By Lokesh Payik & Sushil Pasricha
There is a tectonic shift in the Indian manufacturing sector. Despite having the sixth-largest economy in the world, contributing to 3.1% of the GDP, India’s export contribution to global trade is only 1.6%. That is going to change, buoyed by the government’s robust policy thrust, initiatives like production-linked incentives (PLIs) to encourage local manufacturing, and fresh investments that are pouring into the country’s core industrial sectors. As India emerges as a hub for manufacturing exports, cutting-edge technology and best-in-class workforce are being deployed in the country’s manufacturing domain, giving further impetus to India’s strengths on cost efficiency. Manufacturing is emerging as an integral pillar in the country’s economic growth and one of the key sectors that can benefit from this is consumer technology. There’s a boom around the corner for India’s smartphone manufacturers, and the time is right for phone makers to dial in and ride this wave.
India’s smartphone manufacturing sector has seen an upward trajectory for quite some time. Over the last five years, India’s mobile phone production increased five-fold. A look ahead suggests that rural demand and 5G-network fueled replacement will further lift India’s domestic appetite for smartphones. Indian smartphone manufacturing market remained resilient amid the recent global component shortage. According to a Counterpoint Research report, the industry is reported to have cloaked a 7% year-on-year growth in shipments in the financial quarter ending June 2022.
Exports present another alluring prospect for manufacturers. Recent government policies are expected to expand India’s share in the export pie—India is likely to ship out 60% more smartphones annually up to fiscal year (FY) 2028, with the value likely to be just a billion dollars shy of the $60 billion mark .
All factors combined, India’s smartphone manufacturers are in a never-before sweet spot, and the time to invest in both—an innovation strategy and development efficiency, is now. Given that the consumer mindset is strongly aligned with foreign smartphone brands, growth will depend on new products that Indian manufacturers bring to market. But, to do that effectively they require a well-managed innovation portfolio, strong R&D, smart manufacturing, and more. In terms of “what to develop”, manufacturers need to build the innovation muscles required for efficient product development based on informed decisions linked to client demand, product roadmaps, sourcing options, and other related elements. The R&D function needs to transform into a competitive weapon with optimized cycle times and lower costs allowing them to create a repeatable, fast, and efficient product development model. This now needs to embrace smart manufacturing—to help develop a repeatable model for efficient, easily scalable, and on-time large-scale production.
Smart technologies enable connected, integrated platforms, catering to both products, processes, and machines. This makes real-time production process monitoring possible, with the added benefit of a fully connected value chain. A further possibility of vertical integration (of applications within the factory) and horizontal integration (of suppliers and distributors) makes shopfloor-to-shelf product tracking and monitoring a seamless reality. Factories can gain increased cost-efficiency with smart automation, end-to-end visibility, intelligent manufacturing operations, and digitally enabled employees. We believe a smart, timely factory-upgrade decision is in order.
Manufacturers can use artificial intelligence (AI)-driven analysis for asset optimization, leading to reduced maintenance costs. Industry 4.0 tech makes predictive maintenance a reality, helping save both costs and time. Other maintenance benefits from a tech upgrade include digital condition monitoring of machines and components, AI-driven anomaly detection, maintenance-driven production scheduling, and remote monitoring and maintenance.
With domestic smartphone companies targeting exports, the complexity of product planning is set to rise by a few more notches. AI-driven demand forecast could help manufacturers navigate these complexities and perhaps turn them to their advantage. AI-based demand forecasting helps understand demand hotspots, quantities of smartphones to be shipped, type of high-demand model, and right channel mix, all while considering regionalization. When set specifically to suit the Indian context, AI can help manufacturers to forecast festive demand with higher accuracy and plan their inventory accordingly. With batch-size customization, smart tech also allows companies to customize production to match these demand forecasts.
Gains such as increased throughput, higher production efficiency, lower capital, and operating expenses, along with improved quality, make these smart solutions attractive for manufacturers. We believe the Indian counterparts need to play catch-up quickly and adopt a future-ready strategy centering on tech upgrades. Quality is crucial, and digital quality management solutions can spot quality issues well in time, making issues predictable and redressal quicker. Elimination of manual intervention in inventory transportation through digitization helps reduce turnaround time. Higher efficiency coupled with faster turnaround and superior quality control can provide Indian companies the added edge to compete in the global market.
Global electronic manufacturers are already warming up to these smart production upgrades. Top executives at electronics manufacturer Samsung point out that the company has been investing in Industry 4.0 or smart manufacturing much before the competition, and results are visible. Labor productivity for electronic manufacturer Foxconn at its Chengdu (China) factory increased three-fold (200%) with the adoption of digital technologies. Foxconn also reported a 92% decline in manual inspection at the same factory. Telecom company, Ericsson adopted 5G smart solutions at its Texas facility and saw employee output improve and manual material handling reduced by more than half.
Using Industry 4.0 technologies will propel the transformation of factories, value chains, and business models for compelling financial and operational returns. For example, Wistron’s facility in Kunshan has improved manufacturing costs by 26% through Industry 4.0 technology. Foxconn’s Shenzhen and Chengdu factories are already on the Global Lighthouse Network of the World Economic Forum list. Both Foxconn and Wistron are producing iPhones in India and have deployed solutions based on their experience from their Chinese and Korean plants.
Smart manufacturing initiatives are constantly evolving, as most technological evolutions tend to do. Deliberation around Industry 5.0 revolution is getting louder. On the demand side, a larger share of the smartphone market, both domestic and international, is up for grabs.
Companies need to identify the right opportunity and develop a comprehensive Industry 4.0 strategy to maximize their potential and selectively invest in areas that serve their greater business ambition. A well-rounded strategy can propel Indian smartphone makers further up on the global rank list. Adopting future-proof technologies is definitely the smart route to take.
(Lokesh Payik and Sushil Pasricha are partners in Bain & Company’s Bengaluru and New Delhi offices, respectively. They are leaders in the firm’s Advanced Manufacturing & Services practice)
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