For Whom The BEL Tolls

Bangalore-based Bharat Electronics Ltd (BEL), which recently signed a contract with National Semiconductor Corporation for the manufacture of Cyrix motherboards, has finished the pilot project of manufacturing and distributing the first 1,000 chip-mounted motherboards at its facility in the city. With a good number of takers for these pre-assembled motherboards, such as Zenith, Vintron and HCL, and the launch of the sub-Rs 35,000 multimedia PCs during the middle of this year based on these Cyrix motherboards, National is finally making headway in the hitherto Intel-dominated entry-level PC market.

"We have the capacity for surface mount mass manufacturing applications. Having been in the solutions, systems and software area, we also wanted to complete the IT cycle by getting into

the hardware segment. It was only ideal that we joined hands with National, which was scouting for a partner in India," explains Wing Commander

R Soundararajan, General Manager, Manufacturing and Marketing, BEL. Today, the ISO-certified specialized ball grid array assembly manufacturing facility has the capacity to produce about 3,000 motherboards per month and plans to shore it up to 7,500 units.

This is in line with National's vision of capturing 50% of the entry-level multimedia PC market, thanks to the low cost of the chip and the lower cost of manufacture of motherboards, which will eventually be passed on to the end-users. And in the process make the dream of a Rs20,000 multimedia PC a reality in India before the year 2000. To bring down the price of PCs, National had earlier unveiled the concept of 'PC-on-a-chip,' which integrates graphics, audio, memory control and PCI interface right onto the CPU (central processing unit). The company is also bullish on the next initiative, 'system-on-a-chip', which integrates all these different components into one and targets other electronic appliances that are used in households.

National's strategy has been to treat BEL as an OEM account and let it manufacture and market the motherboards through its 30 channel partners in the country. It will supply about 60-70% bill of material to BEL extended at the highest slab rate to make BEL competitive even in the presence of similar players in Hong Kong or Taiwan. The strategic alliance will also help BEL access the design center and new roadmaps of products at National's Taiwan facility. BEL is targeting a total of 10,000 units by March next year and plans to triple this number in fiscal 1999-2000, thereby bringing in revenues of Rs18 crore.

Sanjeev Keskar, Country Manager (India), National, claims a big cost difference between a Cyrix low-end chip and an Intel one, which he says will help the company capture the ambitious 50% target and achieve cost savings at BEL's plant. While a motherboard loaded with an Intel Celeron processor costs approximately $202 (Rs8,600), an equivalent motherboard with Cyrix MediaGX 200 costs less than half the cost at about $90 (Rs3,780). The import duty on the Intel chip would make this difference even sharper. The pre-assembled motherboard will thus save PC manufacturers time, effort and cost which they otherwise would be spending in assembling the motherboard themselves.

Local benefits





However, as of today, the price of the fully imported motherboard and the made-in-India motherboard at BEL is almost the same, explains KR Jayaprakash, GM (Technical) at Vel Computers. But he still accepts that a BEL-manufactured motherboard will be of advantage to PC manufacturers in India with local warranty and post-warranty support. Soundararajan adds that in addition to the cost advantage, the Indian PC manufacturers will have the benefit of trading in Indian rupee, enjoy support service within the country and plan the inventory better. Also, it is too premature at this point of time to talk of actual cost benefits as, with increase in production, the per-motherboard cost is bound to fall further.

Initial skepticism notwithstanding, Cyrix has gained acceptance in the chip market, with key OEMs already wooing the first-time-user market with the low-priced PCs. "The accent is on taking away the lower end of the PC market," says Sanjeev. It is to be noted that the home segment is growing at 50% every year, with a total estimated market size of 3,75,000 units expected to be sold by February 2000. National is also targeting the PC makers of Indian brands and the unorganized segment for these motherboards, which together constitute 70% of the total PC market.

National is also talking to OEMs such as Compaq and Wipro for the pre-assembled motherboards from BEL. In addition, BEL plans to export the motherboards to neighboring countries next year to leverage on its low cost of manufacture. But for the moment, to the Indian user the dream of a sub-Rs20,000 multimedia PC should look less of a dream.

AKILA S,





in Bangalore.

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