Indian electronics - past, present and future
06 September 2010
When India became an independent country on 15th August 1947, and according to Mr. Nehru (the first Prime Minister), met its ‘Tryst with Destiny’, it was bankrupt! Years of colonial misrule and the massive drain on its resources as part of the war effort had left it virtually penniless and devoid of any meaningful industry, let alone electronics.
According to Abid Hussain, a famous former Indian Diplomat, "…after a long period of subjugation, its land and people were a picture of distress, removed from great events of its past glory and splendour. A whole creative side of Indian civilisation had shrunk under foreign rule."
History records (as confirmed in 'The Proceedings of the IEEE, Jan. 1998') that the famous Indian Scientist, Sir J.C. Bose invented Radio Technology (not Marconi as is wrongly believed) and demonstrated radio transmission in Calcutta in 1896 in front of the British Governor General and repeated it in 1899 at the Royal Society, London in the presence of such great scientists and notables as Rayleigh, Fleming and Lister. Marconi was apparently part of the audience. Yet even at the dawn of Indian independence in 1947 there was no local manufacture of any radio technology based equipment. The closest associated activity was the repair and upkeep of large numbers of radio communication systems of World War Two vintage, by the Signals Corps for use by the Defence Services.
The country had to wait until 1948 for its first locally manufactured valve based radio sets when Philips set up arguably, India’s first electronics manufacturing factory in Calcutta.
Telephony came to India as early as 1882 when the Oriental Telephone Company of England, installed the first telephone exchanges in Calcutta, Madras and Bombay with equipment primarily sourced from Bell Telephones, USA, and a few systems from Ericsson, Sweden. Yet again, India had to wait until 1948 to have its first locally manufactured telephone exchange, made by Indian Telephone Industries Ltd. (ITI), Bangalore, a public sector company set up with technology from ‘Automatic Telephone & Electric Company, Strowger works, Liverpool’, a Plessey entity.
Despite all the problems that India had to face because of its participation in WWII on the side of Britain, it did learn some extremely crucial lessons as far as electronics is concerned and gave a great impetus to the subsequent development of the industry in India. The war era developments in radar systems, microwave technology, other innovative communications technologies, long range radio broadcasting, the first analogue computers etc., clearly pointed the directions in which this rapidly emerging field of electronics was heading towards.
Until 1960-61, barring radio broadcasting and telephony, all electronics activity, manufacturing or otherwise, was more or less under the direct supervision of the Ministry of Defence of the Govt. of India. In 1954, Bharat Electronics Ltd. (BEL), another public sector entity was set up in Bangalore to manufacture a range of electronics systems, equipment and components. By 1956 the company had started producing a wide range of communication systems. In 1961 it started manufacturing receiving valves in association with Mullard and Philips, and by 1962 the company made its first semiconductor devices albeit made of germanium. By 1967 the company was already a significant manufacturer of silicon discrete and integrated circuit devices well ahead of anyone in Asia.
Meanwhile, with the growing requirements for sealed panel meters for defence and other applications, a small start up in the state of Kerala, British Physical Laboratories (BPL) India established a manufacturing unit in 1963 to address this market. (I have to this day a fully functioning multimeter of that vintage made by BPL). Within a span of five years the company grew rapidly and diversified into the manufacture of electro-medical systems, power line communications carrier equipment and subsequently also became a major producer of televisions and other white goods.
With the chronic shortage of foreign exchange in the country, yet recognising the vital importance of a domestic electronics industry to the growing needs of the country especially for its Defence, Space and Atomic Energy programmes, the Government of India in 1963 appointed a very high powered ‘Electronics Committee’ comprising of some of the then best technical brains in the country, including Dr. Bhabha (the father of India’s nuclear programmes) and Dr. Sarabhai (the father of India’s space programme). The terms of reference of this committee under the Chairmanship of Dr. Bhabha were:
• To assess the total requirements of the country in respect of various items of electronic components and equipment
• To survey the existing and potential sources of supply and to recommend how best these sources can be tapped and capacity expanded
• To recommend measures for the planned development of electronics, so that the country as a whole may become ‘self sufficient’ in this field in the shortest possible time and in the most economical manner
Laudable as the objectives were of appointing such a committee with all the expertise available to it, the reference to an attempt at achieving ‘self sufficiency’ in a planned manner and subsequent recommendations of the committee were very much in line with the newly introduced industrial and economic policies of the Government of the time with a heavy dosage of Soviet style planning. Thus at a time when the total annual indigenous electronics production in 1963 was only about $10 million (roughly a mid three digit number in today’s money), strict licensed capacities for manufacturers and an even stricter import licensing regime was introduced. Philips, the leading local radio manufacturer was only allowed to produce 60,000 radio sets with near zero import content allowed. I recently re-read the seminal work that the August Committee produced. Whilst an admirable work for the period in history that it was made, some of the proposals (enforced by a newly formed bureaucracy, The Department of Electronics) for a modern electronics industrial base as we know it today, sound quite simply ludicrous.
