India needs to move beyond manufacturing to become product leader

The 'Local ke liye Vocal' call came after the Chinese aggression at the border forced the national leadership to look beyond the investment from the neighbouring country and scout for more global partners who can infuse top dollar in the Indian supply chain and product development ecosystem.

From consumer electronics to auto manufacturing, from IT and allied sector to mobile phones, India is now aiming to create a robust local ecosystem by developing the skill set and building the supply chain locally.

The landscape is gigantic and buoyed by the immense opportunity, non-Chinese giants like Apple and Samsung are planning to invest billions of dollars into the manufacturing economy.

Global mobile manufacturing giants Samsung, Foxconn and iPhone maker Pegatron have applied for the Centre's production-linked incentive (PLI) scheme for electronics worth Rs 11.5 lakh crore in the next five years.

Is this sudden shift seeking billions of dollars from the US and non-Chinese tech giants going to help us towards creating an indigenous ecosystem where desi companies can also flourish beyond creating design, helping in R&D and building world-class products?

According to Satya Gupta, Chairman, India Electronics and Semiconductor Association (IESA), the Indian landscape has always been quite diverse, and it is just a perception that everything is happening with respect to Chinese companies only.

"If you look in the past, Nokia and Ericsson had a large presence here. Samsung has now been there for a long time. If you look and segregate the companies other than three large cell phone companies, the rest are non-Chinese," Gupta told IANS.

He said that it is a right strategy for the country to continue to work with global partners.

"If you have to be self-reliant, it cannot be achieved through isolation," the IESA executive stressed.

The government now proposes to expand the scope of the PLI scheme to five or six more sectors, including air conditioners and TV sets, leather, chemicals, furniture, tyres and toys in a bid to boost manufacturing in the country.

The bigger question lies ahead: How do we convert our design capability to product leadership?

For this, just focusing on manufacturing will not be ideal.

"If we just keep on focusing on manufacturing, it will take us a long time to reach the product leadership. We have to work on our strength rather than just following the model which worked for China," said Gupta, adding that China came with the strength of manufacturing and we are coming with the strength of the design.

According to Pankaj Mohindroo, Chairman, the India Cellular & Electronics Association (ICEA), the investments to expand capacity to achieve the numbers committed in PLI and beyond will be made not only by companies such as Foxconn, Wistron, Pegatron, Samsung and Indian ones like Lava, Micromax, Dixon but also from Chinese firms like OPPO, Vivo and Xiaomi etc.

"The capacity and scale bring competitiveness and competencies and this will expand the sector many times and will develop the entire ecosystem. Design, R&D, capital goods assembly will flourish," Mohindroo told IANS.

The PLI scheme will bring additional investment in electronics manufacturing to the tune of Rs 11,000 crore.

The total cost of the scheme is expected to be Rs 40,995 crore which includes an incentive outlay of approximately Rs 40,951 crore and administrative expenses to the tune of Rs 44 crore.

According to Mohindroo, 'Local ke liye Vocal' does not mean only Indian-owned companies but is a broader term for manufacturing, design and from companies of all nationalities.

"A special window for sub-$200 phones to create Indian 'champion' companies, their revival and vigorous growth has been the key objective. The aim will be to create global-scale companies that originated from India to capture a substantial portion of the entry-level phones market globally," he stressed.

The battle is to provide the right support to indigenous companies so that while competing with global companies, we can still make our local companies competitive and world-class.

"We need to put as much focus on product development as much as manufacturing for long-term self-reliance," Gupta said.

In terms of finance, investment is very weak in the product ecosystem.

Investment from the private venture capitalists will take some time to reach this area.

"This is the reason we are asking for a $500 million fund for electronics products and $500 million for the fabless product to provide the seed funding for deserving companies in this space and build solid leadership for India," Gupta informed.

Overall, it is very important to take a pole position in key vertical areas in terms of the product function.

For that, India needs to help its product ecosystem with seed funding to grow..