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Is India the next China?

The promise of low labor rates and access to a potential huge market has lured scores of OEMs and electronics manufacturing services (EMS) to China. By most accounts. electronics companies are satisfied with the cost savings they have achieved in China and many will increase their footprint in the land of the dragon.

However. a handful of companies who operate in China. have also located facilities in India and plan to expand operations there. Other OEMs and EMS providers are likely to follow suit in the next several years to take advantage of low-cost manufacturing and to gain access to a growing market. OEMs such as Samsung and LG Electronics and EMS providers Solectron. Flextronics and Jabil have facilities in India. LG Electronics makes home appliances and Samsung builds televisions and home appliances in India. Solectron has a design center and a manufacturing unit where it builds boards and systems. Jabil also does board assembly and final system builds in India.

Vikram Kothari. an analyst for electronics industry consultant and market researcher iSuppli. says many more EMS providers and OEMs will be heading to India over the next five years because of India’s low cost workforce and to gain access to India’s lucrative market. “India has the potential to become the next China.” he says. “It has a long way to catch up. but India has been aggressive about improving its infrastructure. providing special economic zones and opening up its doors to business. Whether India becomes the next China or not may not be as relevant as whether India becomes a significant player.” says Kothari.

Kothari says the EMS industry in India will grow as the domestic electronics industry grows. He says India’s electronics industry will increase from about $12.3 billion in 2002 to $35.6 billion in 2010. Computers and consumer electronics equipment represent about 61% of India’s electronics market. By 2010. that percentage will grow to 68%. according to Kothari. He says more EMS companies will move to India and by 2010 electronics contract manufacturers will handle about 30% of India’s electronics manufacturing.

Kothari says India is appealing to the EMS industry for the same reasons China is appealing?low labor rates and a potentially huge market. “India has relatively skilled manpower available at very competitive costs. so manufacturing can be done efficiently and cheaply.” says Kothari. He says India’s average labor rate is about $3.000 per year for an employee at an electronics company.

He adds India’s domestic market is small but growing rapidly. He says about 3 million PCs will be bought in India this year and the country is adding about 1 million cell phone users per month. Consumer electronics consumption is also growing in India.

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