Challenges of Setting Up Manufacturing in India
By Amarpreet Singh
Amarpreet Singh
Contract manufacturing in India is growing at a rapid pace, much faster than we have seen in the last 30 years. There is a lot of global interest in moving manufacturing away from China, due to various political reasons and as part of overall supply chain risk mitigation plans.
The size of Indian EMS industry was USD 20 Billion in CY2021, and the projected revenue from EMS companies in India is going to be USD 80 Billion by CY2026.
Apple is one of the more visible OEMs investing in India through its contract manufacturing partners like Wistron, Foxconn and Pegatron and TATA. Several other mobile phone manufacturing companies have set up their factories in India and the numbers keep growing every day.
As contract manufacturing in India continues to expand rapidly, it is not surprising that the industry faces challenges during this rapid growth. The challenges that are most often spoken about pertain to infrastructure, political considerations, ease of doing business, and so forth. However, I want to draw attention to the more cultural challenges that international businesses face here in India, while executing projects.
Some of these challenges can be summarized:
- Commitment – One of the more common complaints or comments by global companies about their Indian suppliers is that the Indian suppliers do not respect their commitments and it is considered OK for the Indian companies to miss the committed deadlines. This comment is quite true about organisations that do not have much exposure dealing with their global counterparts. There is no obvious answer to these complaints, but a local representative who is based out of India can help to drive the commitments with the Indian suppliers on the ground.
- Not Saying No – Saying NO is considered a bad response by most of Indian companies. Indian suppliers will commit to unreasonable/challenging specifications and then struggle to deliver rather than negotiating the right specification at the start of the project. Global companies can manage these scenarios by getting into the details of the project during early negotiations and having real time updates about the progress of the projects rather than getting surprised at the end. The other option for global companies is to have an Indian procurement office or engage with an independent consultant who will work with the supplier closely to ensure the goods are delivered as per the challenging specifications. A certain set of audits, inspections during the process helps to deliver what is required.
- Project Management – As the manufacturing industry is growing and the supplier eco-system is getting developed in India, there is still a lack of professional communication and project management at mid or small scale EMS companies in India. Global customers must plan to do considerable more follow-up for quote, material updates, deliveries etc, which actually increases the effort and cost of doing business with India companies.
- Scalability – The overall manufacturing ecosystem in India doesn’t support fast ramp up considering the maturity of the manufacturing organisation and the supplier eco-system. High precision tooling projects are still getting done in China, Malaysia or Singapore and those kind of arrangements makes fast ramp ups challenging in India. Global EMS Companies don’t face these challenges as they have either their supply chain in India or have established global suppliers to cater their to requirements.
- Operations Maturity – Overall operations maturity is not very visible in Indian EMS companies, especially if these organisations are not exposed to global EMS standards or practices. These organisations needs to put in specific and focused programs for building operations maturity to build world class operations. European companies make use of ISO procedures very effectively; however these ISO systems are not well adopted by EMS businesses in India beyond certifications.
Yes, there are challenges. But these are not insurmountable and they will improve as the industry matures and by the global EMS companies setting standards as they move their projects to India. On the other side, moving the business to India enables important opportunities:
- Access to Market – Considering the population of India, having manufacturing in country provides access to a big market for the global players selling their products in India. Global players can design their products globally and get these manufactured in India for the Indian as well as global markets.
- Manpower Availability – There is enough manpower available for filling manufacturing jobs in India and at a very competitive price compared to China and other Asian countries. That cost and availability of manpower makes India a very attractive destination for global players to outsource the manufacturing of electronic assemblies to India.
- Low Language Barrier – English is spoken widely across India and that makes it easy for the overseas customers to interact with Indian companies. The English speaking ability of Indian companies, also opens up outsourcing of white collar jobs which can be done remotely. A lot of US & European companies have set up India back-end operations taking advantages of cost and availability of skilled manpower in India.
Overall EMS manufacturing in India is on exponential growth path is on track to become an $80Billion USD Industry by CY2026. This provides a lot of opportunities for global OEMs to move their manufacturing to Indian EMS companies.
About Amarpreet Singh
Amarpreet Singh is an Indian EMS Industry professional with 28+ years of experience working with various industries in India, Malaysia and China. Amarpreet runs his own consulting company supporting growth of Indian EMS manufacturing eco-system. www.singhamarpreet.com
