Consumer electronics industry mulling contract manufacture of foreign brands

By Our Special Correspondent

MUMBAI, JAN. 21. The consumer electronics industry, caught in a situation of flat demand, high duties on components, gross underutilisation of capacity and, therefore, lack of economies of scale, plans to look at the business of contract manufacturing for overseas brands. But this will be possible only if the Government and the industry find their views converging. Both will need to map future trends and exploit them.

To start with, the Consumer Electronics and Television Manufacturers Association at its executive meeting last week decided to lobby hard for this proposal with the Government which by changing the Department of Electronics into the Ministry of Information Technology has shifted its attention to the software industry at the cost of hardware development. CETMA officials conceded that ``we are nowhere in the picture in the world-scale scenario.''

The CETMA's lament is that the country has the skills in the hardware segment - as good as what has gone into software writing - and even the required manufacturing base but it has not been able to the big league of manufacturing ``because none looks at us.'' It admits that it will have to attract attention to its capabilities. Its chief, Mr. Rajeev Karwal, said, ``We need to analyse China and learn from it.'' It would now push the Government towards this line of thinking.

For instance, about 37 per cent of the component cost of a television accrues to the Government. In China this is limited to 17 per cent. A colour TV set, despite falling prices, costs Rs. 12,000 in India whereas in China, it costs only Rs. 5,500 for a 21'' set though that size is now passe; the preference is for 25'' and 29'' sets. ''What crime have Indians committed to pay more for the same item?`` And why should a black and white TV be sold along with a car battery? Demand would therefore not grow, it is pointed out.

Of course, at this point, the CETMA's focus was on a pre-budget presentation for the media on duties. It wanted the rates to be pared and anomalies in the abatement levels for various items removed. Mr. Karwal said the industry passed through its worst ever phase. Citing ORG figures, he said everything was in a negative growth mode even as the imported grey market was snapping at its heels. This ''needs to be curbed.''

Key players in the industry asked, ''Why should it always be China if world majors have to seek out contract manufacturers?'' If the American market was a whopping $90 billion per annum and meets its requirement internally to the extent of only 6 to 7 per cent, why should not the Indian Government and the industry together bring the focus back to hardware instead of harping on only software?

The CETMA's calculation is that the present Rs. 11,500-crore industry - it relates to a ''flat or negative year 2000'' - can grow ten times in as many years. But to reach that scenario, there are lots of ''ifs'' like a responsive Finance Ministry that should accept CETMA's position on taxation.

Though the executive committee of the CETMA did discuss the need for ''a change of the mindset,'' going beyond the cost-plus concept of pricing and seeking greater efficiencies, the bottleneck is that the country does not manufacture its own chips and ICs. No manufacturer of worldclass would step in unless the manufacturing base is large enough here to absorb the output. None of the majors such as Samsung or Sony, for instance, has had the courage yet to draw such major vendors in.

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