chinese EMS companies in India are proof that skills exist

Shrikant Sharadrao Borkar, founder,(Consultant EMS) of SSB Technocrat, in an exclusive conversation with Electronics B2B, shed light on the situations that are clouding the electronics manufacturing activities in India. In his three decades of electronics manufacturing career, he has been associated with big names like Videocon, SHARP, Jabil, Star Engineers (Automotive supplier HONDA , BAJAJ, HD) and Consulting EMS right from Zero establishment. He is Black belt 6 sigma honed to implement Management concepts. Currently he is coaching Zeal Electromech in the capacity of a general manager.

Borkar started working with one of the largest electronic manufacturing companies in India in 1989. Over time he saw several FTAs being signed and Chinese entering the Indian markets.

He is of firm view that Indians do not lack skill sets and Chinese companies assembling in India and ruling smartphone and smart TV segments is a big proof of that.

Excerpts from the interaction

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EB – You have been associated with the contract electronic manufacturing vertical in India since 1989, what is the situation right now?

Ans – Electronics contract manufacturing in India is not doing well now. A lot of original equipment manufacturers (OEMs) have started doing manufacturing on their own and have stopped outsourcing to electronics manufacturing services (EMS) companies. Many of these OEMs have started optimizing their manufacturing processes to produce more. Their processes have become lean.

The OEMs generally contact EMS companies when the demand is higher than what the former can manufacture. If we look at electronics manufacturing, the same can be divided into two – one is contract electronic manufacturing and the other one is manufacturing by OEMs.

One of the biggest advantages of contract electronics manufacturing via EMS companies is the cost effectiveness. It is usually based on the labour charges. Second, the setup required to manufacture electronics also falls under the investments made by EMS companies. This includes machines, shop floor space, maintenance and many more things. Companies giving the contract to EMS companies are required to only give components required for the manufacturing. Additionally, if there are any quality issues faced in the final product, the cost of the same must be borne by the EMS company.

In one sentence, the Indian EMS industry is suffering now!

EB – But, with more Indian OEMs setting up their own manufacturing unit—isn’t that good news for the overall industry? More machines, more jobs?

Ans – Yes, it indeed is a good news. But the OEMs we are talking about, either local or outside India, they are setting up the electronics manufacturing for their Product Since this comes under one umbrella hence can bear overheads. Second, we have to consider  the local value addition taking place in India. Are we just assembling knocked-down and semi-knocked down electronics, or are we doing something else as well?I think the only value addition happening in India at the moment is the economical labour cost involved! More machines might mean more jobs but where are the profits flowing? To the parent company or the subsidiary companies operating in India? If we find the answer to this question, we will know where we stand today and where we stood in 1989!

EB – Also, is it not true that some of these OEMs themselves are providing EMS services too— thus forcing the traditional players to up their game?

Ans – How many such OEMs are there, and how many of these are Indian? My answer is a handful! Most of the OEMs assembling in India are not Indian. Right now the competition seems to be between the foreign players operating in India. During the last two decades more foreign players have come to India than the ones that have originated in India!

Moreover, are the existing Indian OEMs living up to the expectations they had started originally? If yes, why are foreign brands giving more and more orders to EMS companies having units in India but headquartered outside India. The ratio between foreign companies grabbing orders and India ones grabbing these is not at all healthy.

Now, to answer your question, the methods used by many of the foreign EMS (in some cases OEMs) are production-centric. From my experience working with the Korean, Japanese, Chinese and Indian teams, I can tell you that the quality standards of the Chinese are not that satisfactory. But they deliver more before time. The next thing that makes Chinese OEMs preferred is the fact that they can deliver more in less costs.

Following the present circumstances, if companies have to outsource electronics manufacturing to a company not-headquartered in China, which company can they reach out to? Japan and Korea can be strong contenders, but their production costs are much higher than China. So the costs will increase!

Next in line comes India! The costs and quality produced here can be better than China but what we lack is the ecosystem and the intent. Other players from countries Vietnam can also be in the picture but do they enjoy as big a local-market as India. We have to learn to identify and make use of advantages instead of letting others point towards what’s not there. What’s not there can be bought but what is already there has to be utilised!

EB – Overall, is it not correct to assume that as competition has increased—the pressure on Indian firms to improve their productivity and reduce their wastage?  
Ans – Yes, the competition is increasing! However, India has something that no one else has – a big local market and very-good manpower. The country will have to work to Improve on the 4M and 1E.

By 4M and 1E I mean men, machine, method, material and environment approach. This is not a term that I have coined but it is something that has been advocated by industry leaders. By men I mean the skilled manpower availability in India. ESSCI is already working on this. Next comes the method and it stands for industrial engineering. Can we envision a single individual operating three machines at a single time? In China, many companies have been doing the same for a long time. Use of lean methodology are not in the book but in practice , PCB assembly Standard certifications like IPC  and others are also a part of the method.

