IBEF Design India

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I B E Fndia rand quity oundationwww.ibef.org

INDIAFASTEST GROWING

FREE MARKET DEMOCRACY

Made and Designed in India

MANUFACTURING


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M A N U F A C T U R I N G

MADE AND DESIGNED IN INDIA

A US $ 700 Indian motorcycle has more electronic applications than

even high-end bikes in the developed world. The number of tasks that

electronics in a 100-150 cc bike manage is much higher than an advanced

1000-1500 bike in the USUnimaginable even ten years ago but ever so

believable today.

For those who reckoned that India had missed the manufacturing bus in

the 1990s heres news from the 2000s: India has boarded this time.

The importance of localisation and customisationThe importance of localisation and customisationThe importance of localisation and customisationThe importance of localisation and customisationThe importance of localisation and customisation

Localisation and customisation has played a huge part in the evolution ofmanufacturing in India. India has an existing advantage in custom-based

manufacturing and assembly products like transformers and industrial

equipment actuators. This is not just because of Indias design and

engineering skills, but also because most custom-based products have a

higher proportion of non-electronic components.

Localisation is another source of competitive advantage. For

transformers, critical components like bath oil, electric-grade steel,

insulation paper, copper coils and circulation fins are all developed or

manufactured locally. In Indias 6 million plus colour television marketwhich is dominated by Koreans Samsung and LG, Japanese majors Sony

and National, and European major Philips, most components are locally

made.

PCB chips are imported but locally assembled; picture tubes are locally

made as are tuners, enclosures and speakers. Even for a sophisticated

product like an x-ray system, the films, monitors, x-ray tubes and tables

are locally made.

The Indian engineering eco-system has helped homegrown Indian

companies make a mark on the global stage. For example, Delhi-basedoptical disc maker Moser Baer from US $ 22 million to over US $ 335

million in just six years from 1998 to 2004. Moser Baer is now the third-

largest player in the world in optical disc manufacture with a global share

of 11 per cent. It manufactures for 10 out of 12 leading OEMs, and

launched its own brand in 2003.

Companies such as Moser Baer, Celetronix and Samtel have proved that

there is sufficient opportunity for Indian companies within custom based

and non electronic segments. Samtel retains a leadership position in the

domestic as well as export markets. Moser Baer, besides expanding

capacity, is continuously innovating new designs. It has made acquisitionsoutside India for market as well as technology access. Celetronix designs

and manufactures power assemblies and most of these assemblies are for

India has an existingadvantage in custom-based manufacturingand assembly productslike transformers andindustrial equipmentactuators.


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next generation products. The assembly business has been built on

design capabilities, and has attracted multiple manufacturing orders from

leading OEMs in Europe.

Consulting firm, McKinsey, which recently conducted a study on leading

Fortune 100 players, has confirmed that their Indian operations are

already reaching if not exceeding global cost and productivity

benchmarks.

Many products have been found to be 30-40 per cent cheaper in India

than in the US or Europe, the Mckinsey study, which assesses Indias

manufacturing competitiveness, points out.

This cost and quality advantage is helping India emerge as a low cost

sourcing hub for multinationals across the board.

Swedish giant ABB makes circuit breakers at its Indian plant. McKinsey

indexed cost of manufacturing at this plant to Europe and found the

voltage switching devices to be 33 per cent cheaper, and components 41

per cent cheaper.

ABB has now decided to develop India as a low cost sourcing and

manufacturing hub for several products, including circuit breakers andmagnetic actuators. ABBs India facility in fact was the first to

manufacture certain outdoor circuit breakersall with local Indian

talent. Not only was ABB able to achieve over 50 per cent cost savings,

it managed to reduce the delivery period to two weeks from four, thus

gain a compelling advantage.

ABB isnt the only one buying into the Indian manufacturing story.

Tata Honeywell has been able to redesign multiple

automation products for India and sell them in similarmarkets worldwide. Specific examples include automation

controllers for air conditioning of cell sites, which were

customized for the Indian climate. The change reduced

costs by 20 per cent and created latent demand in the

domestic as well as select international markets.

Tecumseh, the worlds leading manufacturer of

compressors, manufactures and exports compressors out

of India. It exported US $ 20 million worth of

compressors in 2003, and is the third largest branded

players in the domestic market. The Indian manufacturing

facilities of Tecumseh in Delhi (1.5 million units a year)

and Hyderabad (600,000 units per year) are the only ones

Swedish giant ABBmakes circuit breakersat its Indian plant.McKinsey indexed costof manufacturing at thisplant to Europe andfound the voltage

switching devices to be33 per cent cheaper,and components 41 percent cheaper.



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in Asia.

Siemens sources many power transmission and

distribution equipment components (mainly castings and

forgings) from India. These have typically resulted in 25-30

per cent savings over European and US costs.

