 "Tamil Nadu's electronics, IT hardware sectors see recovery")
The electronics & information technology (IT) hardware industry in Tamil Nadu had felt the heat after the shutdown of Nokia's manufacturing unit in November last year - both in terms of job losses and a drop in exports. However, if a series of announcements in the past few months are anything to go by, there has been some recovery of late.
Electronics major Flex has, for instance, announced it will expand its domestic tariff area (DTA). While electronics maker Sony has announced production of television sets, smartphone major Samsung is investing Rs 800 crore in the state. Taiwan-based Delta Electronics is putting Rs 4,000 crore in Tamil Nadu, while contract electronics manufacturer Foxconn has shown interest in starting production here.
However, the challenge for the industry in the state, as for most other parts of the country, is the high compliance cost of manufacturing in India. It will need to be reduced for attracting more investment in manufacturing, say industry players. They also want the approval process to be made quicker.
Since the Nokia shutdown, around 30,000 people have lost jobs, hitting the sentiment in the electronics cluster. When Nokia's manufacturing was at its peak in 2012-13, electronics and electrical goods' exports from the Chennai airport stood at 23,600 tonnes. However, the volume dropped to nearly a fourth, 5,746 tonnes in 2014-15. The imports of electronics and electrical goods dropped 33 per cent from 42,192 tonnes in 2012-13 to 28,325 tonnes in 2014-15.
The scenario was a major challenge for the state, which kept blaming the Centre for the mess at Nokia. The mobile handset maker's factory in Sriperumbudur near Chennai had been frozen by the income-tax department before its shutdown. The state had also slapped a value-added tax (VAT) claim of around Rs 2,000 crore on Nokia.
Against this backdrop, the Global Investors Meet that concluded last week saw 98 memoranda of understanding (MoUs), worth Rs 2.42 lakh crore, being signed. Of these, two MoUs are particularly good for the electronics industry.
Under the first, Taiwan's Delta Electronics will set up an electronic hardware unit for around Rs 4,000 crore in Krishnagiri district, along the Tamil Nadu-Karnataka borders. The second MoU will see Samsung investing Rs 800 crore in setting up a unit to manufacture mobile handsets in Sriperumbudur. The company did not respond to an email sent by Business Standard .
Flex, earlier known as Flextronics, is in the process of expanding its DTA to manufacture electronic goods - from mobile phones to modems and set-up boxes. The company refused to disclose its investment details.
These three factories alone will provide employment to around 9,500 people.
The state's electronic hardware industry is estimated to have attracted a cumulative investment of $711 million in about eight years. That has created employment for over 10,000 workers in both organised and unorganised sectors. Tamil Nadu at present houses facilities of those like Nokia Siemens Network, Motorola, Salcomp, Flex, Samsung, Sanmina, Moser Baer, Dell and SPEL.
Amar Babu, chief operating officer of Lenovo Asia Pacific, and chairman of Lenovo India, said the industry in the country needed a stable policy regime where the industry could see the policy sustaining for a longer term. As an investment destination, Tamil Nadu has to compete with some global and domestic business hotspots. Babu said, the state had all the basic requirements to become a hub for industry; adding an ecosystem for component players would strengthen the potential.
According to Alok Ohrie, president & managing director, Dell India, the Tamil Nadu government is supportive. But some electronics manufacturers that have invested in building capacity in the country are seeing their capacities largely underutilised, as the local demand has not caught up with expectations. Ohrie said localisation in IT products was low.
Dalip Sharma, managing director of Delta India Electronics, said, "This facility (the one in Tamil Nadu) will be the largest for us in India, and one of the largest among our facilities across the globe." The company currently has manufacturing facilities at Rudrapur and Gurgaon, besides two research & development units (Gurgaon and Bengaluru).
Delta's Tamil Nadu facility is strategically located close to its Bengaluru R&D centre where it employs around 500 engineers, including in design, to support manufacturing. It is also near a port which will help the company to export. Delta was looking at exports in a big way from this facility, Sharma added.
On the advantages of setting up a manufacturing facility in Tamil Nadu, Sharma said there was an availability of engineering talent and power for the industry and the government was investment-friendly.
However, he added that the compliance cost of manufacturing in the country was high and needed to be reduced for attracting more investment into manufacturing.
