India has grabbed a great deal of attention lately as a possible electronics center. Electronics manufacturing services (EMS) providers have been setting up operations there. But purchasing professionals familiar with the business environment suggest careful study as they set up sourcing operations there.
Charlie Barnhart, senior consultant for Technology Forecasters, says there are clear advantages for some large OEMs. “The labor force in India is a better labor force than in China,” says Barnhart. “The work force has more education and I think India culturally has a longer tradition of commerce, more of a free market kind of mentality than China.”
Additionally, he says, the Indian government is pro-business, and that rolls down through their culture.
EMS providers have built “world-class” facilities in India that have the same capabilities of facilities they have in other regions of the world. “They are building world-class factories, the same factories that they have any where in the world,” says Barnhart. “The HPs and Ciscos of the world that go to India find the tier one EMS suppliers provide a mirror image factory operation to what they are used to seeing anywhere else in the world.”
However, there are disadvantages to India. One is logistics. “The logistics problems in India are the same, if not worse, that China faced a dozen years ago,” says Barnhart.
He says the issue is the lack of a proper infrastructure. “It takes an inordinate amount of time to get materials and supplies in and out of India just because of the roads and general chaos in their transportation system,” he says.
Barnhart adds the electrical grid is “abysmal and unreliable. They have the usual problems with water, trash collection. Those are real issues in India,” says Barnhart.
The other key issue is the supply base. “Buying in India is tough,” says John Boucher, chief procurement officer at EMS provider Celestica, based in Toronto. Celestica builds telecommunications office equipment and automotive systems at its facility in Hyderabad. There is very little semiconductor production and limited passive component production.
Celestica buys build-to-print items, like printed wiring boards, cable assemblies and enclosures from suppliers in India. “These are heavier items where there is a benefit in sourcing locally,” he says. “I have full-time folks in India trying to find suppliers of the right grade steel and aluminum to make sure we have high quality and PCB suppliers that have the right capabilities. It is a challenge and we are developing our own approved vendor list in India.”
