Nitin Kunkolienker, President, Manufacturers’ Association of Information Technology (MAIT), explains how combining scale with a design-centric approach can open up many opportunities for India in electronics manufacturing
To reduce imports and make India a manufacturing powerhouse in electronics and information and communications technology (ICT) products, the Government of India has floated the Production Linked Incentive (PLI) scheme. After the India-China border conflict last year, many Indian electronic goods manufacturers have raised the issue of delay in supply of components and parts from China, which have hurt their businesses. According to Nitin Kunkolienker, President, MAIT (Manufacturers’ Association for Information Technology), which is the apex body representing India’s electronics and ICT sector, putting hurdles in raw material sourcing by China presents a chance for India to create an alternate supply chain network.
Nitin says, “We have been pursuing the Union Government with our demands and largely, the government has been responsive to our considerations. Earlier, the government was giving duty protection schemes like higher tariff, duty arbitrage, etc. However, this government came out with a radically different approach with Production Linked Incentive (PLI) scheme for mobile industry (for which MAIT has worked closely with the government). PLI is the first scheme that talks about scale and exports led growth.”
When this policy was about to be launched, Covid 19 struck, which led to a demand for smart phones and gadgets, given that education and corporations moved online and the healthcare sector felt the need for sophisticated IT devices. This caused a disruption in the supply chain. When the industry resumed plant operations after the first nationwide lockdown, the India-China border issue erupted, which again affected the supply chain severely. While demand was picking up, the issue of supply still posed a problem. At present, the industry is working towards making business processes smooth. The government has also extended the PLI schemes to other segments in electronics (telecom products, networking devices, medical electronics, IT hardware, etc) and other sectors. “Our endeavour this year would be to make these schemes successful and prove to the world that India can be a good destination for producing electronic goods. India has the potential to become a manufacturing hub in the next five years,” Nitin adds. An excerpt of an interview with Nitin Kunkolienker.
Why is creating an electronic hardware design ecosystem important for India?
One needs to understand that with the advent of Industry 4.0, there is hardly any scope in assembly led growth. India can become an economic powerhouse, if the manufacturing sector grows. The electronic industry has the potential to propel growth of the manufacturing sector manifold because of its multiplier effect on other sectors and the economy. The import of electronics is now second in the import basket, after oil. If the trend continues, electronics can surpass oil imports in the future. We have been lobbying with the Union Government to have a robust Electronics System Design and Manufacturing (ESDM) sector. India has to play a volume game for giving a push to ESDM sector and that will only happen by export-led growth. For exports to increase, India also needs a strong logistics infrastructure, which includes shipping line, ports, port connectivity with manufacturing hubs in the country, etc. We are not a strong player as of now. If we want to make our exports competitive, then design-led manufacturing can give India a good name in the global electronic market. Lots of emerging technologies and products need a design ecosystem. India has the potential as we have IT-centric brains that have helped the country to become a global software hub. We must capitalize on electronic hardware design and I am happy to say that some of the top multi-nationals have started taking interest in creating a design ecosystem in the country. For example, one of the leading global majors is talking about starting 1000 IT hardware startups in India. Hardware ecosystem is in the nascent stage. PLI scheme can add scale to hardware manufacturing; and if you club it with a design-centric approach; it will give us plenty of opportunities for manufacturing electronic for those products start moving from other regions to India or new supplier base starts building in the country, it will give a big boost to the electronic hardware ecosystem. If this happens, then India can be a global leader in designing electronic components, PCBs, semiconductor chips, etc. Existing local demand, coupled with exports, can change the prospects of some of the sectors. The PLI scheme has come out at an appropriate time. It will create a good demand for electronic hardware ecosystem and many more players will come and support with enough funds being available. The future for electronic engineers in the country looks very bright.
How can we develop an ecosystem for electronic component manufacturing?
From 2000 to 2012, India went for an inverted duty regime, which affected the growth of manufacturing sector. This encouraged imports of finished products instead of manufacturing them in the country, thus affecting the component supplier base in India. We moved regressively away from component production, while other players like Taiwan took advantage of the situation by adopting progressive policies and took a good lead in component manufacturing. To succeed in the component game, we need economies of scale and the PLI scheme is offering this. Two things are in our advantage today – first, the changed global trade order and the PLI scheme. The pandemic has made big companies realise the need to have an alternative supply source to China. As they adopt a plus one strategy for China, India – along with other countries – stand to gain, as these companies would also like their supplies to move to a new destination. This presents an opportunity for Indian component suppliers to tie-up with big companies to fulfill their needs. PLI is a demand aggregation policy – it will help you to consolidate demand. It will work wonders, if there is a right collaboration between the Centre and the States. The government should also push for ‘Source from India’ policy. We have been requesting the government to have component hubs in the country, which can increase manufacturing efficiency.
A global shortage of chips is affecting the production of electronic devices and parts. How is India coping with the situation?
There are three reasons for the shortage: 1) rising global chip demand; 2) disruption in supply chain due to the pandemic; and 3) a changed political order. When India came out with the PLI, one could see that China was not supplying components with ease and Indian manufacturers were facing difficulties in procuring components. China’s policy has been to encourage finished goods exports and control the component supply chain. In the past, India’s duty arbitrage policy encouraged companies to import semi knocked down/completely knocked down (CKD/SKD) units, which benefited China. Now, the Government of India is more alert to the situation. This has not gone down well with China, thus creating hurdles in component supply for manufacturers in India. The time has come for Indians to look beyond China and tie up with suppliers from other countries.
Is rising material prices a cause of concern? Has MAIT raised this with the government?
Lot of contracts were signed based on the raw material prices prevailing at the time of getting the order. Shortage, coupled with rising prices, was a major concern and, some believe it is being done deliberately from the supply chain side. A couple of months back the Ministry of Commerce, Government of India, had raised this issue with China. If China is putting hurdles in raw material sourcing, then it is a big opportunity for India to create an alternate supply chain network.
What are the emerging trends that the world will witness, in the aftermath of the pandemic?
Post the pandemic, there will be a new global order. Healthcare, biomedical and education will have a major impact on the electronics market. Automobiles, along with emerging electric vehicles, will be in big demand. Storage power and renewable sector is another area, which will see a rise in usage of electronics. All sectors are undergoing drastic changes, generating big demands and ICT will be the game changer for India.
What is the outlook for the ICT and the electronics hardware industry in India?
If the hardware design ecosystem catches up, India can lead the world in electronics very soon. We must aim to become a global leader as far emerging electronic products are concerned. I think that is where India is heading to and the world is looking at India. We need to ensure that our academic system is tuned to develop this industry. Research oriented education in electronics should be the focus in universities.
Disclaimer & Courtesy: This interview was conducted on 4th August 2021 by Rakesh Rao for IPFonline.com
