Electronics component manufacturing never really took off in India since its entry in India in the 1960s. Even when the Indian electronics and power electronics markets began to show tremendous potential and witness enormous growth, manufacturing was never really seen as the country’s forte. There was never any significant initiative like in China and Taiwan, where manufacturing of components for power electronics flourished not only locally but globally as well. Domestic component manufacturers often see government policies as unfavourable, especially with regard to duties on components.
On the other hand, foreign manufacturers stayed away from India and did not think of it as a manufacturing base, citing want of domestic volumes to sustain a profitable manufacturing base and poor infrastructure as the reasons for their lack of interest. Many considered India a market that is good only for trading, something which became more attractive because of the lowering of duties.
By Srabani Sen
Saturday, September 19, 2009: Over the years, circumstances haven’t changed much. Government policies more or less are the same as they were five years ago. India’s infrastructure is still inadequate. The component base for power electronics is still not adequate to sustain manufacturing. With virtually no domestic production of power electronic components, manufacturers of UPS and inverters like Su-Kam, Microtek, Numeric, Luminous, Servotech, Convergence, Protronics and many others are forced to import components from countries like China and Taiwan, which has become a major financial burden.
Components for UPS, inverters
There are many different power circuit topologies and control applications used in inverters and UPS. Different designs address various features and employ different components for them. The typical components employed in a UPS or inverter are rectifiers, converters, controllers, capacitors and inductors. The designs may even include transformers, connectors and resistors.
This indicates that the growth of the components market is commensurate with the growth of the UPS and inverter market. Therefore, irrespective of all the hindrances, manufacturing of these components should take place in India and can indeed become a thriving industry, predict industry analysts.
Ample apportunity, say buyers
Due to lack of availability of components in the domestic market, it becomes difficult for manufactures of power devices to source them. They feel that it is difficult to change the mindset of the local players who are afraid to invest in the components business. The manufacturers want buyers to guarantee that whatever they manufacture, the latter will purchase the entire lot. Buyers, therefore, opine that component makers should realise that no business is without risk. Since there is ample opportunity for component manufacturers in India, this risk would be worth taking, say manufacturers of UPS and invert-ers—the buyers of components.
Convergence Power Systems, a manufacturer of UPS and inverters, imports 40 per cent of its components from Taiwan and China. “These are basically IGBTs, metal oxide semiconductor field effect transistors (MOSFET), ICs and liquid crystal displays (LCDs), which are not made extensively in India. Whatever quality products are available in India, we purchase from here itself. We source transformers, enclosures, DC capacitors, wires and cables only from India,” says Srikumar, director of marketing, Convergence. “The components’ technical and commercial viability matters when the purchasing decision is being taken, not their place of origin. We go for sound quality and good price. There is no common platform where one can get to know about the components produced in India. However, through our network, we manage to find the concerned vendors,” he adds.
Srikumar thinks that Indian components are being upgraded to keep pace with time and international standards of quality. “Their quality is good but innovation and variety are missing,” he says. According to him, “The Indian component market is gaining strength and more people are manufacturing components in India now. We envisage a 20 per cent growth in this market in the next five years. Earlier, people weren’t aware about what kind of machinery and facilities were needed for manufacturing components. Now, they are more educated on the matter and are taking initiative. Surely, more and more people will join the bandwagon,” he comments.
Protonics Systems India Pvt Ltd, another manufacturer of power electronics devices, procures MOSFETs, IGBTs, ICs and microcontrollers from Japan, Taiwan, Korea, China, Hongkong, Singapore as well as India. “About 30 per cent of our components are imported. The rest are locally made. We buy metal parts, plastic parts, PCBs, transformers, wires and cables from the Indian makers,” says Anil Bhushan, director, Protronics.
While Bhushan is of the opinion that the quality of the Indian components is at par with the international ones, “the local components industry is still suffering as very limited items are available here, due to which we are forced to import. A broader range of components should be produced,” he feels. However, Bhushan feels that there is enormous market potential for India-made components and in the coming years the Indian component market can do good as the UPS and inverter market is flourishing.
Servotech Power Systems Pvt Ltd imports 90 per cent of its semiconductors from southeast Asia. “We don’t import directly—we buy from the Indian importers,” says Raman Bhatia, managing director, Servotech. “We have no choice as more than 70 per cent of the components are not being produced in India. We do buy the ones that are available, for instance, resistors, buzzers, capacitors and wires.”
Bhatia feels that the Indian component market is sluggish owing to the power crisis, due to which, deliveries are hardly ever punctual. Other than that, Bhatia admits to facing no major problems while sourcing its components from the local market. “Though manufactured on a small scale, Indian components are as good as the international ones. However, they turn out to be costlier than the latter as they are produced in modest quantities. The Indian component market is growing with time and that growth will be directly proportional to the growth of the power electronics industry. Manufacturers will slowly start manufacturing high end components,” Bhatia adds.
A SILVER LINING
Despite the limitations of the component manufacturing market, there are some components, especially those made locally for UPS and inverters, which are prospering. These include resistors, transformers, capacitors and PCBs, amongst others.
