India: Makers Adopt Export-or-Perish Mantra

Resistor companies in India are climbing on the exports bandwagon. Competing against cheap imports from China for the low end of the component market is no longer a viable option. Chinese firms have an advantage in manufacturing volumes which even the largest of India’s component makers cannot match. The option then is to focus on building niche and specialized products for both the domestic and export markets.







The focus on exports is beginning to pay off. According to Karan Dogra, executive-research & database, Elcina Electronic Industries Association of India (Elcina), “The 60 companies manufacturing resistors in India could be exporting 40 percent of their combined production volumes. We expect this to rise sharply in the coming two years.” Primary export destinations are Europe and the United States. Elcina anticipates a 20 percent CAGR rate for exports from 2005 to 2007. S.



Ramakrishnan, a director at Watts Electronics, expects his company’s export growth to easily outstrip the Elcina estimate, “We expect a CAGR or around 30 percent from our export business, mainly due to strong demand from the consumer electronics sector.” Pamela Ann Mathew, managing director O/E/N India, on the other hand expects export growth rates in excess of 60 percent fuelled by demand from sectors like automotive, defense and telecom equipment.



To help garner export business most companies are focused on building up quality certifications and investing in R&D. According to Mathew, “Getting quality certification like the ISO series is critical for component makers. We are ISO 9001 certified and certainly this helps when we are trying to export.”



According to Ramakrishnan, “We are focused on R&D as a means of improving product quality and developing new ones. We realize the importance of manufacturing products acceptable to international buyers and this is only possible with a sustained focus on R&D.”



Domestic demand is also strong for the product. Most companies say capacity utilization is in excess of 90 percent. O/E/N and Stead Electronic Industries production lines are claimed to be running at full capacity. Primary domestic demand drivers are audio/video manufacturers, with color TV makers being the largest consumers. The automotive sector is another strong consumer, with demand from this segment growing by around 30 percent per year. Given the strong domestic demand and growing export focus, most companies see resistor volumes growing by about 35 percent annually.







Most are expanding rapidly to keep pace with this growing demand. While demand is strong, makers here say prices have been falling. This is primarily due to the easy availability of standard quality products from mainland China. Companies have to constantly innovate on products and adopt cost cutting measures to remain competitive. On average prices have dropped 5 percent since Q1 2005. This trend is expected to continue with a further price erosion of around 3 to 5 percent expected during the year. Raw material costs on the other hand have maintained an upward trend.