Operating in the ever-dynamic electronics manufacturing segment, BGM Holding Company has succeeded due to its emphasis on the latest, high quality production lines. Installing three Juki SMT lines has helped it emerge as a one-stop destination for all domestic PCB manufacturing requirements
By Anwesh Koley
The Indian electronics industry has emerged as one of the fastest growing segments in the country. Over the years, electronics as an investment avenue in India has witnessed renewed interest among global EMS players due to a slowing down of various other economies. There’s little doubt that the international demand for electronics is constantly rising and is estimated to reach a market size of US$ 400 billion by 2020. Of this, India is expected to contribute a significant share.
According to market reports, the Indian EMS market clocked a revenue of US$ 4.24 billion in 2013 and is expected to expand at a compound annual growth rate (CAGR) of 13.3 per cent from 2013 to 2018 to reach a market size of US$ 7.92 billion by 2018. The Indian government is also making earnest efforts to increase domestic manufacturing levels to seize the enormous opportunities presented by the industry.
Electronics manufacturing: A target segment for fresh investments
The prospect of lucrative growth and a sustainable future has encouraged many young entrepreneurs to enter the electronics manufacturing domain. One such organisation is BGM Holding Company, which started its EMS operations in 2009 and in a short span of time has carved a niche for itself. Speaking about the journey of the company, Amrinder Singh, managing director, BGM Holding Company, says, “We started in 2009 as an EMS company for PCB assembly and over the past six years, we have developed our expertise in different product categories like set-top boxes, DVD players and electronic boards. We are an authorised RDS-approved service provider for Bharat Electronics Limited (BEL), C-DAC, the Delhi Metro Rail Corporation (DMRC) and even the Indian Railways.” The company also has certain turnkey projects from the lighting industry.
India promises to emerge as a major hub for electronics manufacturing among the south Asian nations owing to its low operational costs and easy access to various markets. These advantages provide ample potential for global OEMs and EMS companies across different verticals to outsource their assembling to Indian companies. The market for mobile handsets and audio equipment has seen major activity due to these advantages. “We are the largest manufacturers of PCBs for MP3 players and home theatre systems, producing around one million units per month for all audio related products,” says Singh. This was the company’s core area of operations till 2014.
In August 2014, BGM entered the mobile phone manufacturing domain by creating a separate company called BGM Telecommunications Pvt Ltd. This proved to be a profitable venture. “In a span of around four months, we were manufacturing around 300,000 mobile handsets per month. This went well with the ‘Make in India’ initiative announced by the government and by June 2015, our production capacity was around two million handsets per month,” says Singh. Entering this market was a prudent decision as the telecommunications industry contributes the highest share of revenue—around 30 per cent—for the electronics market, followed by the consumer goods and industrial segments.
Areas of operation
The company has two production units located in Ghaziabad, Uttar Pradesh. The combined area of both the facilities is over 9100sqm. BGM employs over 1000 people and the senior level management comprises former employees from LG, Samsung and Nokia, amongst other large firms. “We are currently doing business with Karbonn, Lemon, Jivi, Hightech and Swipe. We are in talks with some other leading brands and we hope to finalise those deals soon,” says Singh.
Apart from handsets, the company is also coming up with a battery manufacturing unit and an LCD production plant soon. The LCD display plant for mobile phones is expected to be ready by the first quarter of 2016 and the battery production facility will be functional by October this year.
Production standards to match competition
The market for low- and mid-range mobiles in India is witnessing phenomenal growth due to the increase in disposable income levels and faster penetration of technology to remote corners that were earlier inaccessible. Indian EMS companies have contributed significantly to support the distribution channel. “We are producing around 800,000 handsets per month currently and our target is to cross one million units per month by August this year. We wanted to be one of the first companies to provide EMS to companies willing to avail the services of domestic players,” says Singh.
The existing manufacturing units of the company roll out bar phones, feature phones and entry-level smartphones. BGM will soon come up with another facility to manufacture high-end smartphones in Noida, Uttar Pradesh.
Partnering the right technology provider
BGM Holding Company started its EMS operations using three Juki FX-1R SMT machines and continues with the same machines even today. When asked why it opted for Juki, Singh says, “The machines from Juki offer excellent productivity and till date, we have not encountered any operational problems that might have hindered our production cycle. Currently, we are not manufacturing the PCBs for mobile handsets, but in the future, we might look into this segment as well, and our first choice for mobile PCB manufacturing too, would be Juki machines. If we can achieve this manufacturing objective, we would be one step closer to the ‘Make in India’ dream,” believes Singh.
For a young EMS company, the long term viability of buying any equipment is of paramount importance, as it helps in shaping the fundamental base for the business and decides the future course of action. BGM has had a successful journey with Juki since its inception. “The quality of the Juki machines is commendable and the after-sales service offered is top notch. Juki has created a brand name for itself by providing seamless service to its customers. Over the past six years of our association, we have never encountered any productivity loss due to a glitch in their services. This goes a long way in enhancing customer confidence. Whatever expansion plans we undertake, Juki will always be on our priority list,” says Singh.
Addressing the requirements of a growing market
The increase in demand for mobile handsets and the development of the right technology to help meet it has enabled companies like BGM to establish themselves in the market. Earlier, around 2.5 million handsets were being imported every month; a number which has gone down significantly after domestic EMS companies have started assembling handsets for the local market. “Not every company can assemble the entire range of handsets in its own facility and not everyone would want to enter such areas of operation. This makes our position quite lucrative as we get to work with international mobile brands and have the responsibility of sending the products to untapped markets,” says Singh.
A lot of technicalities are involved in this field, coupled with the requirement for professionally skilled manpower with a clear understanding of the systematic workflow involved in the production processes. Also, since the ecosystem for handset manufacturing is still developing in India, a concern for domestic manufacturers is that key components need to be sourced from China, which is a time consuming process.
Chinese companies that earlier followed the Completely Built Unit (CBU) route, do not have a clear idea of the ‘Make in India’ concept. “Sending a CBU to India is different from sending a Semi Knocked Down (SKD) kit to be assembled in India. This results in losses for the Chinese exporters due to their lack of expertise in developing an SKD for the Indian market,” says Singh.
Local manufacturers do not have local supplies for most of their requirements and hence everything has to be outsourced. The long standing debate between opting for a local supplier or importing components ends in prioritising between cost and quality. “We either find good quality or a bargain price with regard to local suppliers. If the price is low, the quality is questionable, and if the quality is as per our requirements, the price is prohibitively high, warranting the need to resort to imports,” says Singh.
Singh believes that the ‘Make in India’ campaign can only be a success if all the required components and ancillaries are also manufactured in India, slashing imports to a bare minimum. Though this will be a gradual process, it will eventually reduce the country’s dependence on imports.