Desi Slice 5: Electronics Manufacturing and GCCs - New Economic Drivers for India?
Sep 14: Do we have a second chance to make a first impression in Manufacturing?
Photo by Hyundai Motor Group : https://www.pexels.com/photo/assembling-machines-in-factory-19233057/
India - Transforming the IT Industry from Back Office to a Global Competence Hub
BFSI GCC (banking financial services and insurance global capability centers) are on Fire:
Check out these highlights:
Number of BFSI GCC in India - 130
Number of employees- 537k
Revenue per employee -$46k (annual)
Avg salary -Rs 24.5 lacs or $29k (annual)
BFSI GCC Revenue growth (annual, $Bil)
2020 -$13.4 Billion
2021- $15,2 Billion
2022 -$17.8 Billion
2023 -$ 20.8 Billion
2024 (est)- $24.6 Billion
Top BFSI GCC by Rev (2023, annual, $ Billion)
JP Morgan - $2.3Billion
HSBC - $2.2 Billion
Wells Fargo- $1.3 Billion
Citibank - $1.2 Billion
Barclay's - $1.1 Billion
Bank of America - $1 Billion
Standard Chartered Bank - $1 Billion
American Express -$1 Billion
Goldman Sachs - $0.8 Billion
(The list is not exhaustive)
BFSI GCC is $20bil+ with 16% growth annually
Check the overall GCC Numbers in India (2024)
FY 2024
Total number of GCC: 1700+ GCC
Per Nasscom Zinnov's report
Currently over 17% of global GCCs are hosted in India
Employ 1.9 million workers
Generate about $64.6bil in Rev (business value) with a CAGR of 9.6%
Of these 220 GCC in tier 2-3 towns with 82k employees
Engineering R&D GCC
have contributed about $36.4 billion in Rev (2023-24)
with 1.3x growth faster than overall GCC growth
6500 global positions are running from Indian GCC
with at least 1100 of them being women
The AI talent pool in GCC is about 120k
185 GCC have set up AI / ML CoE Centers of Excellence
30% of Internet and software GCC have created in-house AI CoE
Projected -
by 2030, 70% of Fortune 500 companies will have GCC in India
GCC count will grow to 2200 by 2030
Will employ about 2.5-2.8 million employees
with about $99-$103 billion in Revenue
Source: Nasscom and Wizmatic computation data
The GCC growth story has gone from being mere operation hubs to engines of innovation and growth on a global footprint. This space is exploding and directly impacting the quality of jobs, career prospects, and overall discretionary spending we see soaring in India.
New R&D Gigs Startup in India:
Lam Research - the company that provides critical equipment to semiconductor foundries of companies like Intel, Samsung, and TSMC broke ground this week on a new systems lab at its India Center for Engg in BLR.
Lam Research's one-half of its R&D resources are based in India. The new facility in India will enable Lam engineers to design, test, and validate semiconductor manufacturing processes and equipment on-site and off, creating shortened design cycles.
Taiwan's Delta Electronics- a components supplier to Tesla, ISRO, and others, inaugurated a global R&D center in BLR to extend its current facility. Delta is projected to employ about 750 engineers in the next 3 years.
Astera Labs sets up India R&D center in Bangalore:
Astera Labs, with an annual run rate of about $300 mil, and a focused semiconductor solutions provider for AI chipsets and cloud infrastructure -is a Bay-area Headquartered, firm started in 2017.
Astera's uniqueness is that they were the first ones to realize that new generation servers would have advanced AI chipsets from Nvidia and would also need to interwork with Intel and AMD chipsets from the traditional world. This demands the design of an advanced digital nervous system that interconnects these different processors for storage and networking applications.
Meanwhile India in the Global AI Patent Race
The number of Gen AI patents filed annually shot up by over 20x between 2014 and 2023.
Going by the number of patents filed so far, China looks like the country to beat in the AI race. China has over 38k AI patents - more than double the number held by the top 5 remaining countries combined. Source: https://www.wipo.int/
Electronics Manufacturing: When the chips are down globally, bet on India!
