“Government should subsidise large investment projects and enable faster clearances”

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Tuesday, March 18, 2014: Lucky Components, a large scale independent components distributor, evolved into Swingtel Communications, which has shaped itself into a hi-tech solutions partner. Swingtel focuses on creating value for its customers in the form of price, design, service, speed and sourcing, which helps them become competitive and increase their market share. The Swingtel Group has expanded and rapidly diversified into the telecom business.

 In a conversation with Srabani Sen of Electronics Bazaar, Moiz Manasawala, managing director, Swingtel Communications, shares his opinion on the local manufacture of components, the tax structure, and the company’s growth path.

 Moiz Manasawala, managing director, Swingtel Communications
Moiz Manasawala, managing director, Swingtel Communications

EB: What, according to you, should be done to boost the manufacture of components in India?

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India has really missed the boat with respect to setting up semiconductor fabs in the country. In the last decade, India’s potential to develop as a strong manufacturing hub in competition with China was very obvious. The good part is that we can see some efforts being made by the government now, to woo investors to set up fabs and stimulate components manufacturing. We feel fabs will act as a catalyst for the country’s components and equipment electronics industry. India currently imports a majority of its electronics because chips aren’t made locally. Local fabs will reduce imports, stimulate investments in the economy and create jobs. So it is very important for the government to subsidise large investment projects and enable faster clearances to reduce gestation periods.

EB: Please comment on the duty and tax structure, which seems to be a hurdle in the path of local manufacturing?

Indian manufacturers face a complex tax regime, as we don’t have a standard tax structure or GST. This creates an anomaly and creates regional barriers. Also, a few states announce several packages for setting up new manufacturing units in backward areas, with exemptions that are based on populism and on commercial or geographic considerations. So existing units, elsewhere, run the risk of facing unfair competition. Ideally, the duty and tax structure should be uniform, and the aim should be to encourage manufacturing growth across India. Irrespective of where the component factory is located in north India, the competitive cost benefit to the end consumer or OEM based in some remote corner of south India should be attractive.

EB: How does a customer choose a distributor?

India has seen tremendous demand for electronic components consumption and, hence, the world’s top class distributors are pretty active in India, and are expanding. The size and complexity of the market prohibits any single distributor from being in a monopoly position. It is definitely a buyers’ market, and customers get plenty of choices. For the same product range or brands, customers look at the kind of support that comes from the distributor. There are many factors that decide the preference for a particular distributor, the main ones being price, delivery, credit terms, tech support and, most importantly, the relationship.

EB: What are the latest marketing strategies that the components distributors are adopting in India?

Marketing strategies involve engaging customers for new designs and providing tech support. Distributors are looking for flexible business models to support the customer. They are focusing on reducing BOM cost, which entails re-engineering of designs and cross-referencing. Distributors, today, act like a back office for the customer, rather than a components warehouse. They play a strong partnership role in an effort to market a solution. It’s a win-win model.

EB: What marketing strategies does Swingtel follow?

Swingtel is a very dynamic organisation. We are continuously evolving our strategies to position ourselves and our customers on the forefront. We are fully aware that the traditional route to the distribution business is no longer sustainable.

We have a very strong think tank, and we review strategies to market and approach customers very meticulously. There is a method in our madness and, hence, we are called a thinking company. We are always challenging our inner potential to see what best we can do for the customer and the growth of the industry. Our customers are our partners. We have a high level of engagement and strong relations with existing customers. With new customers, we try to build trust and credibility, which requires consistent effort and clear communication.

EB: What has been the growth of Swingtel in the last five years?

We have seen a growth of almost 400 per cent in the last five years as we’ve launched several smartphones and tablets under our brand ‘Swingtel’, and expanded rapidly in the components distribution business as well. We are adding more products in the field of telecom convergence as well as components, fuelling creation of greater demand for our range of products and components.

In semiconductors, we have been highly focused on active components. We are now also expanding our range to include passive components, and create a bigger basket of products. We may also explore EMS and export opportunities in the future.

EB: Do you prefer the ‘Made in India’ components over foreign brands in your product range?

Our semiconductor distribution business has been very heavily concentrated on active components and deals with top class brands. Right now, in this segment, we do not have many options to introduce ‘Made in India’ components. As an Indian, we would like to promote local brands. If the fabs take shape as planned, we may see some strong Indian brands in the market after five to seven years of gestation period. With respect to other components like capacitors, switches, potentiometers, fuses, etc, we can see quite a few good quality Indian brands active in that space. These are also competing well with the foreign makes, both in price and quality.

EB: What value addition do you offer to your customers?

Our customers are like our partners. Our value addition revolves around their needs. Every customer is structured differently. The basic support involves best price support, credit, inventory planning, just in time delivery, global sourcing, consolidation, and more. Our engineers help to design solutions or offer solutions to customers looking for design support. They use reference boards and work closely with our principals to do so. We provide strong handholding to our customers, so that they can focus on manufacturing rather than on sourcing. Our customers realise that amongst the many vendors in the market today, committed suppliers that provide quality products are very few. So what our customers get from us is consistency, quality, price and relationship.

EB: Online trading is quite popular in other countries. Why is it not picking up in India?

Online trading is a powerful concept and is doing well across the world. It introduces efficiency into a system and reduces net costs to the customer. It also helps the supplier offload stocks at a fair price. For our telecom business we have leveraged the online trading model, and seen tremendous growth in India.

However, online trading of components has not taken off in India. The reasons are many. Trading in components is not a cash and carry business. There are credit terms involved. Currently, 30-60 days is the average credit period. To expect companies to buy components online through RTGS is unimaginable at the moment, except in case of sudden shortages or, maybe, for obsolete parts. In India, there still exists a parallel economy, where components are being traded without proper documentation and ‘being smuggled in at ridiculous prices. Such channels will never want to buy or sell online as their stocks are never accounted for.

Then there is the issue of credibility; probably, only the companies that trade in genuine products would be able to market them online. We are still seeing a huge influx of duplicate components being smuggled into India from China. This creates chaos in the market, similar to fake currency notes. If online trading has to pick up, stock audit agencies will also need to get active and provide their services at very competitive prices.

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

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