HARDWARE MANUFACTURING IN KERALA

In the seventies and early eighties, Kerala led the front in electronic manufacturing. Keltron spearheaded the movement. The products of Keltron brought pride to every Malayali. Companies such as BPL, ITI, Instrumentation Ltd, OEN etc also helped the manufacturing cause. Later, we had a great fall from the leadership and today Kerala does not figure anywhere in electronic or IT manufacturing. Other than and V-Guard, FC OEN & OEN in the organized sector and some loitering public sector companies, what we have today is few local UPS manufactures and hoards of computer assemblers.

Early Indian IT Scenario

In the late Seventies, due to Central Govt. policy changes, companies such as IBM, ICL etc left India. The chasm created by the exit of these companies was filled fully by indigenous computer companies. They came out with their own product and solutions. The global IT industry was at its nascent stage then, with no standards available to be followed. Proprietary hardware and software ruled the roost. Lots of the State Government companies went into computers. Meltron, ESPL, Hartron, Uptron, WEBEL etc from the State Govt. sector and ECIL, ET&T etc from the Central sector had actively participated in the early IT evolution in India.

Private Indian Companies took over the leadership from Government companies in the second half of Eighties. Those were times when standards were emerging in IT industry. The Personal Computer (PC) came into being. Companies such as HCL, Wipro, Hinditron, PCS DG, and Zenith came out with Mini Computers, Personal computers and workstations. Marketing and advertisement campaigns boosted these companies and products.

IT Manufacturing in India now

Opening up of Indian economy by the Center in the early Nineties and the resulting globalization helped the multi national hardware giants to set foot in India again. Today, we have a thriving hardware market in India ably backed up by Indian manufacturing. Both on quality and standards, Indian IT products are at par with its counterparts in developed world. In this financial year, Indian PC sales had crossed 5 million mark and every year, this is growing in excess of 20%. We should also take into account computer peripherals and accessories into this. And together, this forms big time manufacturing endeavor for the country.

Core IT manufacturing never happened in India. We have no plants or factories that manufacture Computer motherboards, Drives, Controller cards and Display and Storage devices. This has now become the monopoly of Taiwan, China & South Korea. So, what come to India for manufacturing are fully manufactured sub systems, which get integrated as a computer system or a peripheral, in Indian factories. Even this activity requires high level of automation and strict quality checks. And remember, the quantity is huge.

The size of the opportunity

Convergence of Mobile phone and Laptops are now taking place. Palmtops and other mobile devices are getting sold and used very well. With ‘devicification’ IT (devices and appliances delivering distinct IT utility), the scope for manufacturing and high level assembling is very high. Indian market itself for these devices is huge. The sales could exceed million numbers for each of these units. I find it as an exiting opportunity for Indian IT manufacturing!

Whither Kerala?

However none of this manufacturing ever came to Kerala. To a large extend, IT manufacturing today is concentrated in Bangalore, Delhi, NOIDA, Mohali, Chennai, Pondicherry etc. I am very impressed at the growth of computer manufacturing facilities in Pondicherry. Full credit for this must be given to the Pondicherry administration. Today, every major computer brand, national and international, is manufactured here. For a geographically spread country like India, this alone will not be sufficient. One see States like Himachal Pradesh, Andhra Pradesh and Uttranchal etc wooing major IT manufacturing companies and MNCs to set up their manufacturing bases in their State. And they are offering plenty of sops & incentives for the same.

Perception of Kerala as a manufacturing base (for anything) is very poor. The major reason sited very early is the militant trade unionism in the State. Though it is a thing of the past, doubt still lingers in the mind of industrialists and businessmen. Another major negative factor is the frequently occurring bandhs and hartals in the state. It is a major show stopper indeed.

Anyone who had done business in the State will also comment on the attitude of Government and bureaucracy towards businessmen and entrepreneurs. Unless and until proved otherwise, an entrepreneur here is viewed as an exploiter, a tax evader and a profit monger. Inspector raj and visit raj still continues in Kerala. Kerala laity even now believes that companies are meant for employment and not for profitability. Who will invest here when our business objective itself is faulty?

The political leadership is highly insensitive towards business and manufacturing. They will think of business people only during election time. As soon as they come to power, rhetoric and highly ambitious statement are made before Chambers and businessmen. The Ministers and bureaucrats make three four world tours to invite businessmen to set base in Kerala. But when anyone tries to start one, he is forced to go through umpteen hurdles, particularly from the bureaucracy. There is absolutely no empathy towards business fraternity here.

