Friday, December 12, 2014: To achieve progressively higher levels of value addition and to support design and development activities, it is essential to have a competitive, diversified component manufacturing base and a developed supply chain
By Richa Chakravarty
The electronics manufacturing sector in the country is aiming to grow to 25 per cent of the country’s GDP by 2022, and the information, communication technology and electronics (ICTE) vertical has been identified as having significant potential to contribute to the objective of increasing India’s manufacturing base. The global production of the ICTE industry in 2013-14 was estimated to be about US$ 35 billion. Though this sector has registered a CAGR of about 15 per cent in the last decade, surprisingly, India accounts for only about 1.5 per cent of the global ICTE turnover.
India has not been able to adequately leverage the opportunities provided by the global electronics hardware manufacturing industry. Investment opportunities in the sector can be gauged by the fact that currently, over 50 per cent of domestic demand is met through imports. The share of ICTE production, which presently accounts for about 10 per cent of the manufacturing GDP, can grow to 33 per cent by 2022 to become the key driver behind the growth of the manufacturing sector and for employment creation. In order to achieve progressively higher levels of value addition and to support design and development activities, it is essential to have a competitive, diversified component manufacturing base and a developed supply chain. Underlining this pressing need, the Confederation of Indian Industries (CII) organised a seminar on the ‘Domestic supply chain development for ICTE manufacturing’. On the side lines of this seminar, Electronics Bazaar spoke to some of the major ICTE players in the country on strategies adopted by them to overcome the challenges they have faced in supply chain management and yet continue to strengthen the electronics manufacturing base in the country.
Local sourcing is the biggest challenge
One of the biggest challenges faced by manufacturers is local procurement of raw materials and components in the country. Surprisingly, even major players like Nokia, Jabil, Ericsson, Dell and Salcomp, to name a few, have been sustaining their manufacturing only through imports. Out of the total bill of materials (BOM), Nokia procures only 12 per cent locally, which is similar to Jabil’s share of local supplies. Ericsson’s local sourcing in 2013 amounted to 16 per cent, whereas that of NTL Electronics was 20 per cent. Despite such low figures, these companies have sustained growth in the country. Nokia has been manufacturing in India since 2008 and it has been supported by the small ancillary industries based close to its Chennai plant. At this unit, Nokia manufactures and exports the entire gamut of telecom products for the domestic as well as overseas markets. Interestingly, 30 per cent of its finished radio base station products are exported overseas.
“Our strategy has always been to stay closer to the market. Ours is a technology oriented product, so to expect the complete sourcing to happen from one market is difficult. Being in the technology business, we accept the fact that not all parts can be made out of one market. As much as we would like to have made more parts here, there are certain products for which the IP resides with certain companies outside the country. So, we procure products of the best quality from across the globe and look for companies that can help us stay at the leading edge. We, along with our suppliers, are always coming up with innovative products. So, the essential part of our business is that the supply chain is global in nature. Given that fact, we still need to have a high local content here. Considering that we have a supply chain disability, we have to work that much harder. Hence, we need to stay innovative in the way we manufacture products, and also have a very high level of engineering to make sure that we are pushing the productivity levels and improving our business processes. This is how we have managed to stay competitive,” shares Satendra Singh, head of manufacturing operations, Nokia Solutions and Networks, India.
Working to overcome the supply chain management constraints, Jabil targets to increase its local procurement to 30 per cent by 2016 and, for that, the company plans to strengthen its local suppliers. “We need to develop a responsible and robust supply chain. This will help in creating long term opportunities for local players as well as to reduce the lead times and time to market at the manufacturers’ end. Also, working hand in hand with local suppliers will raise their competence in making global quality products at the local level,” shares Nagraj Kulkarni, senior director, supply chain management, Jabil Circuits Inc.