Thus, given the strangulating licensing controls, perennial shortage of foreign exchange, limited availability of modern manufacturing machines and most important of all, a limited indigenous market (exports then were a pipe dream!), numerous electronics locally owned (foreign owned companies were prohibited in most sectors, Philips India being a notable exception as it already existed at the time of independence) manufacturing units were set-up in the country’s protected market at scales of manufacturing and attendant high costs of output that had very little bearing on what was happening in the world outside. Sure, we (self included) were manufacturing silicon transistors and Integrated Circuits (wafer fab included) in India before 1970, long before even the Japanese got into it actively with China nowhere in the picture. The country and the pioneering managers and engineers were immensely and justifiably proud of their technical prowess and achievements not realising that the cost structures were totally out of whack. The sufferers were the end customers who for years did not have the availability of more modern, cheaper, better performing products as imports were restricted.
Companies were set up to manufacture pretty much everything. Transistors, Diodes, ICs, Hybrid Circuits, Electrolytic and Film Capacitors, Chip Capacitors, Resistors, Connectors, Ferrites, you name it. Some from indigenously developed technologies, some from reverse engineering and some from old generation technology sourced from overseas. In 1967, the electronics group from the Department of Atomic Energy was spun off as the Electronics Corporation of India (ECIL) with a view to generate, in ECIL’s own words: “A strong indigenous capability in the field of electronics, the initial accent being on total self reliance”. Thus were born India’s first solid state TV and India’s first digital computers based on Russian and COMECON versions of IBM 360 technology and the French (CII- Honeywell Bull) IRIS range. Peripherals were based on Polish and Bulgarian designs.
A Centre for Development of Telematics (C-DOT) was set up under the brilliant and dynamic leadership of Sam Pitroda. C-DOT came out with quite revolutionary and, in terms of technology, possibly the very latest in the world. Although C-DOT had a very significant effect on developing Telecom technology in India, a limited domestic market and unwarranted political and bureaucratic interference stunted its growth.
With IBM and ICL, the two leading computer manufacturers of the day having been asked to leave the country, along with Coca Cola, by a petulant Labour Union Supremo who by an accident of political history had become the Minister of Industries, ECIL had pretty much a monopoly.
Ironically it were the laid off high calibre engineers laid off by the departing IBM and ICL who started companies doing data entry operations and software tasks that were to set the foundation of India’s highly successful Software business, an area of activity which mercifully had negligible licensing or bureaucratic controls.
Foreign companies who admired the technical prowess of India’s electronics engineers and sensing the potential of coupling that English speaking resource with India’s abundant, low cost labour, wanted to set-up in India for large scale exports. Unfortunately, given the heavy socialistic influence in policy making, ‘exploitation of Indians at minimal value added’ was not to be encouraged. So of course Electronics assembly activities of large multinationals found avid takers without the socialist baggage, first in Hong Kong and Taiwan and subsequently in Singapore, Malyasia, Thailand and finally in a welcoming China.
The Indian Electronics industry, as did many other manufacturing sectors in the country, thus meandered its way through the 1970s and 1980s to great praise from its admirers in the erstwhile Soviet block who could and did massive trading with India in soft currencies or a barter system based around imports by India of weapon systems and military aircraft. But this was really ‘Alice in Wonderland’ stuff that came rapidly crashing by 1990 when India was quite bankrupt again, as at the time of independence. The then Finance Minister (currently the Prime Minister) introduced economic liberalisation. Licensing and other controls were removed, foreign exchange regulations were massively liberalised, travel restrictions were now part of history.
A brave new India was born in 1991. But the electronics industry soon discovered to its horror that it was, barring exceptions, no longer a really viable sector. Latest equipment and components could now be imported at much cheaper prices and at substantially higher quality and reliability levels. This was the death knell for all those electronics manufacturers who thrived solely on the basis of a highly protected local market.
The consumer electronics business rapidly became dominated by the Korean and Japanese companies, who having reached viable scales established local assembly. Even a highly respected and long established company like Philips India had to sell of some of its major production facilities to Jabil. Companies like BEL and ECIL now largely concentrating on professional equipment for Defence, Space etc., continued as niche players with volumes coming from the manufacture of Electronic Voting Machines (Please see The democracy dividend for Indian Electronics).
ITI, the pioneer in telecommunications equipment manufacture struggles to survive out flanked by nimbler foreign companies. The component and materials manufacturers pretty much died out almost eliminating the local supply chain for meaningful local electronics manufacturing. Indian electronics was now largely Chip and System designing, a high value addition offshoot of the very successful Software Sector.