Computer Assembling/Integration in Kerala

Though Kerala’s share of IT consumption comes to only 4 to 5 % to the national average, it is still a big number. Out of about 200,000 plus computers (including Desktops and Laptops) that comes to Kerala, 50% still are assembled. More than 100,000 computers get assembled in Kerala, that is. 40 to 50% percent of computers will also go with add-ons such as printer, UPS, Scanner etc

But this assembling is not at all done properly. No scientific and automated process is followed for assembling. No quality test happens. The assembling and integration are not done in proper ambience. Static electricity, rough handling of components etc can reduce the longevity of the product.

Assemblers are a fragmented lot. There are close to 2000 computer resellers/assemblers in the State. Out of this, tax registered companies will come to about 1000 and the rest are one man, two man armies. But still the sales happen because the buyers are highly concerned about the price. Even today, an assembled computer cost 30% less than a MNC brand and 20% less than a national brand. Since assistance for operation and usage is required even after installation, buyers prefer ‘friendly neighborhood’ assemblers. If one put some values to the numbers that is assembled in Kerala, the Kerala assembled computer market would exceed Rs. 250 Crores.

The Keltron Angle

Purchase by State Government depts. are done through public and closed tenders. In the past years, there had been an effort by State Government to revive Keltron from the dumps and this had resulted in Keltron getting into computer sale, particularly to the Government. Since it is a Government to Government deal, the buyers do not bother much, as compared to buying from private companies. Keltron is taking advantage of the situation and in the process, they are able to generate good margins for themselves. However what needs to be understood is that Keltron only acts as a trading house or at best, a VAR. No Keltron brand computer is sold. If Keltron takes a market vision and applies itself to address it through proper planning and scientific manufacturing methods, it could capture a good percentage of the above assembled market pie. However lack of focus and sincerity combined with poor marketing efforts makes Keltron just an ‘also ran’.

Some time back, there was a move by Kudumbasree to manufacture computers as a part of its self-help group (SHG) activities. However, it had not registered any impact in the local computer scenario.

Scope for IT manufacturing in Kerala

This could be anybody’s guess. However looking at the ever increasing number of computers and devices that get sold every year, the gut says that the scope exists. If the local manufactures can find market in outside States too, the scenario is all the more encouraging.

Firstly, State Government must have designated hardware manufacturing parks. Uninterrupted quality power, single window clearance, Tax concessions, testing facilities etc could help local manufacturing. IT hardware manufacturing does not produce pollution and it does not create environmental hazards. Therefore, it could be considered as clean manufacturing.

The Government should take efforts in bringing in one or two major MNC or national player to Kerala to set up the manufacturing base in Kerala. This ‘bringing home the leader’ would help set a manufacturing ambience in the State, which could encourage others to start hardware manufacturing facilities here. Look at what Uttaranchal Government did this year. It gave free space and tax concessions to HCL to set up its manufacturing facility in the State. Today HCL is using this facility for manufacturing computers that it sells to entire north India which will amount to more than 200,000 computers a year.

Last year, Dell computers had decided to set up its manufacturing base in Tamil Nadu. One sees a ‘Maran’ hand behind it. I would call that as commitment to State by a politician. Our MPs, MLAs and Ministers must take note of it, than fighting (in the open) among themselves or undoing the policies of the previous Governments. Other brands such as Lenovo are scouting for setting up its integration base in India. Largescale manufacturing/assembly facilities in Kerala by MNCs can help them make cost effective computers meant not only for the local market but also for Middle East and African markets. With the developments happening in Cochin Port and Cochin International Airport, there is a distinct possibility for this to happen. The Government and political leadership must cash upon this opportunity. If the Government can give the level of encouragement as done by other Governments such as Uttranchal, Himachal, and Andhra, I am sure this can come true. Employment generation and the resulting economic upliftment of the locals would give ample gratification to our leaders.

If the government can also assist the local manufacturers by getting Keltron/ Kudumbasree to give them umbrella marketing coverage for their products, it can help develop a good number of process oriented IT manufacturing units in this State. It could be an arrangement similar to the current V–Guard stabilizer business model.

The State should be able to incorporate studies about hardware manufacturing models and processes in the syllabus of engineering studies for degree, diploma and certificate courses, with stress on practicals. This would bring out good number of graduate and diploma engineers, who will be prepared to go into manufacturing companies. These institutions must encourage entrepreneurship of the student fraternity and should set up incubation and testing centers within it, to help budding entrepreneurs.

If the Government is serious about setting up of electronic or IT manufacturing bases in Kerala, it has to get out of the current attitude of ‘come to us if you want’. For the number of engineering graduates and diploma holders that is produced every year in Kerala, the State needs to think in terms of encouraging such endeavors. IT manufacturing will qualify for the white collar job aspirations of Malayali and looks as a good option. The lethargy and complacency that the State shows towards electronic/IT manufacturing must give way to enthusiasm and encouragement of entrepreneurship in the field.

Let a thousand IT flowers bloom in Kerala!