India’s contract-manufacturing business is expected to nearly triple in revenue over the next five years, a development that will present both opportunities and potential pitfalls for the worldwide electronics supply chain, iSuppli Corp. predicts.
Revenue generated by Electronics Manufacturing Services (EMS) providers and Original Design Manufacturers (ODMs) in India will expand to $2.03 billion in 2009, rising at a Compound Annual Growth Rate of 21 percent from $774 million in 2004, according to iSuppli. Indian EMS/ODM revenue will grow by 20.8 percent to reach $935 million in 2005.
Like China, an obvious allure of locating electronics production in India is the nation’s low labour costs. Other equally important benefits from operating in India include a fast-growing domestic market, an excellent education system, the nation’s technology parks and the recent improvements in the country’s transit and utility infrastructure.
However, iSuppli does not expect the Indian contract-manufacturing industry to pose a significant threat to China’s position as the epicentre of electronics manufacturing in the short term. India’s contract manufacturing activities primarily serve the nation’s indigenous demand. OEMs primarily outsource manufacturing to cater to the Indian domestic market, although export of Indian-assembled electronic goods does occur.
In the longer term, i.e. 2009 onwards, India may compete with the Chinese providers in select products as the nation’s share of the global electronics market increases, iSuppli predicts. For OEMs, using contract-manufacturing services in India can help them penetrate the local market, despite various risks.
Meanwhile, semiconductor suppliers are expanding their manufacturing activities in India in order to serve the growing contact-manufacturing industry in the nation.