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Friday, 30 June 2006 12:30

Contract manufacturing wave lashes Indian shores

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ImageIndia has been deluged by a wave of multinational Electronics Manufacturing Services (EMS) firms that are in the process of setting up or ramping up operations on the subcontinent.

Some of the activity currently taking place includes:

•    One of the world’s largest contract manufacturers, Singapore-based Flextronics, is shifting into top gear and expects to have its products out in September.

•    Jabil Circuit Inc. in January acquired Celetronix, India-based manufacturer of electronic products to get a stronger foothold in the Indian EMS market.

•    Elcoteq, the first EMS player to start operations in the country is set to act as a one-stop shop for world class product design.

•    Foxconn Electronics, one of the world’s largest EMS players is setting up shop in Chennai. The Taiwan-based firm generated revenues of $27.3 billion, up 62% from $16.8 billion the previous year.

This is just the beginning of the Electronics Manufacturing Services (EMS) wave that is hitting Indian shores.

Market research firm iSuppli Corporation predicts that the Indian EMS and Original Design Manufacturing (ODM) industry will grow 21% per year from $774 million in 2004 to $2 billion in 2009.

The above EMS companies, as well others like Solectron-Centum and Sanmina SCI, Celestica are either expanding or setting up base in India to build telecommunications and consumer electronic equipment for Original Equipment Manufacturers (OEMs) for the Indian market.

The size of the India telecom opportunity and the speed at which the sector is growing has ensured that almost all EMS players as well as global telecom equipment manufacturers are here to cash in on the gold rush.

Says Flextronics’ director of India operations, A Gururaj, “Today, it is the phenomenal growth of mobile subscribers, about 5 million a month, that is spurring manufacturing activity here. And, manufacturing handsets for local use makes a lot of business sense —by getting the manufacturing costs down, you can sustain this kind of a growth.”

Three months from now the first phase of Flextronics’ Chennai facility which will manufacture handsets, set-top boxes and base stations will be ready in September and in the second phase the company would look at the manufacture of computers and digital multimedia products.  “We plan to more than double our headcount to over 2500 people by this year end from the current  combined 1000 headcount in our  Bangalore and Pondicherry units. By the end of 2007, this will again be doubled,” adds Gururaj confidently.

Similar tempo is seen at Jabil Circuits, Elcoteq and others too.

Jabil wants to make Indian operations into a billion dollar project and has plans to invest over $ 100 million over the next few years. “ We have 5500 employees in India and we are confident that we will hire around 8-10,000 in the next couple of years,”  William Muir, President APAC, Jabil Circuits said. The company had recently acquired  Celetronix early this year to give it a stronger foothold in the Indian  EMS space.

Meanwhile Elcoteq was the first company to have set up a manufacturing facility  in Bangalore last year. “We believe that we have been a catalyst for the development of hardware manufacturing in India. Today, Elcoteq acts as a gateway for OEMs in all regions as we can partner with them to be a one-stop shop and meet all their service needs - from board and system assembly up to full turnkey supply chain and engineering services,” said Henry Gilchrist, APAC Director –Busines Development, Elcoteq Asia.

According to Gartner, the interest in setting up a manufacturing hub in India arises from two aspects – a burgeoning domestic market and a global sourcing facility. Moreover, local manufacturing would also help companies become cost-competitive, especially in a price-conscious market like India.

Today the Indian EMS vendors are  looking at the lucrative handset and base station market because almost all the handset vendors are manufacturing or readying to manufacture here -  Nokia, Motorola, Nortel, Ericsson, LG, Samsung and ITI-Alcatel as well as telecom equipment vendors like  Siemens, Lucent and  Huawei Technologies and ZTE of China.

"We're not talking millions any more when we talk about the India contract  manufacturing market. I believe the market would be in billions and that is a very attractive proposition for any EMS player,” said Raj Khare, who heads Broadcom India operations here.

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