The Indian PM has set an ambitious target of more than 3x growth in electronics manufacturing to $500 Billion in 6 years arguing that India will make chipsets and finished products.
At the Semicon India 2024 (Semiconductors and Manufacturing event) he clarified that he wants India to be the manufacturing base and an investment destination. And that the government of India will do whatever it takes to make India a semicon powerhouse.
Nearly $ 20 billion worth of semiconductor investments in design were announced at the event. The call is to switch from oil diplomacy (which India came away having its way) to Silicon diplomacy which is the new economic driver.
In this regard, the Indian Govt has planned to announce a new chip package to attract fresh investments and this is likely to be far higher than the initial package of INR 76k Cr (~$9bil). The following investments were attracted as a result of the first package:
-L&T plans $300mil chip unit
-Tata Electronics has targeted to generate 50k jobs in Gujarat and Assam (part of manufacturing and assembly units) as a part of their Rs 1.2 Lac cr commitment ($15 billion).
-NXP committed to double their R&D spend to above $1b
-Renesas committed to double headcount in India by 2025.
India - State of Manufacturing and An Opportunity
Currently in India-
-Manufacturing is less than 15% GDP
-employs less than 11% of population
-exports 2% of global goods
All high growth economies have grown because at some point their manufacturing gave them the big push and for a sustained period
Apple -2nd manufacturing base in India having made devices only in China till 2021
Since having opened India manufacturing Apple has created more than 150k direct jobs and 450 k indirect jobs, produced phones worth $14 billion and exported $10 billion worth phones a year. This is only 14% of Apple's global production and is expected to rise to 26% by 2026.
To make India a true global manufacturing base, India will have to attract Iphone component makers who represent 85% of the value add - most of these are Chinese makers. When they come in, they will add a whole array of demands from the local suppliers, employees, work force resulting in more skills and technology transfer, and prepare a workforce for real global challenges and levels of work experience.
If this value should be received then this level of give and take becomes necessary. If India wants to grow and this means a bunch of Chinese companies need to brought in to setup shop so be it - else the larger objective will never happen. Let us not get myopic and create trade barriers artificially.
This much progress in manufacturing is indeed a big deal and having reached this far to lose it would be a shame.
A few points I picked up from a piece written by Shri Gurucharan Das former executive chair at global MNC and business advisor, writer are reproduced here.
Top lessons we need to remind ourselves of:
India is not a top choice for manufacturing by any means today (despite the Apple success).
India cannot expect to grow at any desirable rate, without breaking into the manufacturing zone (no country can make a mark with only domestic sales)
Successful export and to become a dependable global scale supplier of hardware is a big deal and we have to do whatever it takes to get there
The global trade market is a space of about $24 Trillion (we are not even a speck of dust in this space). To play this game, India needs to drop tariffs.
PLI is a sweetner but it cannot go on for ever, it needs to be defined with relevant sunset clauses on high tariffs.
Indian companies that have risen behind protectionist walls will have a wake-up call when they have to release their output to the wide global markets with brutal engineering, innovation and launch cycles.
The Real Questions:
The big question now is how can we sell the PLI success in smartphone manufacturing to the composite device making (including sub components) and how can we extend this successfully to other sectors - garments (while Bangladesh is having its own turmoils), toys (we have made a breakthrough already), food processing (we are already largest raw meat suppliers for certain categories) and shoes (we are a top leather exporter).
If you dig deeper, you will soon strike those big barriers - reforms in land, labor, and capital. And for these, you need political mettle. Does our leadership have what it takes?
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Owner: Sridhar Pai Tonse - Tonse Pai Academy.
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What we make out from this write up is that India is nowhere near to achieving a large slice of manufacturing world class products. First step is to cultivate the mindset to produce world class products at every opportunity, so that we don't miss the bus in building a strong base for manufacturing which is a very important step towards growing our economy in leaps and bounds.