EFY’s Yashasvini Razdan engages in a conversation with Sajan Pullikoti David from Amara Raja Electronics Limited (AREL), the electronics manufacturing services arm of the Amara Raja Group, to put some light on how the company aims to capitalise on the growing momentum in domestic electronics manufacturing. Keep reading to find out more!
Q. What businesses does Amara Raja Electronics support?
A. Amara Raja Electronics is one of the Amara Raja group’s companies which provides electronic system design and manufacturing services with an end-to-end solution, from customer design services to turnkey manufacturing, including printed circuit board assemblies (PCBA), system-level integration, cable harnessing, magnetics, and post-sales support.
Q. How do you see the government’s production-linked incentive schemes impacting the electronics manufacturing sector? Has it benefited you in any way?
A. Domestic demand along with constructive government policies over the past few years have promoted production of goods within India having several schemes to encourage the manufacturing of electronic components. While the full impact of these initiatives is yet to be seen, the initial push has already improved the ecosystem for manufacturers in India. As the trend moves towards deeper manufacturing, encompassing both components and assembly, it paves the way for a sustainable future. We are also poised to benefit from this burgeoning ecosystem in India.
Q. How do you plan to leverage the growth in electronics manufacturing in India?
A. Growth will occur by securing new customers and expanding capacity by investing in modern technologies along with establishment of multiple factories. We are also considering potential mergers and acquisitions for future growth within India and globally.
Q. What industries do you offer your EMS services to?
A. We provide services to industries such as the automotive, consumer, power, energy, and home automation. We also have a smaller presence in the medical or healthcare sector, with some involvement in the defence and aerospace markets.
Q. What volumes of production can you support and what infrastructure do you have in place to support that?
A. When we work with automotive and consumer businesses, we often deal with high-mix, low-volume, and low-mix, high-volume operations. The former means we produce a variety of products in fewer numbers, but the overall volume is remarkably high, ranging from 100,000 pieces to a couple of billion pieces per year. On the other hand, in sectors like energy, medicine, and industry, we focus on high-volume production, producing a wide range of products in larger quantities.
We intend to diversify our revenue streams across these segments to protect against industry-specific shocks. Our state-of-the-art factories are equipped with the latest technology and automation to support this.
Q. Do you also offer prototyping services for startups?
A. While prototype manufacturing is not our core business. we support all types of customers, whether startups or established companies. We do not specialise exclusively in prototypes or small-volume production. However, we assist customer with their prototype needs and volume production requirements.
Q. Do you source the components for your customers, or do they provide them, or is it a mix of both?
A. The design to manufacturing process is guided by the bill of material (BoM), which depends on the customer’s specifications, such as which manufacturer and port number to use in the product. However, there are areas where we have the flexibility to make choices.
Q. What do you do with the excess inventory that is left?
A. In electronic manufacturing services, it is important to minimise excess inventory to avoid tying up funds in unwanted stock. While eliminating excess inventory may not always be possible, it is important to work with suppliers and customers to minimise it. This issue is common in high-mix, low-volume businesses, so teams need to develop strategies to minimise excess inventory and avoid financial challenges.
Q. Who bears the cost of waste, and how much is it at Amara Raja?
A. The amount of waste in the electronics industry is minimal if a strong manufacturing practice is in place. Only setup wastage occurs in the plant, making it a small issue. With a strong manufacturing system and efficient practices, wastage is not a problem for AREL. The wastage percentage in electronics manufacturing is less than one per cent. Being not a huge issue, it is important to note that all manufacturing businesses have a certain amount of wastage, which is a part of the manufacturing cost and needs to be financially managed within the system.
Q. Do you have any plans to incorporate AI or robotics in the future?
A. The increased labour costs in Chinese manufacturing have led to increased automation and AI integration. Indian factories are following suit, but we still have the advantage of competitively using manual labour for more years. It is important to use automation judiciously and focus on leveraging our strengths. We should invest in automation only where necessary, considering the importance of skilled labour and human judgement in decision-making. Smaller Indian companies also play a very essential role in manufacturing despite budget constraints.