Resistors: The growth of power electronics in the country has created immense scope for the resistor industry in India, which has been demonstrating constant growth in the last few years. According to Girish Nangia of Stead Resistors, “The demand for resistors has amplified because of constant innovation in the electronics industry and a surge in the requirement of existing products.” Although the presence of global players in the local market has contributed to the enhancement of the quality level of India-made resistors, leading to improved quality and productivity, the former are giving stiff competition to the local manufacturers as well. “Their low costs, swift delivery and consistent quality are making it difficult for local players to survive in the industry,” says Pradeep Khadilkar, director, Cermet Resistronics, a manufacturer of resistors.
Another factor that is holding local players back from venturing into this field is the zero per cent custom duty on imports, which has resulted in drastic reduction of product prices. Nevertheless, those involved in niche resistor manufacturing are not impacted by the already established foreign players as customers’ requirements vary.
“The only way to survive in this competitive environment is to innovate and provide tailor-made solutions to customers rather than try to compete on the bulk supply price front,” advises Khadilkar.
PCBs: Advance Technologies manufactures PCBs and membrane key boards. “The demand for PCBs is quite strong and the market is growing in India,” says Amit Agarwal, director, Advance Technologies. “Though manufacturers of UPS and inverters prefer imported components, they go for domestic PCBs as India made PCBs are reliable and quality controlled. Indian PCBs boast of approximately 70 per cent market share. ”
“Many reputed players in the UPS and inverter sector use their own technology, for which they prefer locally made PCBs. Manufacturers in India are producing a wide range of PCBs including single side, double side, flexible, rigid flexible and multilayer. However, the price competition is quite sharp. The Chinese made PCBs are cheaper and we have to match them on that front but as long as the dollar price is high, we get benefited,” says Agarwal.
The import of cheaper and qualitatively better raw materials is restricting the growth of PCB manufacturing in India. Many local manufacturers are hesitant to enter the field as the scenario here is not conducive for manufacturing. Agarwal also thinks that technology wise, PCB manufacturers still have a long way to go in order to compete with the imported ones. “Indian PCB manufacturers are concentrating on innovation to counter the competition from foreign players,” adds Agarwal.
Transformers: Sharma Electronics, and ISO 9001-2008 certified firm, has been manufacturing transformers for inverters, UPS, panels, etc since 1996. Its buyers’ list comprises established names like Kevin Power Solutions, SS Enterprises, Powersys Incorporation amongst others. “The vast development in technology has made the manufacturing process of transformers easier for manufacturers. The industry has adapted itself according to the latest technologies,” says Ramesh Sharma, director, Sharma Electronics.
“With the burgeoning need for UPS and inverters, the demand for transformers, too, is expanding. With the foray of various manufacturers into the market, competition is growing tougher and to succeed, each and every manufacturer is customising transformers for power devices,” says Sharma.
According to Sharma, the Indian manufacturers face no competition from Chinese and Taiwanese transformers as the latter are inferior in quality. “We design transformers as per customer specifications, develop them to their satisfaction and deliver on the scheduled time. We believe in ‘fit it and forget it’,” adds Sharma.
Huge demand, say importers
The sector also harbours a strong presence of importers, who import components for UPS, inverters and batteries, mostly from China and Taiwan and distribute them to manufacturers of power electronic devices. These importers also feel that there is huge demand for components in the power electronics sector but only a handful of manufacturers in the domestic sector. They, therefore, turn towards foreign countries for importing components to meet the demand in the domestic power electronics sector.
One such importer and distributor is Aaj Tech Trading Corp, which imports connectors from China and Taiwan that are used in PCBs of inverters. It sells to inverter and PCB manufacturers. “There is a huge demand for connectors and it is increasing every year. Since the manufacturing environment of PCBs is good, any amount of connectors imported are sold off. The market is wide and the business is flourishing. You just need the capital to invest,” says Shivani Agarwal, director, Aaj Tech Trading. Shivani opines that the local manufacturers do not suffer from components being imported as it is a parallel market and there are buyers for both.
Formax Electronics Pvt Ltd imports German company Insenon-made insulated gate bipolar transistors (IGBTs) from Singapore. Says its managing director, Manoj Saini, “Manufacturers of UPS and inverters usually prefer imported components as they feel that the R&D of local manufacturers is inferior. In addition to R&D, domestic manufacturers need to invest in better infrastructure. Also, the government needs to extend support to them.
“Nevertheless, Saini is optimistic about manufacturing in India. “There are several advantages in sourcing components from the Indian soil. There will be no delivery problems, manufacturers will get immediate feedback from local customers and buyers can directly approach manufacturers regarding defective pieces or other problems.” To combat the stiff price competition, Saini suggests that manufacturers come up with innovative designs, use modern machines and new techniques and concentrate on quality.