Indias manufacturing advantageis essentially skill-based sectors and

emanates from four areas.

Process engineering:Process engineering:Process engineering:Process engineering:Process engineering: Indian process engineering skills have enabled higher

asset utilization at Siemens, whose India plant maintains an uptime for

capital machines that is 40 per cent higher than that of Siemens plants in

Germany.

Product engineering:Product engineering:Product engineering:Product engineering:Product engineering: Product engineering abilities have led to strong

competitiveness in refurbishment. Siemens India has redesigned medium

and high voltage switches in power equipment for India. Tata Honeywell

has developed a temperature controller custom-built for Indian mall size

climate. These products can now be easily exported to countrys in Asia

and Africa with similar climatic conditions.

Quality manufacturing:Quality manufacturing:Quality manufacturing:Quality manufacturing:Quality manufacturing: Another engineering strength in India is the ability

to perform high-quality manufacturing. For instance, the specialized skills

of operators in India make it possible for a GE-Bharat Electronics joint

venture to make fairly complex sub-assemblies like x-ray tubes.

The quality of manpower, in fact is a key source of competitive

advantage. We have not had to hire a single blue collar worker in the

last 12 years; all our workers are skilled, says Baba Kalyani of Bharat

Forge, a component manufacturer whose exports now account for more

than 50 per cent of revenues.

Capital engineering:Capital engineering:Capital engineering:Capital engineering:Capital engineering: India has high capital engineering skills. A highly

evolved tooling and machining industry has enabled indigenization of

capital equipment. McKinsey estimates that plant set up costs are typically

20 per cent lower than those in other low cost countries, and in some

facilities it is up to 35 per cent cheaper.

Design engineering:Design engineering:Design engineering:Design engineering:Design engineering: Mechanical control valveswhich are a key actuator

in industrial systemsare manufactured by in only three locations

worldwide. The first location is the US, and the other two are in Malaysia

and India. The McKinsey study has indexed cost of production to the US,

and India emerges with a cost of 70 units, five less than Malaysia. In termsof raw material, machining and manufacturing, India and Malaysian costs

run neck and neck. Where India scores is design, with a six per cent cost

India has high capitalengineering skills. Ahighly evolved toolingand machining industryhas enabledindigenization of capitalequipment.



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advantage. This makes Indian-produced mechanical control valves the

cheapest in the world.

Quite clearly, the countrys mechanical and eletro-mechanical

manufacturing base has improved dramatically with the evolution of its

tooling and machining industry. This, combined with the easy availability

of key raw materials such as steel, polycarbonate, plastics, aluminium and

acrylic has given India a non-electronics ecosystem that is difficult to

matchand is creating competitive advantages not just in bikes and cars

but also sub and final assemblies such as transformers, televisions and x-

ray equipment. If mass-manufacturing is Chinas pocket borough, design-based manufacturing could soon be Indias.

Chart: Manufacturing business models that are working in IndiaChart: Manufacturing business models that are working in IndiaChart: Manufacturing business models that are working in IndiaChart: Manufacturing business models that are working in IndiaChart: Manufacturing business models that are working in India

Indias mechanical andeletro-mechanicalmanufacturing base hasimproved dramaticallywith the evolution of itstooling and machiningindustry.

Value

proposition

Key success

factors

Examples

ManufactureManufactureManufactureManufactureManufacture

Lowest cost producer

for existing design

Low cost operations

Ability to manage

O EM relationships

World classmanufacturing

practices

High quality standards

Siemens and ABB

source power

transmission and

distribution

components

Design &Design &Design &Design &Design &

manufacturemanufacturemanufacturemanufacturemanufacture

Ability to convert

specification into

design or help design

better products for

OEM

Design capabilit ies

Ability to manage

OEM relationships

Lean and efficientsupply chain Ability

to manage global

organization

Celetronix designs

and manufactures

power assemblies for

leading computer

hardware OEMs

Design, manufactureDesign, manufactureDesign, manufactureDesign, manufactureDesign, manufacture

and brandand brandand brandand brandand brand

Deep understanding

of end-customer

needs; ability to

design tailored

proeucts and

manufacture at

required cost on

consistent basis

Research and design

skills Marketing skills

High customer

responsivenessAbility to manage

global organization

Short time-to-

market

Moser Baer (worlds

lowest cost optical

disc maker) has

recently started

promoting ownbrand globally



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The

the Ministry of Commerce, Government of India and

the Confederation of Indian Industry.

India Brand Equity Foundation is a public - private partnership

between

The Foundation's primary objective

is to build positive economic perceptions of India globally.

I B E Fndia rand quity oundationc/o Confederation of Indian Industry249-F Sector 18Udyog Vihar Phase IVGurgaon 122015 Haryana

INDIA

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