Machines in the 4M and 1E stand for the latest tech, equipment and machinery used in electronics manufacturing. If we take the simple case of SMT machines, most of these machines are imported. There is almost zero local-value-addition here too! Similarly a lot of components required have no production in India as well. ICs, modules, connectors and a lot of consumables are also sourced from outside India. These are counted in the material part.

Coming to the environment, the likes of infrastructure and government policies are counted. More Policies encouraging EMS need to be introduced and older one need to Review . More ever we need to reach out to Electronics manufacturers to acknowledge the Policy benefits .

The best part about this 4M and 1E method is it is all interconnected. Indian Electronics OEMs, EMS companies as well supporting supplier companies, government and institutions will have to move in one direction collectively to handle the pressure. Then only we will achieve the Prime Minister’s goal of atma nirbhar bharat!

EB – How were things for the EMS companies back in 1989, when you started?

Ans – When I started in 1989, there were not too many competitors in the Arena. This was possibly because we did not see too much activity from the likes of China and other countries. Perhaps, the agreements were not signed till then. The company I started working for was the biggest OEM  manufacturer for TVs; later it became a contract manufacturer. We used to manufacture TVs for almost all the brands including Akai, Sansui, Toshiba etc.

Going back to my college days in 1985, we were from DOS PC and it too was not available in many of the polytechnic colleges , nothing was taught in competitive manner likes facilities available today .When we stepped out of the college all we knew about electronics was TVs, tape recorders and VCRs.  Simply put electronics was all this to us. To give you another example, we only saw windows computer demos in exhibitions which offered us to play with the mouse and click on windows button menus.

We worked on FoxPro DoS and similar kinds of softwares . Even the best of technicians and professionals working in the domain had no idea what all did the vertical of electronics encompassed. There were only a few people having sound knowledge of assembly equipment,  auto insertion and placement machines .These people had to multitask. One, they had to work during the production. and second, they had to share knowledge with other colleagues to create skilled manpower.

Things have improved comparatively today. There are institutions that teach A to Z of electronics manufacturing. Consumers are almost as much learned as the professionals. We have access to better machines, components (sourced from outside India). However, the contract electronics manufacturing, barring a few segments like smartphones, has not evolved with other things.

EB – What do you think are the reasons behind the same?

Ans – A good question! I think while technological advancement has evolved with time, productivity knowledge and advancement has degraded. The vision of manufacturing on a bigger scale is missing these days.

A lot of people in the management, and on the shop floors of EMS companies always miss answering the basic questions like how to achieve more manufacturing in given time and how to make sure that my manufacturing capability increases over time! In fact, despite a lot of automation, technologically advanced machines and many more things, big brands that once ruled the Indian markets have vanished.

This could be because of a lot of reasons spanning across political and financial vectors. However, now being able to evolve with time, especially in the manufacturing space, is and always will be a big factor behind brands vanishing in thin air despite reaching their peak!

I think the likes of Sansui and Akai should have been able to carry on with their peak points, but it became a ‘U’ curve for them! And not just Sansui and Akai, even Videocon and Onida reached the peak of manufacturing, but they also vanished!
Today when we can make everything easily available in India, the productivity sense is still absent. The answer to this question is not easy to find as there are a lot of factors involved which range from political pressures to an organisation’s failure to adapt!

EB – Was there a comparison between India and China in terms of contract electronic manufacturing back then?

Ans – I do not have any idea about how Chinese were doing in other countries, but they were not at all good in India. And then within a decade, almost by 1999, we started seeing Chinese in almost every electronics field in India!

Before I continue let me give you an example of calculators. In contract manufacturing calculators, a company must seal just one chip inside a compartment and the final product is ready. This is the level of advancement that China has achieved in terms of Electronics manufacturing. Now, can you name companies in India which can do the same today? If yes, how many?

The manufacturing capability of Chinese has improved so much over time they are now producing electronic toys inside their homes! Can we do that in India? I am not talking about using the screwdriver to bolt a few screws and assemble the ready kit to create the final product.

When I was in Bangalore, I came to know about an energy meter project that was going on. These energy meters used a fine pitch IC as a key component. I visited a lady in Bangalore who was working manually to place those fine pitch ICs. Her work was amazing, and the best part was that she was not using any SMT or automation machines. Instead she had created a gig there, which she was using for placing the ICs.

EB – What’s the context of the pitch IC example?

Ans – The reason I brought this up is because I wanted to tell you that we have all the skills required to be the hub of electronics manufacturing. As a matter of fact, our biggest skill is our manpower! But we have failed to grow up. We have failed to even address the requirement of such machines.

