 "Tamil Nadu strives to reclaim place in India's electronics industry map")
Among the recent developments is Lenovo’s announcement that it will resume the Motorola facility near Chennai and produce six million units of Lenovo and Motorola phones in a year.
Another notable development is that Foxconn is reportedly in talks with the state government to start manufacturing in the state. Sony, too, has announced it will start manufacturing TV sets in the state, while Videocon's consumer durables factory is set to go on stream soon. Dell, too, has reportedly held talks to expand capacity.
These positive stories come soon after the Nokia facility near here was shut following tax disputes with the central income tax department. While the incident had dented Tamil Nadu’s image, the new developments have come at a right time for the state, gearing to hold a Global Investors’ Meet next month. According to officials, the target is to attract investment worth Rs 1 lakh crore.
“Our global manufacturing partner had a facility there which we could leverage. That was the basic reason and we were comfortable with availability of talent, port connectivity, etc,” said Amar Babu, chief operating officer, Asia Pacific & India, chairman, Lenovo. He added the firm had always seen Chennai as a good location logistically and for ease of doing business.
Electronics past
Tamil Nadu was once a major player in electronics manufacturing. In the early 1980s and 1990s, it had 43 television manufacturers, making the state one of the largest hubs for this.
The 10-km stretch along Sriperumpudur-Sunguvarchatram near here was the largest corridor for the electronics industry in India. Things turned upside down after the liberalisation in the early 1990s, which paved the way for multi-national companies (MNCs). Local manufacturers could not withstand the intense competition, putting an end to Tamil Nadu’s dominance in electronics manufacturing.
However, the state’s contribution to national electronic hardware output did not wane. It, in fact, increased from 10 per cent in 2008-09 to 18 per cent in 2012-13. In 2012-13, hardware exports from this corridor were Rs 20,000 crore.
According to a senior official with the state government, things have slowed since 2013-14. While exports data for this period is yet to be released, the official pegged a 40-50 per cent drops.
“There is zero duty for finished products but if it is a component, it will attract duty. This inverted duty structure has really taken a toll on the domestic industry,” said the official.
The official noted that at its peak, Nokia used to bring one jumbo jet to Chennai full of components.
The company’s localisation was only 15-18 per cent, which was, though, the highest compared with other companies located in Tamil Nadu.
The Nokia factory alone employed about 8,000 persons, 50 per cent of whom are women, directly. The plant employed another 25,000 indirectly. Between 2005-06 and 2011-12, it had a cumulative turnover of about Rs 1.5 lakh crore.
Besides Nokia, Motorola Mobility, Foxconn, BYD Electronics, too, have closed operations in the state, which resulted in thousands of people losing their jobs.
The total investment in Tamil Nadu’s electronic hardware sector is estimated at $710.95 million, employing 40,000 workers in both organised and unorganised sectors.
Among the major players in the electronic hardware sector in the state are Nokia Siemens Network, Motorola, Polymatech, Flextronics, Sanmina, Samsung, Dell, Natronix, TAPP and SPEL.
Tamil Nadu has 23 electronic hardware technological parks located in major information technology-centric special economic zones of Sriperumbudur, Oragadam and Mahindra World City.
Way forward
Sunil Rallan, president, Tamil Nadu Association of SEZ infrastructure Developers, was apprehensive about the industry a year ago. However, he is now optimistic because the state government has woken up to the issues and has started addressing those. “I personally attended several stakeholders’ meetings called by the state government and I could see what the government wants to do. One important thing is developing vendor base, which is critical for the industry.”
Supply chain is critical for the success of this industry. For instance, in Taiwan, one of the world's largest electronics manufacturing hubs, 90 per cent of the goods are manufactured by small and medium enterprises.
Tamil Nadu Electronics Industries Association of India plans to set up electronic manufacturing clusters in Coimbatore, to be spread across 157 acres of land. Similarly, in Krishnagiri district, a GMR Special Investment Region has also been proposed.
The Department of Electronics and Information Technology, Government of India, has notified Kancheepuram and Vellore districts as ‘brown-field electronic manufacturing clusters’ to enable the electronic manufacturing units to claim incentives under the Modified Special Incentive Package Scheme, or MSIPS.
The state is in the process of creating a value chain for electronics industry, like it did for the automobile industry. “While in terms of value and units, the state might be the biggest cluster for electronics, but if you take the number of units, it will be relatively low compared to the neighbouring states of Andhra Pradesh and Karnataka,” said an official.