A recent article in a leading business news-paper claimed that industry executives had discussed in a government meeting that EMS firms offer more employment than manufacturers of electronics components–for every Rupee invested! We decided to cross check with both manufacturers of components and EMS firms, and some trade associations too…
Media has always been an important instrument to influence government policy. And that’s exactly why the media needs to ensure unbiased research and reporting. But, when leading media firms publish news items which cite unnamed industry experts, and all of them seem to be biassed towards one direction–it raises red flags.
India’s electronics industry has already borne the consequences of many policies in the past, which were clearly influenced by those who did not have a serious stake in its growth. Now that we are seeing growth opportunities after a long time, we need to ensure that history does not repeat itself.
I am referring to a news item that appeared in India’s leading business daily. This piece left us wondering if it was a well researched article, or was it developed to influence policy in a certain direction. In a nutshell, this news item simply hinted at the claim that EMS firms (electronics manufacturing services aka contract manufacturers) offer much more employment for labour as compared to manufacturers of electronics components–for every Crore invested in them. And, it laid the responsibility of this claim on the shoulders of “industry executives”. It went on to further hint that the Government of India might be influenced by such findings to offer more subsidies or incentives to EMS firms rather than manufacturers of electronics components.
Wow! Talk about influencing policy.
And, these industry executives who shared their views? No names. Not even a mention of their credentials. Could as well as be PR or marcom folks of those who want to influence such decisions.
Did they try and get some counter views? Errr, again no.
But, can we simply disqualify their claims without attempting to find the real facts?
No, that would be shifting to the same level of journalism, which is not what Electronics For You stands for. Instead, our team of journalists–Nijhum Rudra, Nitisha Dubey and Yashaswini Razdaan spoke to their industry contacts. And to ensure that we don’t end up biassing our story–they spoke to representatives of both – EMS firms and manufacturers of components. Plus, then they spoke to heads of a few trade associations too–many of whom represent both categories of players. And, here’s what they found:
- The obvious, which is the level of automation differs across manufacturing of components and EMS firms. Not every firm (EMS or components) has the same degree of automation. More automation means lesser employment per investment (or turnover).
- Just like there are product categories which require more labour in EMS, there are categories of components (such as passives) which require a high degree of manual labour.
- On an average, component manufacturers can hire 3 to 5 times more labour than an EMS of the equivalent size!
- Since many functions in EMS firms can be non-skilled, the percentage of contractual labour tends to be higher. Components manufacturing needs more skilled labour and hence these firms tend to hire employees–thus providing a much longer term employment, plus more opportunities to up-skill.
- The seasonality of work and thus seasonality in demand for labour is more in EMS than in components manufacturing,
- Components manufacturing can be set-up in rural areas too, while EMS firms are better suited in urban settings.
- The level of automation in EMS is exceeding manufacturing of components. There is already talk about dark room factories–one where there are no humans on the floor. Thus, the employment to investment ratio will continue to drop faster in EMS than in manufacturing of components.
Plus, there are more strategic reasons for manufacturing of electronics components in India. Namely: steady supply-chain and more predictability in input pricing for manufacturers of electronics. These two factors are critical to support our manufacturers of electronics in India and make India’s electronics industry truly “aatma nirbhar” (self-reliant).
The above conclusions are all thanks to inputs shared by industry leaders representing different facets of the electronics industry of India, which are shared below (in alphabetical order w.r.t. name of organisation)…
Rajesh Bhope, VP, Alcon Electronics (components)
“EMS (Electronic Manufacturing Services) companies are buying components and then assembling them. They themselves are first of all dependent upon all types of component manufacturers. If their supply chain improves, they will grow and thereby fuel the growth of their suppliers–like the proverbial egg and chicken situation. Government must support both the industries simultaneously.”
Abhishek Malik, Executive Director, Calcom Vision Limited (EMS)
“Yes, assembly (EMS) can create more employment; however, it is only temporary until the government stops providing benefits. Electronic Components are generally more capital-intensive and have a much longer-term outlook, thereby creating long-term employment.”
Pankaj Gulati, Exec. VP & COO, CDIL (components)
“There will be much more job creation in the component industry than I can see in the EMS because there hardly exists any components industry in India, today. I need help finding skilled workers in the components industry.”
Jairaj Srinivas – Director-General, CIMEI (trade association)
“No! Labour hiring in EMS (Electronics Manufacturing Services) firms is definitely not more than electronics components manufacturing. In EMS, everything is mechanised and automated, so not much labour is required in EMS companies. However, when it comes to component manufacturing, it is more labour-oriented. If the government is serious about setting up a component industry, they will need to employ more labour, especially women, as physical labour is often required in electronics components manufacturing.