At present, the problem has worsened. We rely on other countries to source components required. The other problem is that we are not ready to accept that it is a problem. We need to admit that we do not have an ecosystem for components. we also must start to work on other areas where our strength is .

EB – Why aren’t the China-based EMS companies facing these problems in India?

Ans – Thank you for asking that question. Let us first see what it proves. I think it proves that manpower in India is skilled enough to work on any kind of electronics manufacturing projects.

To answer your question most of the Chinese are bringing the whole setup from their country. Machines, SMTs, Tools and more, everything in these factories is from China. Their next step is to train on job Indian manpower on the same. Now, even if some India-based electronics manufacturing company brings the same setup to India, will he be able to skill the manpower in the same way as the Chinese? In my opinion no!

The biggest smartphone brands in India are manufactured in various facilities setup by the Chinese in the country. The expertise that works on these smartphones after getting trained is Indian! Why cannot we develop the same skill sets and setup here in India.? You look at Gujarat or Noida, the machines and the setup is Chinese, but people working on, and with them, are Indians!

 

EB – Can employing Chinese professionals to train Indians be a solution?

Ans – It is not as simple as it sounds. Let’s begin with the communication problem first. While getting interpreters for foreign languages is easy, getting an interpreter who can convert Chinese into English is easier. But how many such interpreters are available in the market who can interpret Chinese manufacturing technology language into English?

I know a company who tried to employ Korean Experts for teaching its employees about the technology. The results were also promising, but at the end the costs involved were too high for them to continue the program. We have to understand that such programs require long-term commitments from trainee professionals to create successors.

But nowadays some private colleges have established full SMT lines with small wave soldering machines with assembly conveyors in their campuses. Second, the people being trained in India are trained on an ‘On-Job’ basis. Engineers and professionals from other countries open and operate the machines in front of them and teach them everything that is required for production or manufacturing. Today, most of that work is done using the internet and IoT .

This is also a reason why Videocon, SHARP  was a leading player in the electronics manufacturing domain back in time. Indian engineers were trained to do everything in the company!

EB – Can there be any solution to improve this situation? What’s your opinion or how to start ?

Ans – That solution is electronics manufacturing clusters! When we say electronics manufacturing, most of us only look at the electronics side of it. However, electronics manufacturing also encompasses mechanical work, chemicals, plastics moulding, testing jigs , Fixtures, and a lot of other things.

We need to develop clusters that support Prime electronics manufacturing  As we have now started talking openly about China let me give an example from how such clusters are back there in that country.

Let us suppose you are contract manufacturing wireless earbuds for a company. After manufacturing a few 100 pieces initially, you come to know that the plastic or silicon enclosure used is faulty! What will you do in India? You will most probably wait for the moulding guy to come, take measurements, return to his facility, and give you the new measurements to feed in the machines.

But what will a company in such a cluster do in China? The guy probably located just some blocks away will rush in and do everything as quickly as possible, resulting in saving time for the contract manufacturer!

Additionally, such clusters will not just complement the electronics manufacturing industry, but a lot of other industries as well. Chemicals, plastics, and lots of other things are used in manufacturing items that are not at all electronics. Setting up these clusters will also benefit such industries and the whole country!

EB – But the scheme of such clusters (EMCs) already exists?

Ans (or a question) – How many loans calls do you receive in a day?

EB – The context of this question?

Ans – When private as well as government banks call you more than three times every day enquiring about loan requirements, cannot something be done similar in case of such schemes.

I understand that the government might not be able to implement this, but a lot of private players can. How about an organisation that keeps track of such schemes and benefits associated with it? The same organisation can call electronics manufacturers and explain the benefits.

These can also make an offer to companies about guiding them through the complete process and charge a fee! This model can involve over time. The reason I am proposing such a model through you is because of a lot of things. I am part of many professional electronics manufacturing WhatsApp groups. But whenever I post questions regarding such policies none have replied. Even if I post policy documents in a group, only a few can understand it.

Either the government makes these announcements as simple as possible, or a private player emerges, but unless the schemes are communicated clearly to stockholders, I don’t think anything will happen!

To make sure that EMCs develop rapidly in India, the electronics manufacturing professionals will have to form a cluster among themselves. They will have to use these clusters to inform about all the incentives and benefits associated with government schemes. The focus should also be on how to apply effectively for all the schemes.
Similarly, why cannot we announce incentives for women’s self-help-groups (Bachat Gat )involved in electronics manufacturing. I hope you know that a lot of electronics manufacturers prefer women professionals when it comes to simple joint and component manual soldering jobs.

The companies train them and pay them handsomely. In a lot of cases, these parts are taken back home by women workers to solder or assemble. In return, they get paid in accordance with the number of pieces they finalise. I think the government can also incentivise the same.

Why not utilise this basic skill offered at lms-essc.org from the ESSCI curriculum to get trained  women and men equally?
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