To bolster the Indian printed circuit board (PCB) manufacturing ecosystem, increased PCB assembly needs to be done within the country. To encourage this, the government must look at giving MSMEs some special incentives, as they continue to face challenges while setting up a manufacturing unit in the country. One success story in the PCBA field is SGS Tekniks, a company that has achieved 25 per cent year-on-year growth for the past five years. Sanjiv Narayan, chairman, SGS Tekniks, says the company can grow even faster if the government comes forward with more favourable and steady policies.
By Baishakhi Dutta
The PCB is the backbone of key electronic products such as PCs, tablets, phones, smartphones, etc. Due to the government’s Make in India initiative, the PCB market in India is reaching new heights, primarily driven by consumer electronics and IoT (Internet of Things). Besides these two sectors, strategic electronics, automotive electronics, telecommunications and industrial electronics are also driving this market.
“PCB assemblies should be made in India, even if it means using 100 per cent imported components. This will create local employment and value. India will become a sourcing place for the world. The perception that everything is coming from China needs to be changed. PCB assembly can be the turning point for Make in India. If a product assembly process employs 100 people, a PCB assembly will employ 1000 while component manufacturing will employ up to 10,000 people. The value is added gradually in the manufacturing chain. Getting the PCB assemblies done here in India is very important,” says Sanjiv Narayan, chairman, SGS Tekniks.
India imports PCBAs mainly from countries like Taiwan, China, Hong Kong, USA and Korea. The prices of these imported assemblies are on par with domestic prices with a difference of just about 5-8 per cent. At present, India also exports 24 per cent of its PCB production to Germany, USA, Malaysia, Belgium, Austria, Netherlands, Spain and UK. India is exporting single-sided, double-sided and multi-layer PCB boards to these countries.
“Local PCB assembly typically happens when there is a 10 per cent differential in prices between locally made assemblies and imports. This happened in the case of mobile phones. It happened with set-top boxes also. PCB assembly started off when there was a price differential, and the moment that ceased to exist, PCB assembly for set-top boxes stopped in India. At present no one is doing such assemblies in India. We must assemble PCBs in India. This message has to go out loud and clear to the Indian manufacturing industry,” Narayan says.
Latest trends in manufacturing
The field of PCB manufacturing is constantly evolving. Technology is improving, new innovations are being made, and better manufacturing methods are being developed.
“Most of the players are fully geared and capable of setting up PCB assembly in India. They may have two or four lines. But there must be a reason for people to produce here. There must be a non-tariff barrier. Without that, domestic manufacturing won’t happen,” Narayan says.
Commenting on set-box manufacturing in India, Narayan adds, “Malaysia, Thailand and Vietnam are countries that have a FTA (Free Trade Agreement) and their products are coming to India under zero duty. This has to be reversed. Only then can domestic manufacturing happen in India.”
Industry trends in PCB design technologies
“When it comes to the fabrication of the PCB board, I think what we don’t have is adequate capacity, currently. We had it earlier but, at present, the companies have all closed down. Now, new companies need to make investments in this field. There are companies that have shown the capability to do so,” says Narayan.
Talking about SGS Teknik’s manufacturing unit, Narayan informs, “In our unit, we have six lines at present. But we have already got provision for three more lines at our Infocity, Gurugram plant and two lines for our Bengaluru plant. We are ready with the complete infrastructure. Now, we just need to bring in the machinery and start running the lines. Keeping in mind the commitments that we have made, we will open the next three lines by 2018-2019. Hopefully, one line will be opened by this year end. Eighty per cent of the investments are in the SMT area, and we are investing around ₹ 200 million for this project. As of now, automotive and lighting are the two areas that are growing very well. We will be growing in the railway and defence sectors too by the year 2018-19.”
The evolution of the PCBA market
According to Narayan, there are almost 800 SMT lines in India at present. “People have identified their niche areas and are working on these. Everyone has the capability, they just need to implement it,” believes Narayan.
Talking about SGS Tekniks, Narayan adds, “The PCB assembly process has already started in India, for sure. We have been growing at 25 per cent YoY for the last five years. This 25 per cent can very well be 250 per cent, but for that we need to be very sure of a really steady policy. Otherwise, to invest in a potential 10-fold increase in capacity would be a huge risk.”
“There are a lot of consumer electronics and IT companies being set up at Hyderabad, Telangana, which means that there is a market for PCBAs. There should be some government assurance so that companies can start investing in PCB assembly in India. Even if companies don’t want to make investments, they can start tying up with EMS companies,” says Narayan.
Moving forward
Domestic manufacturing are the two magic words for India to evolve into a rich economy, built around the PCB business. Manufacturing and assembling within the country is the only way forward. Narayan explains, “If we want to do true manufacturing, PCBs have to be assembled here in India. Once we start manufacturing, India will become a sourcing hub and will be known as a big market for component manufacturers. Once that step is taken, you will have those component manufacturers looking for business in India. So success depends on how clear our policy structure is and how we can build up our business, based on those policies.”
Many Indian companies are already moving to strengthen the industry. “The mobile phones sector has already done very well. The production of PCBAs for mobile manufacturing can do well too. The television sector has also improved to a great extent. Defence electronics products are being made in India, which are not covered under ITA-1. We should immediately stop permitting the import of such products. Products that are needed in low volumes will open up opportunities for the MSMEs,” adds Narayan.
The government’s role
The government can play a pivotal role in turning the tide. Industry players are looking to the administration for higher levels of assistance. “A lot of home grown companies are competing globally, and have the capability and technology to produce the best. The first thing that the government should do is to promote PCB assembly in India by imposing at least a 10 per cent customs duty on non ITA-1 products, and ensure all the ITA-1 item manufacturers get incentives. Locally made products should get certain preferences. Policies should not waver and the industry should not have to always face questions like, ‘Are you ready?’ when it is clear that we are,” says Narayan.
Simplicity and transparency of policies are both of utmost importance as far as the growth of the country’s industry is concerned. MSMEs are major revenue drivers in the Indian electronics ecosystem and deserve more administrative assistance than what is presently available. Narayan opines, “Stable policies are of utmost importance at present. Large MNCs enter a country fast, but also wind up and leave fast. For sustainable growth down the line, it is the MSMEs that will be the leading players and need to be encouraged. Unfortunately, currently, MSMEs are nowhere on the government’s radar and no support activity seems to have been planned for them.”
Narayan adds, “All the duty concessions and land advantages are going to the big players who are being welcomed by rolling out red carpets but an MSME trying to set up a unit in India faces tremendous challenges. A small electronics MSME would require a minimum of one acre of land to accommodate four to six SMT lines and other necessary infrastructure. Nowhere are plots available for MSMEs at a competitive rate. One must spend ₹ 100 -150 million for the land, and then on the building of the factory and the machinery. For a first-generation entrepreneur looking at even basic assemblies, this is very challenging.”
“The government needs to focus on MSMEs, which it has not been doing at all till date. It needs to understand that the backbone of the Indian economy is the MSMEs, for they don’t wind up easily and, most importantly, they create the maximum number of jobs as well as value addition. The stressed balance sheets of the banks today are all because of the big players and not because of the MSMEs. This realisation needs to kick in now,” concludes Narayan.
