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Steps for India to succeed in electronics services design manufacturing (ESDM)

Last updated November 25, 2014

By Mark Zetter

To paint a picture of the large subcontinent of India, I refer to Octavio Paz, the Nobel laureate, poet and onetime Mexican ambassador to the country. In In Light of India, Paz writes: “The first thing that surprised me about India, as it has surprised so many others, was the diversity created by extreme contrast: modernity and antiquity, luxury and poverty, sensuality and asceticism, carelessness and efficiency, gentleness and violence; a multiplicity of castes and languages, gods and rites, customs and ideas, rivers and deserts, plains and mountains, cities and villages, rural and industrial life, centuries apart in time and neighbors in space.”

Another contrast I experienced on a recent trip there presented itself as a question in my mind. It came as I exited the terminal at Indira Ghandi International Airport in New Delhi at 2 a.m., walking with my luggage and searching for my driver, whom, I was told by our client, would be bearing a nameplate. (OEM Exclusive: Request list of EMS/ODM providers anywhere in India)

I stepped outside. The area immediately surrounding the terminal was dirty. Stray cats and dogs roamed freely across the open ground. The smell in the cool, early-morning air was…interesting. Dozens upon dozens of taxis, far more than what seemed necessary at that hour, idled nearby. The drivers, each ventured far from their respective taxis, visiting with one another.

This activity played out more like a recurring nightly get-together than a disciplined, eager-to-earn-a-rupee, business endeavor designed to place food on the table and build wealth.

In 1991, India found itself nearly bankrupt with no more than three weeks of foreign currency left in its reserves. To help address this, the government began deregulating certain enterprises. Enter Aroun Shourie. Although occasionally controversial, Shourie is one of a group of well-known thinkers changing the Indian mindset on deregulation. Shourie is minister of state and executioner of privatization in the recently displaced BJP-led coalition government.

India continues its privatization efforts to this day, inviting NGOs to invest and help manage, or to purchase outright, previously government-run enterprises, while continuing to implement measures to further open its economy to the world.

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No one can deny India is the last great emerging market. But unlike China, which has grown tremendously over the past 20 years, India still lacks many basic infrastructures. Phones, electricity, water and roads can challenge even the most veteran traveler. Take, for instance, cellphones. Whereas one can purchase a handset in China and rely on using the phone anywhere in the country, India’s infrastructure can necessitate purchasing a new phone for each of the nation’s states.

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Meanwhile, China will soon, if not already, lay claim to having one of the most extensive railroad distribution systems in the world.

Author (third from L), with Rajeeva Ratna Shah, then Secretary to government of India, Ministry of Commerce & Industry, Department of Industrial Policy and Promotion (third from R), at Indian electronics industry event in 2005. Not much has progressed in India's (domestic) EMS industry and capabilities since then.

India is the world’s largest democracy, and benefits from its standing as the third largest English-speaking nation in the world, after the U.S. and the U.K. That said, less than 4% of India’s population speaks English. Some might say there is also wide corruption in all levels of Indian society. So, in some instances, you could be taken advantage of while doing business in India and not know what is going on. (Get the double meaning?)

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In his book, The Corrupt Society, Indian author Chandan Mitra compares that nation’s society today to that of one of Niccolo Machiavelli’s second-category societies mentioned in the 1505 novella, The Prince. In such a society, Mitra points out that India’s citizenry, while actively participating in the political process through elections, is primarily engaged in promoting its own ambition to the detriment of the common good.

Some say that if corruption did not play a significant role in the intricate bureaucracy of Indian government and business, the system would not work at all. The rationale: because of the corruption, plans are drawn and executed and relationships are appreciated by way of greased palms, so as to begin anew another day.

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Technology Footprints

Where NASSCOM (National Association of Software and Service Companies) has been able to move India’s software industry into the world markets, India’s hardware manufacturers are struggling to find footing. Granted, there are some terrific, large companies. However, relative to electronics, seemingly capable contract manufacturers are still finding it difficult to be acknowledged in the global markets, let alone compete.

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