India aims to become a leading nation in electronics and semiconductor manufacturing. However, significant improvements in inward and outward logistics are necessary, according to Ajai Chowdhry, Founder of Electronics Products Innovation Consortium and Co-Founder of HCL. While the Government of India’s Gati Shakti, the national master plan for multimodal connectivity, can help, there is still much to be desired.
Challenges in Inward and Outward Logistics
India faces substantial challenges in logistics, which hampers its electronics manufacturing sector. Chowdhry highlighted these issues in a conversation with Business Today, stating, “India does not have inward and outward logistics done well and still lacks ease of doing business.” For local manufacturing, components are often sourced from multiple countries, necessitating efficient and frictionless import processes.
Chowdhry cited Taiwan and Vietnam as examples of efficient logistics systems. In these countries, components arrive in the morning, are assembled into products by afternoon, and shipped out the next morning. This level of efficiency is crucial for electronics manufacturing, which demands a faster pace compared to other industries. “When Dell used to talk about many years ago, just-in-time manufacturing, that’s what it was all about,” he added.
Importance of Air Logistics
For electronics components, weight is generally not an issue, making air logistics a viable option. Chowdhry emphasized that 80 to 90% of component logistics are not based on ships but on air transport. “Where are the large air cargo planes available? This is a big issue,” he said. NITI Aayog, along with industry leaders, has discussed the importance of improving air logistics to boost electronics and telecom manufacturing in India. Chowdhry pointed out that as the country ventures into electric vehicles (EVs), the significance of electronics will only grow, with 70% of EV components being electronic.
Building a Warehouse Network
One of the critical steps to improving logistics is establishing component warehouses within India. Currently, many large component distributors have their warehouses in Singapore and Hong Kong. Chowdhry stressed the need for these warehouses to be located in India, where manufacturing occurs. “The cost and time of inward logistics can be reduced dramatically by getting a large number of component warehouses set up in India,” he said.
Chowdhry proposed starting with five to six key locations where electronics manufacturing is concentrated, such as Noida, Chennai, Bengaluru, and Hyderabad. Establishing warehouses in these locations would significantly streamline the supply chain, making components readily available and reducing lead times.
Government and Industry Collaboration
To address these logistical challenges, there must be collaboration between the government and the industry. Chowdhry, who is involved with NITI Aayog’s programs for electronics, telecom, and automotive sectors, emphasized the importance of such cooperation. NITI Aayog is working on integrating India into the global value chains (GVCs) and making the country a significant player in the global electronics market.
Discussions with the Department for Promotion of Industry and Internal Trade (DPIIT) and other governmental bodies have highlighted logistics as a key priority. By focusing on improving logistics, India can enhance its manufacturing capabilities and attract more investments in the electronics sector.
Future Prospects and Strategic Moves
While improving logistics is a critical short-term goal, India must also focus on long-term strategies to sustain growth in the electronics and semiconductor manufacturing sectors. This includes investing in research and development (R&D), fostering innovation, and enhancing skill development programs to create a highly skilled workforce.
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Moreover, building strategic partnerships with global technology firms can facilitate knowledge transfer and bring advanced manufacturing techniques to India. Strengthening intellectual property rights (IPR) frameworks will also encourage innovation and protect the interests of both domestic and international companies operating in India.
Conclusion
India’s aspiration to become a hub for electronics and semiconductor manufacturing is ambitious but achievable with the right strategies. Addressing logistical challenges, especially in air logistics and establishing local warehouses, is crucial for streamlining the supply chain. Collaborative efforts between the government and the industry will play a pivotal role in overcoming these hurdles.
As Chowdhry pointed out, efficient logistics systems are vital for the fast-paced electronics industry. Learning from countries like Taiwan and Vietnam, India can develop a robust logistics framework that supports its manufacturing ambitions. By focusing on both short-term improvements and long-term strategies, India can position itself as a global leader in electronics and semiconductor manufacturing.
Improving logistics, fostering innovation, and creating a conducive business environment will not only enhance India’s manufacturing capabilities but also contribute to the country’s economic growth and global competitiveness.
