Valuable supply chains to create a hub of electronics manufacturing in India

June 9, 2022 6:35 pm

PLI idea is to create valuable supply chains that can overcome the disadvantage of higher costs which is associated with the production of goods of certain sectors.

Competitive cost advantage including economies of scale would enable India to eventually produce at cheaper costs and export to the world, states Pankaj Poddar, Group CEO, Cosmo Ferrites, while talking to OEM Update.

Business growth of Cosmo Ferrites in electronics industry 

We are a three decade young leading manufacturer and exporter of soft ferrites, with its state of the art manufacturing facility in the foothills of Himalaya. Our soft ferrite cores are made of Manganese Zinc (Mn Zn) and currently, Cosmo Ferrites exports to more than 50 countries across the globe. The Soft Ferrites manufactured by the company have multiple applications across Industries in power electronics, telecom, lighting, EV, solar, home appliances, automobiles, medicine, railway, and more and is currently a growing market. Moreover, the Government with its various schemes of PLI, SPECS and other schemes has shown the intent to give Electronics manufacturing a major push. The World is also looking at a China + 1 Strategy and India is in a sweet spot as far as Electronics manufacturing is concerned with the recent policy announcements to drive production of electronics within the country. With this focus, we expect the demand to increase further. Our aim is to capture at least 5 percent share of the global market in next few years which currently is below 1 percent.

 

Ferrite compounds potential role in EV and other electronics goods 

EV’s us ferrite cores at all steps for a range of functions, such as energy storage, noise filtering, self-shielding, and power conversion. Ferrites are made up of ceramic compounds with iron oxides integrated with nickel, zinc and manganese compounds that allow higher permeability and saturation induction levels. In other electronic goods, these are used in equipment design to suppress and dissipate high frequency noise levels caused by electromagnetic devices.

 

Government’s aim to introduce PLI outlay as incentive to aid manufacturing 

The Government recently outlined the $300 billion electronics production vision document in January which aims to make India the third largest electronics exporter exponentially expanding to $120 billion from the current $10.6 billion. The idea is to create valuable supply chains that can overcome the disadvantage of higher costs which is associated with the production of goods of certain sectors. This would make India a hub of electronics manufacturing. The competitive cost advantage including the economies of scale would enable India to eventually produce at cheaper costs and export to the world.

 

Semiconductor manufacturing opportunities in India

 The government cleared INR 76,000 crore incentive scheme for semiconductors under which India is to set up more than 20 semiconductor design, components manufacturing and display fabrication (fab) units over the next six years. The global scarcity of semiconductors also has major players in the electronics sector looking to invest in sustainable supply chains for chips. Along with the PLI scheme for electronics manufacturing, India is poised to play a significant role in the global supply chain with its focus to incentivize forward and backward linkages in electronic raw materials manufacturing. The IT ministry recently reported that the government has already received receipts of investment applications worth over $20 billion in the semiconductor space. The impact will be greater exports for India and employment creation in manufacturing sector. Semiconductor manufacturing at home will also drive demand for ferrites and at Cosmo Ferrites we are taking these initiatives into account and preparing for future capacity.

Considering the PLI scheme for electronics, how does PLI with FAME II can help MSMEs achieve maximum localization of components? 

With Fame II, the subsidy will be Rs 15,000 per kWh for electric two-wheelers. The government also announced PLI scheme for the manufacturing of advanced chemistry cell (ACC) in the country to bring down prices of batteries. The combined scheme targets majorly the manufacturer of EVs, lithium ion batteries and electric motors. In terms of primary components like Lithium supplies and some raw materials; we are dependent on imports from other countries. But, if we wish to achieve localization of components, we need to start from the raw materials India has, and that can source to ensure production of intermediaries thus slowly build up our supply chain in EV and other important sectors.

 

PLI to boost manufacturing output surpassing domestic demand enough to export

 Over the coming years, India will consume semiconductors of about $70-80 billion and will manufacture electronics products worth $300 billion in line with the government’s vision by 2026. Recently, Karnataka government has even signed a MoU worth $3 billion with a third party to build chip manufacturing facility in the state. India’s goal is to build and supply for the world, so investing in capacities that achieve that vision would definitely ensure that we manufacture in surplus leading to significant exports. 

 

Evaluating manufacturing growth given Rs. 3 lakh crores of PLI incentives to be paid out linked to manufacturing

 India’s production-linked incentive (PLI) scheme to encourage domestic manufacturing has generated investment commitments of R2.3 4 lakh crores across 14 sectors. In terms of output and job creation, government puts the estimate at output worth R28.15 lakh crores and 6.45 million new jobs over the next five years. We can expect significant ROI from the PLI investment in manufacturing. Moreover, the jobs it creates would have a multiplier effect on demand for other goods and growth. 

 

Indian manufacturers to attract investments to ensure efficiency and cutting edge technology Definitely, Indian manufactures would attract FDIs from matured electronic manufacturers across the globe (USA, Europe, Japan) etc., especially in the field of chip manufacturing, FAB, High Speed high accuracy next generation products and components. This will shorten the lead time and make India at par with the global manufactures.

 

Growth expansion in the coming quarters 

The company is doing well in terms of business numbers. Our quarter results for March 2022 came out recently. The company’s net revenue has increased by 75 percent on YoY basis backed by higher volumes, better sales realization and increased sale of technologically advanced ferrite cores. Our EBITDA increased by 272 percent at 9.38 crores. The company also has expansion plans to increase soft ferrites manufacturing capacity going forward.