A hardware hub is emerging here

IBM, LG, Hewlett Packard and Acer have all done it. A clutch of Taiwanese companies are waiting in queue to do it. Now Michael Dell wants to do it. Setting up a manufacturing plant, that is.

Welcome to India, the new manufacturing hub for PC makers. With mouthwatering growth figures, like those of the consumer electronics players, the list of companies wanting to set up electronics manufacturing operations here is only growing.

India’s PC market is estimated to be around 4.6 million units, which is galloping at 30% a year, according to IDC data.

The overall computer hardware sector including consumer electronics and components is currently estimated to be around Rs 2,000 crore.

An ISA-Frost & Sullivan study says that in the estimated $363 billion electronics market, the global semiconductor segment is likely to touch $36.3 billion or 6.5% of the global market.

While the overall hardware market grew 15%, personal computers and associate peripherals have been galloping at 25-30%.

That’s why the newest entrant, who also happens to be the largest PC maker in the world, has big India plans.  

“We would like to have this facility up and running within this year,” says Paul-Henri Ferrand, Dell’s vice president for South Asia.

This will be Dell’s seventh manufacturing location in the world. Its three other Asian sites include two plants in China and one in Malaysia. Texas-based Dell has a 5% share of the domestic PC market.

“Dell’s decision to be present in India reaffirms the credibility of the growing market in India,” says Vinnie Mehta, executive director, Manufacturers Association of Information Technology (MAIT).

Already, Korean white goods major LG India, which has been manufacturing monitors since 2001 in India, began making PCs from its Noida plant two years ago.

“The thing that works in our favour is, unlike most PC makers, we have the maximum backward integration,” says R Manikandan, LG’s general manager - sales & marketing.

He claims that besides monitors, LG also makes optical drives like DVD Writers and PC cabinents, which not only helps it cut its import content, but also cater to consumers up the value chain.

What makes India a popular destination for these players? Well, there are the same clichéd reasons that they came down for in the first place. Cheap labour, a skilled talent pool, a proven software track record, cheaper finance and a burgeoning 200 million middle class are the oft repeated motives.

“It is slated to be amongst the fastest growing computer markets in the years to come,” says George Paul, executive vice-president, HCL Infosystems.

An industry analyst points out that even as growth rates are high, the PC penetration is pathetic. It is this potential that the players want to leverage.

The infrastructure for welcoming the big hardware merchants is also being readied across states - almost all of which are in the south.

The Karnataka government has roped in real estate firm Shapoorji Pallonji to build a hardware park in 1400-acres near the upcoming international airport at Devanahalli in Bangalore.

The joint venture project is likely to see investments of over Rs 8,000 crore and likely to be operational by 2008.

The state already has APC, Tyco Electronics, TVS Electronics, Flextronics and Elcoteq, whose total exports in 2005-06 was Rs 2,481 crore.

Incidentally, rival tech hub Hyderabad will also get a 5,000-acre hardware park, near the complex where the SemIndia semiconductor factories are being proposed.

Neighbouring Chennai is rapidly becoming a destination for electronic manufacturing in India with automobile majors like Ford and Hyundai, cell manufacturers such as Nokia and Samsung, other major players like Foxconn and Flextronics setting up base in the Tamil Nadu capital.

“What we are seeing today is a huge domestic market - manufacturing here is not just about exports -it is about addressing the Indian market which is becoming the second largest in the word,” Poornima Shenoy, president of the Indian Semiconductor Association said.

“Our “young” population (50% below the age of 30) and a growing “middle class” with high disposable income means a surge in the demand for consumer electronics (including gaming) and communications products besides automobiles and medical electronics,” she said. The government has to be aggressive on promoting good infrastructure like better road transport system, accessibility to cargo of air, rail and sea, single window government clearances and availability of power, land, water at attractive rates to attract the hardware investment in the country, Shenoy said.

With inputs from Nandini Lakshman, Ajoy K Das, Nandini Goswami, Raghu K, Sindhu Bhattacharya & Priti Bajaj