INDIA

FASTEST GROWING
FREE MARKET DEMOCRACY

MANUFACTURING

Made and Designed in India

www.ibef.org India Brand Equity Foundation

 P A G E 2

MANUFACTURING

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
India has an existing electronics in a 100-150 cc bike manage is much higher than an advanced
advantage in custom- 1000-1500 bike in the US…Unimaginable even ten years ago but ever so
based manufacturing believable today.
and assembly products For those who reckoned that India had missed the manufacturing bus in
like transformers and the 1990s here’s news from the 2000s: India has boarded this time.
industrial equipment
The importance of localisation and customisation
actuators.
Localisation and customisation has played a huge part in the evolution of
manufacturing 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 India’s 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 India’s 6 million plus colour television market
which 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-based
optical 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 acquisitions
outside India for market as well as technology access. Celetronix designs
and manufactures power assemblies and most of these assemblies are for

www.ibef.org India Brand Equity Foundation

 P A G E 3

MANUFACTURING

MADE AND DESIGNED IN INDIA

next generation products. The assembly business has been built on

design capabilities, and has attracted multiple manufacturing orders from
Swedish giant ABB
leading OEMs in Europe.
makes circuit breakers
at its Indian plant. Consulting firm, McKinsey, which recently conducted a study on leading
McKinsey indexed cost Fortune 100 players, has confirmed that their Indian operations are
already reaching if not exceeding global cost and productivity
of manufacturing at this
benchmarks.
plant to Europe and
found the voltage “Many products have been found to be 30-40 per cent cheaper in India
switching devices to be than in the US or Europe,’’ the Mckinsey study, which assesses India’s
manufacturing competitiveness, points out.
33 per cent cheaper,
and components 41 per This cost and quality advantage is helping India emerge as a low cost
cent cheaper. 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 and
magnetic actuators. ABB’s India facility in fact was the first to
manufacture certain outdoor circuit breakers—all 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 isn’t 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 similar
markets 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 world’s 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

www.ibef.org India Brand Equity Foundation

 P A G E 4

MANUFACTURING

MADE AND DESIGNED IN INDIA

in Asia.

India has high capital √ Siemens sources many power transmission and
engineering skills. A distribution equipment components (mainly castings and
highly evolved tooling forgings) from India. These have typically resulted in 25-30
per cent savings over European and US costs.
and machining industry
has enabled India’s manufacturing advantage—is essentially skill-based sectors— and
indigenization of capital emanates from four areas.
equipment. 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 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 country’s in Asia
and Africa with similar climatic conditions.
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: 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: Mechanical control valves—which are a key actuator
in industrial systems—are 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 terms
of raw material, machining and manufacturing, India and Malaysian costs
run neck and neck. Where India scores is design, with a six per cent cost

www.ibef.org India Brand Equity Foundation

 P A G E 5

MANUFACTURING

MADE AND DESIGNED IN INDIA

advantage. This makes Indian-produced mechanical control valves the

India’s mechanical and cheapest in the world.
eletro-mechanical Quite clearly, the country’s mechanical and eletro-mechanical
manufacturing base has manufacturing base has improved dramatically with the evolution of its
improved dramatically tooling and machining industry. This, combined with the easy availability
with the evolution of its of key raw materials such as steel, polycarbonate, plastics, aluminium and
acrylic has given India a non-electronics ecosystem that is difficult to
tooling and machining
match—and is creating competitive advantages not just in bikes and cars
industry. but also sub and final assemblies such as transformers, televisions and x-
ray equipment. If mass-manufacturing is China’s pocket borough, design-
based manufacturing could soon be India’s.

Chart: Manufacturing business models that are working in India

Manufacture Design & Design, manufacture
manufacture and brand

Value Lowest cost producer Ability to convert Deep understanding

proposition for existing design specification into of end-customer
design or help design needs; ability to
better products for design tailored
OEM proeucts and
manufacture at
required cost on
consistent basis

Key success Low cost operations Design capabilities Research and design
factors Ability to manage Ability to manage skills Marketing skills
O EM relationships OEM relationships High customer
World class Lean and efficient responsiveness
manufacturing supply chain Ability Ability to manage
practices to manage global global organization
High quality standards organization Short time-to-
market

Examples Siemens and ABB Celetronix designs Moser Baer (world’s

source power and manufactures lowest cost optical
transmission and power assemblies for disc maker) has
distribution leading computer recently started
components hardware OEMs promoting own
brand globally

www.ibef.org India Brand Equity Foundation

 NOVEMBER 2004 P A G E 6

MANUFACTURING

The India Brand Equity Foundation is a public - private partnership

between the Ministry of Commerce, Government of India and
the Confederation of Indian Industry. The Foundation's primary objective
is to build positive economic perceptions of India globally.

India Brand Equity Foundation

c/o Confederation of Indian Industry
249-F Sector 18
Udyog Vihar Phase IV
Gurgaon 122015 Haryana
INDIA

Tel +91 124 501 4087 Fax +91 124 501 3873
E-mail india-now@ibef.org
Web www.ibef.org

www.ibef.org India Brand Equity Foundation