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In an interview with Akshinthala Vijayendra of IPC India, he discusses India’s infrastructure under the direction of the new prime minister, where India currently stands versus China, and the pros and cons for any speculative companies deciding whether to expand into this country.
Barry Matties: Akshinthala, what's new at IPC India?
Akshinthala Vijayendra: At IPC India, the new thing is the hand soldering competition that we are conducting in India that is gaining so much popularity. We had to use a lot of discretion and strengthen our screening process regarding participants. This year, we took only two of them. Next year, we are planning to come with five of them from five different cities. We have found that, for most companies, the Indian contestant who has come to the competition, the boss of the company is also here. It is really getting the attention of the company bosses. The government is now thinking of funding persons for the hand soldering competition. It is picking up because this kind of an activity is not done by anybody else now in India.
Matties: Tell me a little bit about the Indian market. I'm hearing that there's some new investment and other things going on there.
Vijayendra: Oh, yes. The requirement of the Indian electronics groups is something around $400 billion, and that's expected only from defense. Other than that, the companies that are coming from outside of India have business establishments like Boeing, Airbus, and Lockheed; most of these people are coming in and establishing their manufacturing facilities. They are OEMs. Lockheed is planning to manufacture F-16 aircraft in India in collaboration with Tata. Tesla, for example, are in talks to make the electric cars in India. There is a lot of momentum at this point, but it has to practically kick start to happen. The infrastructure is…
Matties: I want to talk about infrastructure because I hear there are great roads three kilometers to the factory, but otherwise it's still all mud puddles.
Vijayendra: The infrastructure is critical and mostly the banking interest rates are a bit higher when compared to other countries. That must be brought down, so the government is working towards that.
Matties: Is there a national strategy that's in place now? Is this a serious strategy or is it just in pockets?
Vijayendra: The prime minister is very enthusiastic and he's already 10 steps ahead of others. The government must catch up with the 10 steps and go to the prime minister. The prime minister is very powerful in India. He can do a lot of things, so with his initiative, it will drag the people, make it compulsory for his team to fall in line and then come in. But it's happening—not as fast as we want, or the world wants.
Matties: When you look at that area, given a choice of government types, a democracy is a better place to do business.
Vijayendra: Yes. India is still a preferred place to do business because, I won’t say it’s completely transparent, but it is very conducive. At least the investors who are going to come and put money in India, they know what is going to happen to that investment after three years. But the point at which they’re going to be earning enough or not is a different issue. But they know that in three years, their investment is going to be safe and then it will keep on earning. So they have them make their business plans whether it's three years or five years. If I'm the businessman, five years is too long a period for me to wait for my ROI. But then I need it for two years, so I will look for a country where I can get my returns faster. In that way, India must reduce the gap. The return on investments to the person or the company must be faster.
Matties: They understand this now, but they have to make it happen, right?
Vijayendra: Yes. There are committees which are set now with the specialists involved in the panel that are discussing and then guiding the government on that. That's one good thing that is happening. There are expert panels working with the government. If their advice is taken well by the government, and they make the investments and build the infrastructure, then things can happen much faster.
Matties: What sort of advice would you give a company considering locating to India?
Vijayendra: I would say that it is not a bad decision. To come and locate is one part of it. Then locating yourself and earning your living or choosing what you want to do in business is something that you need to decide. But for an investor to locate in India is a good choice because the return on investment is very good. Indian companies work with a very high profit margin, so any investor can expect a higher margin of profit in India. It is a good proposal for an investor, but locating yourself to live or to look for jobs and things like that? The job opportunities are increasing, but the local job seekers are preferred.
Matties: What about the wages? What can we expect as compared to, say, China?
Vijayendra: It is regional. It's the same thing really in China, I guess. For example, if you work in the Shenzhen area, they are paid a little bit higher than if you go up north. It is all relative.
Matties: But on average, is it on par with China? So someone coming from America or from Europe can expect some lower labor costs?
Vijayendra: On par, in a sense. In some sectors like the information technology, they are on par with China. Now then if you look at the other sector, core sector, engineering, chemical, electrical, there you can say it is cheaper.
Matties: What about the knowledge, the education for the manufacturing workforce in India?
Vijayendra: The greatest advantage India has is that everyone is are English-speaking, it is part of their education. The guys who are going to be trained who are educated will be exposed to English. So the European and American investors, when they come, they can find workers with whom they can talk.
Matties: It's very difficult in other regions.
Vijayendra: It makes a lot of difference.
Matties: How many PCB shops are now established and operating in India, and are they centralized or spread out?
Vijayendra: Oh, I would say that the listed are 160; they are spread out but mostly located in Bangalore and Delhi.
Matties: Do you have trade events coming up that people should be aware of?
Vijayendra: productronica is there in September. Then there is one IPCA. That is India Printed Circuit Association. They are planning to conduct one in Bangalore in August. Then there is one in electronics, somewhere around February. There is one done by ELCINA. They are also conducting a small defense-related expo and show.
Matties: Is there anything that we haven't discussed that you feel like we should share with our readers?
Vijayendra: What I have not discussed yet is the skill development. That means the skilled operators. We are short of skilled operators. We do not have, in India, the trained or skilled labor. Some may be there, but they are not enough. There is a great need for the skilled labor pool to be developed. Of course, the government is coming out with skill development plans where IPC is asked to help them train the people. We are working with them, but at this time we are seeing the need for 40,000 skilled laborers in the next 12 to 24 months. Even if we train them, we are not going more than about 800 skilled labor trainees every year.
Matties: How does that affect somebody planning to move to that area if there's such a shortage?
Vijayendra: The government of India has come out with a skill development plan, where they're trying to fund the people, for example, with skill development. They have franchised some of the companies who are doing the job. They can approach their dream there for three months or 150 hours. Then they're coming back to the industry market and then get observed with other industries. 150 hours is required for each skilled operator to get certified.
Matties: But are we seeing a lot of automation coming as well?
Vijayendra: There is a lot of automation, of course. The surface mount and all the electronic manufacturing is, by and large, automated. But there are certain skills which the machine will not be able to do.
Matties: What skills are you teaching?
Vijayendra: For example, when the boards are coming out in between, manually, they have to check if everything is in order. Anything can go bad in the process. Intermittent inspection is required and that is exactly where the people must know what to check for. They must be trained not in making, because the machine makes everything, but what to look for and what they have to check for. So that training is what IPC is trying to do, which is also being emphasized by the skills development. They're not really asking the people to get trained for the preparation of board, but looking at the board.
Matties: Some handling probably as well?
Vijayendra: That part is a skill that is required, because it cannot replace the man. Artificial intelligence is not able to just pick up to that extent, only a man can do that.
Matties: So what you're saying is anyone who's looking to expand their business into the East should definitely look at India and there's good government support for this. Are they offering tax advantages or incentives?
Vijayendra: Very good support. They are offering all incentives. Everything for skill development, they are offering 10,000 rupees sponsorship for each person. But it has to happen fast.
Matties: We've been talking about this for 20 years now but it sounds like the pace is accelerating?
Vijayendra: Yes, accelerating, but it should happen quicker. Otherwise, we may lose the opportunity because we will not be able to compete with China.
Matties: Does the government understand that?
Vijayendra: Oh yes, the government understands it, but they are trying to see how to do it. They don't know how to do it.
Matties: Call China. They'll tell you. Thank you so much for your time today.
Vijayendra: So nice to see you again and nice talking to you.
Matties: It's my pleasure.