Donning the Manufacturing Gear

India as
a hardware manufacturing hub-that is being pushed as the next opportunity for
India. But where Taiwan and China have ruled the roost for decades, can India
make a killing?

India is not new to
hardware and electronics manufacturing. Continental Devices has been making
semiconductor devices since 1964. TVS Electronics has been making IT peripherals
since 1986.

D-Link has three plants in Goa to manufacture its communication network
products. HCL Infosystems has been manufacturing PCs for a long time now.
Finnish company, Elcoteq, which specializes in mobile phones and communications
network equipment, has a facility in Bangalore. 

China's hardware
sector, counted among the strongest in the world, took 20 years to shape up.
High-tech companies which had their headquarters elsewhere in Asia chose to move
to China because labor was cheap, and investment conditions extremely conducive.
The Chinese worked rapidly on their infrastructure and showcased themselves as
the right place to invest in.

India is now attracting
some interest, and investment. The one deal that is on everyone's mind is the
MoU signed between the Andhra Pradesh government and SemIndia to set up a $3 bn
Fab city on the outskirts of Hyderabad. European company Tagsys and TCS will
work together to set up a manufacturing unit in Chennai, that will make RFID
chips and tags. According to PTI, Communications and IT Minister Dayanidhi Maran
has stated that Siemens is interested in setting up a plant to manufacture
telecom networking equipment. He also said that Alcatel, AMD, Ericsson, Cisco,
Flextronics, Microsoft, Motorola, Nokia, LG and Samsung have expressed interest
in setting up manufacturing facilities. How many of these will come
through-that is the question that is on top of everyone's mind? And how
quickly?

So what holds up the
progress? Wading through procedures, finding ways around the bureaucracy,
corruption, and labor regulations can be quite mind-boggling. Add to that our
maze of states and the work involved in understanding their procedures and
taxation systems. All these bring up costs that are not immediately visible.
When more lucrative destinations are available, why look at India?
Infrastructure remains a huge issue. Power availability and cost, and water
facilities are areas of prime concern. Transport networks and weak port systems
also are deterrents. To put it simply-we have not done enough to attract
investment.

All this and more would
be overcome if there was a huge market that could be served from India-either
domestic or international-in a cost effective manner. Show companies a market
and they will overcome all hurdles to grab it. The domestic market size has not
been exciting enough.

India, no doubt is a
growing market with plenty of potential. But for manufacturing to really make it
big, the strategy has to be export-led. India became an IT services major with
its exports, not because of its domestic market. So did China and Taiwan, with
hardware manufacturing. A MAIT study says that by 2010, Indian hardware exports
can cross $25 bn and contract manufacturing can be an opportunity worth $11 bn,
which will account for an Indian share of 2.2% of the global electronics
contract manufacturing market of $500 bn.

The opportunity is there. Are we? Not yet. Sadly, that has
remained the answer for quite some time now.