BANGALORE: India’s software success is now driving electronic manufacturing into the country to serve the fast growing domestic market and emerge as a new base for hardware production for the global market.
As global brands eye one of the largest markets in the world, electronic manufacturing service (EMS) companies who build mobile devices to digital appliances for these brands are betting big and investing huge sums in locating their units in the country.
“India has an advantage story in software. Now, the country is shifting towards product design, where software is bundled with hardware and the obvious thing for growth is manufacturing,” Sunil Shenoy, senior manager at analyst firm Ernst & Young said.
India’s total electronics market is expected to rise to $363 billion by 2015 from $28.2 billion in 2005, growing at a compounded annual growth rate of 29.8%, a Frost & Sullivan study says.
EMS Industry in India is estimated to be about $900 -950 million in 2005 and is expected to grow at 21% per annum to reach a size of $2.3 billion to $2.5 billion by 2010.
Besides the domestic market, the Indian industry has potential to penetrate the US, Western Europe and other markets significantly during the period, it said.
Initial driver for manufacturing in the country is mobile devices and telecom equipment.
Nearly 85% of the telecom equipment that support the over 100 million subscribers are imported and the estimated investment planned by players to match the future requirement is about $35 billion.
“The size of the Indian telecom opportunity and the speed that which the sector has grown has ensured that almost all global telecom equipment manufacturers have set up or announced plans to set up a base in India This huge demand has motivated all major companies to set up manufacturing units in India,” Elcoteq Asia Ltd Director, sales, business development and marketing Henry Gilchrist told DNA.
The Helsinki, Finland-based EMS provider has committed investments of $50 million to $100 million in its unit in Bangalore, which dishes out mobile phones and base stations for its customers including Nokia.
The major players in India include Flextronics, Jabil Circuits, Solectron Centrum and homegrown players like BEL, TVS Electronics and Tata Infotech, who in total are spending close to $1 billion in their units.
Flextronics is setting up units at a 250 acres special economic zone (SEZ) near Chennai that would dish out one million mobile phones per month from January next.
The EMS players work on thin margins and manage operations on scale and efficiency to deliver products from design to repair for their customers.
Analysts expect that EMS firms have plans to invest hundreds of millions of dollars over the next two years to serve the domestic market and leverage low cost labour for the export market.
