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The new-age manufacturing
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Opportunities - Manufacturing
Written by Vimarsh Bajpai   
Thursday, 01 November 2007 00:00
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India is on its way to become a major contract manufacturing hub. Are entrepreneurs ready to pitch in?

Contract manufacturing involves outsourcing or sub-contracting to a company, which has the resources to manufacture products or components at low-cost without compromising on quality.

The firm that outsources work owns the design and patent rights, and is called the original equipment manufacturer (OEM). The business model involves economies of scale with OEMs focusing on their core competence by outsourcing manufacturing to low-cost destinations. For long, Taiwan and China have been at the centre of the manufacturing boom in Asia. So much so, that 80% of toys sold in the US are made in China. But things are slowly working in favour of India. There is a huge opportunity in manufacturing waiting to be tapped.
A proper synergy between the OEM and the contract manufacturer (CM) may also result in the latter bagging marketing rights of the product using the OEM’s brand name.

The OEM either invites bids from empanelled contract manufacturers or approaches a CM of its choice with its design. Based on the cost of labour, process and tooling, a CM quotes its price. The OEM then decides on the CM taking into account various factors such as shipping costs and tax benefits. Various sectors involve contract manufacturing with pharmaceutical, automobile and electronics hardware being the major ones.

Advantage India
The face of Indian manufacturing underwent a sea change after the liberalisation wave of 1991. The sector that lagged behind for decades because of licence permit raj and lack of technological know-how is today poised for growth. The country has become a favourite manufacturing outsourcing destination because of cheap labour, talented and knowledgeable workforce, supportive government policies, improved quality control measures, world-class technology and consistent economic growth.

“India is changing from a command economy focused on self-sufficiency to becoming a key link in the global economic chain,” KPMG says in its report titled ‘Manufacturing in India: opportunities, challenges and myths’. As a global manufacturer, India is well placed by geography, language, and historical association to service customers in advanced economies, while as a regional manufacturer India has highly developed historical trading links with the Middle East and Africa as well as its own south Asian back yard, it says.

The big market
Manufacturing exports from India could touch $300 billion by 2015, according to a CII-McKinsey study titled ‘Made in India’. The most promising sectors for India are auto components, pharmaceuticals, electronic hardware, apparel, footware, toys and specialty chemicals. Another McKinsey analysis states that global outsourcing in the automotive components sector could be worth $375 billion by 2015, up from $65 billion in 2002. India could capture up to $25 billion of this amount, to become (along with China, Mexico and Thailand) one of the developing world’s top sourcing bases. Out of a sample of more than 400 Indian suppliers, 80% have ISO 9000 certification—the international standard for quality management.

On the other hand, pharma contract research and manufacturing (CRAMS) market in India, which was valued at $532.10 million in 2005, is expected to touch $900 million by 2010, according to ASSOCHAM.

The country could exploit its strengths to export electrical and electronic goods worth up to $18 billion a year by 2015, say analysts. India’s toy exports have doubled from Rs 200 crore in 2003 to Rs 400 crore in 2007, according to reports.