It was the mobile phone revolution in India that brought back a respectable level of electronics assembly to India. With literally millions of new mobile phones being lapped up each month (10 million in July 2010 alone for example) and with only a slight nudge from the authorities, the likes of Nokia established large scale assembly of hand sets in India. With the rapidly burgeoning telecommunications systems requirements in the country, Ericsson and Nokia Siemens Networks and other manufacturers also established local assembly. They brought with them some of their own supply chain entities and a bunch of the internationally known EMS companies also set-up shop to cater to their requirements.
A further boost to local manufacture came with the massive growth in the Cable TV and Direct–to–Home (DTH) TV sector, requiring very large numbers of set top boxes, remote controllers and associated paraphernalia. Most of these requirements were also met by the now established EMS companies such as Jabil, who had bought out a former Philips manufacturing facility.
What of the future?
Clearly, the mobile telephony boom in India will continue for some years yet. It has a large pent up demand coming in from the smaller towns and rural India. So the likes of Nokia, Ericsson, Nokia Siemens Networks will continue to prosper and grow, as will their supply chain units and associated EMS entities. 3G mobile telephony will soon make its mark in the country leading to considerable additional demand. The five or six Indian handset companies (with reasonable and growing market shares) that currently get handsets made to their own specifications in Taiwan and China may decide that their operations have reached viable volumes, and may take the plunge into local assembly via the EMS route. The likes of Apple however doing any local assembly do however seem very remote indeed.
The Government of India is aware of the huge sums of money that gets spent on imported communication systems and once in a while there is talk (harking back to the heady days of socialism!) of indigenously developed systems. But bearing in mind China’s not so successful flirtation with a home grown 3G Technology (TD–SCDMA), or TD–S, it would seem quite unlikely that there would be any Indian effort in that direction.
With the country’s 8%+ GDP growth rate and a now very visible trickle down effect into smaller towns and rural areas, especially where modern movie halls and multiplexes are not available, there is bound to be a large increase in the demand for cable TV / DTH, and hence an increase in the requirement of set top boxes assembled locally.
The Indian automotive manufacturing industry is booming with growth rates of almost 30% per annum. We are already beginning to see increasing amounts of electronics in vehicles and this is clearly going to be a massive growth area. There are several Indian and foreign companies active in this sector.
The large public sector companies will also continue to thrive on the backs of increasing requirements of Defence / Space / Nuclear Energy establishments. With a thriving democracy and elections at National and State levels every so often, the manufacture of Electronic Voting Machines will continue to provide volumes.
I personally do not see volume assembly of international branded computers and peripherals in India in the near future. The supply chain has not yet been fully put in place and perhaps it is not economical to do so now anyway. But then there are always surprises.
Admittedly labour is now cheaper in India than in China as well as in Taiwan, Hong Kong, Singapore etc. This, coupled with other advantages of India such as a growing educated labour force estimated (by ILO and Goldman Sachs) to be about 100 million over the next decade should, in theory at least, make the country a very attractive destination for large scale manufacturing.
Unfortunately, to quote 'The Economist' (7 August 2010): “India’s manufacturers economise on labour, despite its abundance, favouring capital or technology instead. India’s advantage does not lie in, manufacturing that is labour intensive.” This is because of the strict and somewhat archaic labour laws of the country which become a major challenge to industry. Given electoral political compulsions this situation is unlikely to change soon.
The Indian Chip design business will flourish and grow. Already the world leader in this sector, I think we can reasonably expect more and more brilliant design ideas originating from India which will be incorporated in virtually every electronic appliance in the world, from smart phones to iPads, to home entertainment systems.
But where India will definitely score and possibly be ahead of the world would be in the area of innovation, already being dubbed as INDOVATION. Following on from the great success of the world’s lowest-priced car the Tata Nano, new products are coming out thick and fast from Indian entities. There is the world’s lowest cost (US$ 65) refrigerator from the Indian company Godrej & Boyce that runs on a cooling chip similar to the ones used in computers. It can stay cool for hours without electric power, can run on solar energy and has only 20 parts.
There is the $35 computer (yes it actually is a reality), Project Shakshat, developed by a combination of faculty and students from the Indian Institutes of Technology and the Indian Institute of Science. What is now making waves is the very low cost Tablet PC, the ‘Adam’ just introduced by the Indian company ‘Notion Ink’ (started by a bunch of 25 year-olds) in Hyderabad. The Adam, already being termed as the iPad killer, uses two breakthrough power saving components – nVidia’s Tegra 2 Chip and a Pixel Q1 Screen. Recently introduced is the world’s first dual screen computer by a company called Silicon Labs Pvt. Ltd. A company called ‘Virtual Wire Technologies’ has introduced to the world a new generation of chips that enables playing online video games on TV sets without even wiring into a computer. I can give many more examples but let us save this for a totally separate article. How many of these become world beaters like the Tata Nano remains to be seen, but there is no doubt that India will be back on the international screen, long before 2013 when it overtakes China as the world’s fastest growing economy, according to a very recent report by Morgan Stanley!
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