India has never been seen as a manufacturing hub. The first RFID
tag manufacturing initiative in India by Gemini Traze, therefore, invited a
whole lot of skepticism even as it got a pat on its back for being the first in
India. While some industry experts qualify it as a brave move, detractors find
it nothing less than foolishness to try to make hay while the sun's not
shining.
According to Ravi Mathur, CEO, GS1 India, "Several vendors
have been looking at tag manufacturing in India, but we do not expect to see
many vendors setting it up in the near future.
In the midst of applauds and brick-bats, India's first tag
manufacturing initiative has, yet again, opened up the debate on India's
manufacturing prowess and raised a plethora of questions: Is there a business
case today to justify the significant investments required? To give an estimate,
a single equipment costs in the range of few hundred thousand dollars. And, tag
manufacturing is more of an automated process and not labor intensive, where
India can leverage.
A majority of RFID projects in the domestic market are in the pilot stage |
Any company setting up tag manufacturing in India, will be doing
to cater to domestic demand or the export market or both. But, setting up
manufacturing for the domestic market is not feasible at the current volume
levels. A majority of RFID projects in the domestic market are in the pilot
stage and the overall adoption is also not in the mainstream.
As a result, the demand volume of the tags in the domestic
market at present, does not justify the kind of investment required. According
to Bimal Sareen, CEO of Avaana and president, RFID Association of India, even if
one saves on the custom duty by manufacturing the tag domestically, the low
volumes will push up the price per tag, as the vendor doesn't enjoy the
economies of scale.
On the other hand, if the companies plan to target the export
market, then the demand for volume increases but the market also opens up to
fierce competition. In the export market, they have to compete with large
players, which already have the volumes for economies of scale, track record,
proven technology and product, which customers demand. It will take some time
for the vendor to stabilize its manufacturing in India, and build the expertise
Some experts feel that considering these market dynamics makes
business sense for any vendor to invest into tag manufacturing in India, only if
its able to procure long term purchase commitment from at least one to two
customers. Companies are considering tag manufacturing in India and looking at
some long term bulk deals to provide the necessary catalytic pressure. But, the
purchase commitments of that order usually come when backed by proven expertise.
All this, therefore, lands up the companies in a chicken and egg situation. Till
one finds a way out of this vicious circle, the tag manufacturing vision will
have to fall prey to the pitfalls.
Shipra Arora
shipraa@cybermedia.co.in