To further grow employment within the EMS sector, the current cap of ₹18 crores should be removed because not all players within the EMS industry have that capacity or need to invest. But, if they get incentives too–they will certainly grow their operations and hire more labour.”
Vinod Sharma, MD, Deki Electronics (components)
“If you look at the finished goods industry where SKD is being done, the number of jobs for every crore of turnover is about 0.5 to 1. However in the EMS industry, where we are doing CKD, SKD, and even box packaging, the ratio is taken as 1 crore for 1 person in terms of turnover. In the passive component manufacturing, the number could be between 2 to 5 people per crore of rupees of turnover.
In an EMS company, a person assembling a manual component on PCB can be trained in a few weeks, but in components manufacturing, many skills requirements are such that it will take for a workforce to take 3-6 months just to come to a line.”
Rajoo Goel, Secretary-General, ELCINA (trade association)
“Components manufacturing also supports EMS and assembly manufacturing and thus is the building block of the ESDM Ecosystem.”
Girish Vaze, CMD, Elcom International (components)
“The statement that ‘job creation is technically tough in electronic parts’ is incorrect. Electronic parts are of various types. There are some parts which require automation for final assemblies or processes, but there are an equal number of parts most of which are electromechanical which employ labour-intensive processes and automation is not feasible as there are a lot of customisations and variations required.
Our experience is that our products have generated a lot of employment for assembly workers both male and female and also for semi-skilled and technical employees up the stream of the product development. It is not only ESDM or assembly of mobile phones that generate jobs, but also the parts which are used for every type of electronic products, whether the end application could be white goods, instrumentation, aerospace and defence, power electronics, automation and others.”
M Thiyagarajan, President, IPCA (trade association)
“The real situation is that any electronics component that we manufacture in India will grow the complete industry. Since we are importing components, fluctuations in pricing and delivery are very high for our manufacturers including EMS firms.
In the electronics industry, indirect employment will happen mostly. Countries such as the US are making AI chips in a large volume, which is not only for employment in that particular industry, but it will help in manufacturing other electronics products, which will ultimately increase jobs in various industries.
EMS can operate mostly in large areas, whereas components and small industries are also operating in rural areas.”
Mr. Shishir Gupta, CEO, Oakter (EMS)
“The claim that EMS firms should receive more incentives due to better job opportunities for labour is a significant oversimplification. Both EMS firms and component manufacturers are vital contributors to India’s electronics industry, each with its own unique value proposition. Disregarding the interconnectedness and contributions of both sectors can lead to misguided policy decisions that may hinder the overall growth and development of the electronics industry.”
Dileep Jain, CEO, Rajguru (electronics products & components)
“EMS companies have automated most of the work. SMT lines just require a single person to handle one entire line from the start to the end process. Sometimes, one person can manage two lines. We even have machines for DIP assembly. Some parts require labour, but that is unskilled labour. In the case of component manufacturing it’s the opposite; the demand for unskilled labour is less in that case.”
Varun Manwani, Director, Sahasra Group (EMS & components)
“First, India’s EMS industry is continuously importing components, which puts them at a dis-advantage to their global peers. Therefore, component manufacturing needs to be localised.
It is not correct to say that component manufacturing is highly automated only. It depends upon the component that is being manufactured. Workforce will always be required when you approach the lower categories of components, such as passive items like connectors, etc. For example, if you take PCB manufacturing as an industry, you need a lot of people in PCB manufacturing or for that matter even in connector manufacturing because these are highly labour intensive.”
Nandini B, Director, TESCOM (EMS)
“In the EMS industry there are entry level jobs too and many of them in the operator category, but manufacturing components is a little more complex and has lesser opportunities for unskilled labour. Moreover the ratio of jobs to the investment made is higher for the EMS industry. EMS is more labour intensive for both skilled and unskilled labour, but the component manufacturing industry is largely skill oriented.”
Aniket Pathak, Uniglobus Electricals and Electronics (components)
“While it’s true that EMS firms might show higher immediate labour hiring, it’s crucial to consider the development time required for electronics component manufacturing. This sector often involves more complex processes, requiring significant research, development, and innovation time before reaching the same employment levels. EMS and component manufacturing are integral to the electronics ecosystem, each with its timeline and impact. A nuanced approach that considers these differences would likely result in more effective and balanced industry growth.”
CLICK HERE to view the said article or go to: https://economictimes.indiatimes.com/industry/cons-products/electronics/electronics-component-manufacturing-push-may-not-lead-to-as-big-a-jobs-surge-as-expected-industry-executives/articleshow/112884141.cms
