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A subdued SMT equipment market may look up in 2012

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The year 2011 was not as exciting for the Indian SMT industry, as was expected. The volatility in the financial markets, the European crisis, the still recovering economy of the US, the weakening rupee, high domestic interest rates, and the strengthening Japanese Yen added to the woes of the domestic electronics manufacturing sector. In turn, these economic problems had a profound impact on the SMT equipment market as well.

By N Chandramohan, country head (SMT division), Juki India Pvt Ltd

Tuesday, March 20, 2013: No large projects went on stream last year—the only saving grace were the lighting and metering industries, which grew steadily. The industry most affected was consumer electronics, which normally sustains and drives the growth of electronics manufacturing. The growth in the automotive sector was also affected due to rising fuel prices and the high cost of borrowing.

As the fate of the SMT equipment market is closely intertwined with the electronics manufacturing industry, it directly influenced the sale of SMT equipment, narrowing down its growth rate. In 2011, the SMT equipment market in India grew by 20 per cent. This growth was mainly driven by sectors like telecom, lighting and consumer electronics.

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Flexibility, therefore, became the key mantra for survival, with SMT players now supplying flexible machines that enabled electronics assemblers to reduce their manufacturing costs through the optimum use of installed capacity. SMT equipment players also resorted to providing value-added services, and introducing innovative products to meet the changing needs of electronics manufacturers.

Players hopeful about 2012

The forecast for 2012 does not augur too well at this point of time. With regard to the Budget, one expects another year of populist measures. However, if the draft National Manufacturing Policy is implemented, there may be the hope of some large projects coming up in 2012. Though 2011 was an average year, one hopes that 2012 will see some investments coming through in lighting, metering, the automobile industry, and hopefully, in mobile manufacturing as well. This, in turn, may bring some growth to the SMT equipment market. We are hopeful of seeing a conservative growth of 30-35 per cent in 2012.

The mobile phone, set top box and LCD TV segments are still largely dependent on imports from China and these are the volume drivers for the SMT industry. These industries must be given incentives and a level playing field to enable substantial growth.

Today, in the global electronics manufacturing market, which is worth US$ 1.5 trillion, India contributes only 0.7 per cent. Even a 20-30 per cent growth, year on year, is not substantial when viewed from the global perspective. However, explosive growth is possible if the government is keen to support and prop up this industry with fiscal incentives, favourable labour policies, setting up of hardware parks and development of a proper ecosystem for manufacturing. At the moment, the government is blind to the opportunities that electronics manufacturing could create in terms of generating employment, curbing expensive imports, and managing the balance of payments issues, especially with China.

There certainly is a great demand for electronics in India, and hence, we are hopeful about manufacturing getting a boost this year due to the recent government initiatives. That is one bright spot for the SMT industry at present.

The steady growth of the SMT equipment market will be bolstered by the demand from various end user sectors such as communications, consumer durables, industrial production, automotive, medical and defence/strategic electronics—areas in which the use of electronics is on the rise. The mobile revolution is also necessitating the indigenous manufacture of various telecom products such as handsets, base stations, modems and VoIP phones, thus creating demand for SMT equipment. The automotive industry, too, is replacing its legacy equipment with SMT equipment to improve efficiency in the production process.

Electronics Bazaar, South Asia’s No. 1 electronics B2B sourcing magazine

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