AUTO COMPONENTS
Potential
  • Potential of over $5 billion for investment
  • India amongst the most competitive manufacturers of auto components; especially:
  • Metal intensive components such as forgings, stampings and castings
  • Labour-intensive components such as machining
  • Hi-tech components such as electronic fuel injectors
Highlights
  • Highly fragmented industry
  • 50% exports are to Europe and the US
  • Majors including Delphi and Bosch have set up operations in India
  • GM, Ford, Toyota have set up International Purchasing Offices
  • Daimler, Suzuki and GM have set up development centers
  • 100% FDI allowed through the automatic route
Major player / customers
  1. Bharat Forge: BMW, Ford, Volvo, GM etc
  2. Tata Auto Components System: Daimler, Fiat, Hyundai etc
  3. Sundaram Fasteners: Volvo, Proton, MAN, Ford, GM etc
  4. Brakes India: Swaraj Mazda, Tata, Toyota etc
Source: Investment Commission, CII, Electronic Industries Association of India (ELCINA)
PHARMA
Potential
  • The contract manufacturing segment likely to grow at 10-12%
  • Cost of manufacturing in India is 30-40% lower compared to western countries
Highlights
  • About 20,000 manufacturing units. 80% are into contract manufacturing
  • Firms offering drug development due to the new product patent regime
  • Pharma MNCs offering preferred vendor status to Indian firms
  • India has the largest number of USFDA approved plants outside the US
  • Six times the number of trained professionals as the US
Major Players
  • Dishman Pharma
  • Jubilant Organosys
  • Shasun Chemicals
  • Suven Pharma
  • Orchid Pharmaceutical
Source: Investment Commission, CII, Electronic Industries Association of India (ELCINA)
ELECTRONICS HARDWARE
Potential
  • Global market opportunities in electronic manufacturing services:
  1. Contract Manufacturing: $500 billion outsourcing opportunity by 2010 of which India can tap $11 billion
  2. Design Services: $7 billion projected by 2010
  3. Component Exports: $5 billion projected by 2010
  • Availability of low-cost, high-skill manpower
  • Booming domestic market for electronic goods and mobile handsets
Highlights
  • Revenues to touch $2.03 billion in 2009
  • Electronics industry likely to grow to $40 billion by 2010
  • 100% FDI allowed under the automatic route with a few exceptions
  • Electronic Hardware Technology Parks in several cities
Major players / customers
  1. Flextronics: Casio, Dell, Ericsson etc
  2. Elcoteq: Nokia, Ericsson, RIM etc
  3. Jabil Circuit: Nokia, IBM etc
Source: Investment Commission, CII, Electronic Industries Association of India (ELCINA)
Comments (11)Add Comment
conract manufactring in toy or in any other industry
written by SUNNY JADHAV, June 22, 2010
Dear sir,

i am intrested in contract mnaufcring i want to knw to whom shall i contact get all the detail or gudience about contract man
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Consultant
written by Sumit Mehta, June 14, 2010
We,Mehta Enterprises, Manufacture Washers(plain, HT, Stainless Steel). Are willing to provide our services. Do write in at summehta@gmail.com
Regards
Sumit Mehta
97666 33788
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...
written by caje, June 12, 2010
Hi Pleae let me know of any manufacturing concept or contract manufacturing , willing to invest.

REGARDS,
Caje
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written by Nisheeth Singh, November 26, 2009
I have completed my MBA from a prestigious institute and am intrested in contract manufacturing in any field in Uttar Pradesh, so if any party is intersted please feel free to contact me.
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written by Akshay Abhay Walawalkar, July 11, 2009
we are solution providers in industrial automation solutions, electronic and instrumentation . intrested parties in outsoursing please contact us
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Business Partners / JV
written by Mohammed Abdul Khader, April 29, 2009
I am looking for establishing a manufacturing or service oriented company which provides professional services for the indian industry especially in and around hyderabad industrial belt. Companies who are keen in this line of activity can contact me @ +91 9701797670 or through mail: aykhader@yahoo.com

This is an urgent requirement and response needed immediately. Can be personally met and discussed in detail.

M A Khader
Managing Director
Crane Inspection & Maint. Services
Hyderabad
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plant manager
written by Somatilaka Jayamaha, March 30, 2009
We are the biggest electrical manufacture in Sri Lanka. We have capacity to do engineering products, Moulding tools,plastic moulding,assembling ect
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general manager
written by john, November 20, 2008
we are a contract manufacturer for sheet metal and fabrication jobs, interested in parties looking to get their jobs outsourced.
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bussinessman
written by Aniruddha Doshi, October 08, 2008
i am intrested in contract manufacturing in any field so if any party is intersted please feel free to contact us.we are group of family individuals with good bussiness and education background.
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...
written by Mynampati Sreenivasa Rao. Hyderabad, August 17, 2008
We, a group of investors, are ready to take up projects of value of up to Rs.40.00 crores , if there are good contract manufacturing Opportunities. Please send project profilkes immediately.
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written by LC TOLANI, August 15, 2008
i want to tie up with some european co. for manufacturing equipments and machinery in india,

seeking help,partners,consultants.
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