Perfect Radios director Sunil Makkar, however, shares a different view. “Manufacturers are either importing finished products or finished component kits from China and Taiwan,” says Makkar. Perfect Radios imports integrated circuits (ICs), capacitors, resistors and many other components for power electronic devices. “The need for components is, therefore, decreasing. We have started feeling the pinch and are diversifying into other areas. Now, we are importing components for medical equipment and other industrial manufacturing equipment,” adds he.
Makkar feels that if the government doesn’t wake up to the problems of component manufacturers immediately, then many will be forced to shut shop. He suggests that the government levy duties on imported finished goods like UPS and inverters or finished component kits. “Then only can the local manufacturers survive,” he stresses. Makkar also believes that the price gap between the locally made and the imported components is strikingly vast. “The imported ones are much cheaper. Indian manufacturers cannot afford to lower costs as their manufacturing cost is quite high,” he adds. Promila Joshi of Airmaster Rectifiers also opines that traders are bearing the brunt of the shrinking market. “Manufacturers of UPS and inverters are directly approaching local manufactures for their bulk component needs, ignoring traders like us. This is obviously impeding our growth,” she says. Airmaster Rectifiers buys semiconductor devices from local manufacturers as well as imports them from Taiwan and China.
Many impediments, say manufacturers
Domestic manufacturers,however, have a different take on the matter. “Many factors collectively serve as an impediment for the manufacturing of components for power devices in India,” says Pradeep Khadilkar, director, Cermet Resistronics Pvt Ltd, a manufacturer of resistors. “The qualitatively better raw materials imported from other countries are much cheaper than the domestic ones and that is restricting the growth of indigenously produced components. Many local manufacturers are hesitating to enter this sector as the situation here is not conducive for manufacturing components,” he adds.
Amit Agarwal, proprietor, Advance Technologies, points out, “With the demand for UPS and inverters growing, it has become even more exigent for power electronic players to source components from the domestic market. Presently, almost 70 per cent of the components that are used by manufacturers are being imported and thus, the advantage India has of low labour costs gets nullified by the duty charges they have to pay for importing components. We also have a lot of catching up to do when it comes to domestic component manufacturing for power electronics, in terms of technology and infrastructure.”
Labour is a vital aspect of component manufacturing. “If you want to make about a million defect free circuit boards, it would require a labour content of 2 per cent. However, if you want to make a million defect free pieces, then you have to employ adequate machines (SMT assemble line), production technologies and methods and then you calculate the manpower per unit of the overall cost, it will be as low as 2 per cent. Now, if you make a profit of 2 per cent, then you are definitely making losses because our operating cost is very high,” states Bharat Pandey, director, Parma & Parma Pvt Ltd.
Novoflex makes a number of components for power electronics, including for UPS and inverters. Its director, Dinesh Kumar Banka, sees significant advantages in manufacturing components in India. “We can hire qualified, efficient and productive labour at a reasonable cost. Moreover, there is a vast market for selling the products manufactured to numerous industries located far and near the manufacturing base.” Novoflex manufactures products like strain relief cord bushings, nylon printed circuit board (PCB) spacers, flexiguard grommet rings, P-clips and twist clips amongst others. “All these components are being manufactured in India and they are all doing well,” adds Banka. He attributes the company’s success to innovative products, timely delivery, competitive prices and easy availability.
Says Pandey, “China is a challenge for us. The Chinese style of doing business is different from ours. They produce in bulk and sell at low costs because they have the market all over the world so they can do business in low profit, whereas we believe in regular and as-per-demand production with a high focus on quality and we have only domestic market to cater. Our prices are higher in comparison to the Chinese products.”
The buyers of components used in UPS and inverters and the importers of components, however, suggest that component manufacturers in India should invest in manufacturing for domestic business as well as export. Moreover, hardware manufacturers need to innovate in order to cater to emerging countries, they state. While Srikumar says that the manufacturers should try to produce components that are as good as the imported ones, Bhatia opines that they should pay heed to R&D. “Indian component manufacturers should have quality and should be competitively priced. They should try to address the requirements of the world market as well. If they just cater to India, there are chances of running into losses. Also, indigenous manufacturers should stretch their horizons by making more kinds and varieties of components so that the industry has to import less,” says Srikumar According to Bhatia, “Some levels of corruption is also involved—the values of components displayed are different than the ones that are exhibited during testing procedures. Quality needs to be improved to curb such deviations.”
Soul searching needed
Indian manufacturers need to know that owing to the massive demand for UPS and inverters, now is the opportune time to venture into the components business. They need not be intimated by the hurdles and challenges and must manufacture more, in terms of quantity as well as variety so that buyers don’t look towards other countries for their sourching needs.
Also, the buyers of components for UPS and inverters should be aware of the fact that some of the Indian components are doing well and are indeed better, in terms of design and quality that their imported counterparts. Most importantly, the Indian ones can be customised as per customer requirements. If the manufacturers and buyers of components make an effort to comprehend each other’s needs and cater to each other via supply and demand, there will be no stopping the Indian market from scaling great heights. The prospect of investing in component manufacturing is formidable, no doubt, but if both the government and the industry work in tandem to formulate investor friendly policies, India can be a force to reckon with in the global electronics manufacturing arena.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine