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India has already established itself as a global player in software services and solutions, thanks to skilled English-speaking workforce and competitive pricing strategy.
It is now the turn of its much older counterpart, the hardware sector, to emerge as the next hot destination for electronic manufacturing services, or contract manufacturing.
At a special summit on 'Contract manufacturing/electronic manufacturing services: Destination India,' held as part of the eighth Componex/ElectronicIndia 2003 International conference-cum-exhibition in Bangalore on Friday, experts from India and abroad said India had all the wherewithal to become the right destination for outsourcing electronic and IT components, products, and services by global companies to target the Indian and international markets.
With only top 10 countries contributing about 80 per cent of world electronic and components' production, the global electronic market is currently estimated to be about $1,000 billion. And 35 per cent of the total business is outsourced through contract manufacturing alone.
Various surveys by industry organisations have projected that the total electronic business will grow phenomenally by 2010, with outsourcing of electronic management services alone constituting about 50 per cent.
"Just as in the case of software industry, India has cost-effective, intelligent manpower, managerial and technical skills in the hardware sector too to cash in on the emerging opportunities," said Krishna Kumar, director of IT department for components and materials division.
"Though India has a manufacturing base for passive and electromechanical components, the industry needs to invest heavily on latest technologies and take up research and development on a massive scale," he said.
The areas that merit attention and top priority to become a supply hub are microelectronics, surface mount devices, and chip components.
In order to build capacities and capabilities, India will have to set up a state-of-the-art microelectronics fab facility for strategic reasons at the earliest.
"The fast growing demand for electronic equipment such as computers, telecommunication, consumer electronics, home appliances, healthcare, and industrial sectors will drive original equipment manufacturers and multinationals to invest more in the components sector," he said.
Hence, India should be in a position to tap the huge potential contract electronic manufacturing provides in the domestic as well as international markets.
"Embedded technology is another emerging area where India can make a big impact as embedded chips enable to produce a variety of applications in consumer electronics, telecom devices, computers, mobile phones, automotive and other sectors with the country's software and design capabilities," Kumar stated.
A Nasscom-McKinsey study has estimated the market for embedded software to be $21 billion in the next couple of years. A combined effort to leverage the strengths of hardware and software will provide a winning strategy to the Indian electronic and IT industry.
According to Consortium of Electronic Industries in Karnataka Shobana Prakash, the hardware sector as well as the government need to undertake aggressive marketing strategy to project India as the real destination of EMS on the lines of what China has been doing to showcase as the world's largest manufacturing hub.
"Proactive policies by the government in support of EMS as a sunrise industry in the electronic sector with a strategic import-export mechanism will go a long way in projecting the country's potential in contract manufacturing," Prakash declared.
Solectron Centum Electronics managing director M V Appa Rao presented the success story of his Bangalore-based company in EMS to illustrate the potential and capabilities of the Indian manufacturing industry in cornering a pie of the global EMS market.
Though Centum began its modest operations in 1994 by manufacturing hybrid microcircuits to the domestic market, the quality of its products and low pricing attracted the attention of global players to undertake contract manufacturing from it increasingly.
C-MAC Industries of Canada was one of the first to outsource Centum's hybrid microcircuits for its customers in the US and Europe. US manufacturers followed suit due to the cost advantage, time-to-market delivery schedule, and superior quality.
"The win-win strategy made C-MAC enter India as our venture partner bringing in investment and latest technology as its revenues shot up to $3 billion in 2001 from $250 million in 1997. Its subsequent merger with Solectron made Centum a part of the global company," Rao disclosed.
Centum's recognition by the Kaizen Institute of Japan as world class electronic manufacturing services company made global OEMs to start sourcing frequency control product for their leading telecom customers such as Nortol, Marchoni, and Lucent.
"The design and quality of FCPs made in Bangalore were certified to be far superior to those made in the plants of Europe and the US," Rao claimed, adding that both the Centum products made C-MAC emerge as a low-cost but high quality producer.