Digital Circuits’ big growth plan

Bengaluru-based Digital Circuits Pvt Ltd, an ISO 9000 and 14000-certified electronics manufacturing services company, boasts of having retained each one of its customers since the time of its inception and has grown in terms of revenue from a modest 4 million in 1997-98 to 250 million in 2007-08

By Jesus Milton Rousseau S

Tuesday, May 12, 2009:From an ancillary unit in a small town in Uttar Pradesh, Digital Circuits Pvt Ltd has grown into a 250-million unit, catering to the demanding market of electronics manufacturing services (EMS). To add a feather to its cap, it has also diversified and forayed into a different arena—kudos to the strong hands behind its achievements

Subhash Goyal, managing director, Digital Circuits, completed his engineering degree in electronics in 1971 from Punjab engineering college, Chandigarh. Though he belonged to a business family, he had the desire to pursue a professional career, joining Instrumentation Ltd, Kota, a public sector company. He worked in various departments of Instrumentation Ltd and gained the valuable experience required to run an enterprise. During this period, he also travelled to the UK to receive training on printed circuit board (PCB) testing and designing.

After working for eight years, Goyal resigned in 1983 and entered the EMS business by setting up an ancillary unit to ITI in Rae Bareli, Uttar Pradesh, for PCB assembly. The business took off and flourished till 1991 and the company started servicing the other units of ITI, which were situated in Naini (Allahabad) and Manakapur. However, in 1991, when the telecom sector was thrown open to private competition, the business of ITI started declining and Digital Circuit too, suffered. This development, on the one hand, reduced business opportunities with ITI but it also offered Digital the opportunity to serve other electronics and telecom companies in the private sector, which were growing with celerity. “After the liberalisation of the economy in 1991, a large number of electronics and telecom manufacturing enterprises started mushrooming in the private sector. We took advantage of this opportunity and amplified our capacity and facilities,” reminisces Goyal.

Diverse evolution

According to Goyal, the turning point came when he started to feel handicapped in his desires to tap the growing market due to the remote geographical placement of Rae Bareli. He decided to move to Bengaluru, the hub of the electronics industry in India, and also where his family was based at the time. The move to Bengaluru paid off as it got Digital a tremendously positive response from the industry.

In 2005, Goyal founded another EMS unit at Baddi, Himachal Pradesh, availing of incentives like exemption of excise duties and income tax that were being offered by the government to inspire increased manufacturing in the country. In 2006, the company moved into its new premises in Bengaluru, a 65,000 sq ft state-of-art facility. This facility proved to be a lucky charm for the company as the latter acquired many estimable customers after shifting into its grounds.

In 2007, the firm diversified into plastic injection moulding by establishing a unit in Baddi, a step towards proffering total turnkey solutions to customers. In 2008, Digital purchased a 4-acre industrial plot in Sriperumbudur, Chennai, on which, construction has already commenced. The latest addition to the Digital Circuits family will be a compact EMS plant including PCB assembly, wiring harness and injection moulding, offering complete box build services to customers. This plant is expected to start production by the end of 2009. Furthermore, the company has constructed one more unit in Mysore to serve local customers there. The company has a combined manpower of approximately 250, incorporating qualified and experienced managers, engineers and technicians.

Its strength

The company has a sturdy domestic customer base including all verticals—telecom, power, energy, automotive, consumer durables, medical electronics, defence and avionics. Digital is also in dialogue with a few potential clients regarding export.

Digital Circuits has strengthened in terms of revenue, from 4 million in 1997-98, when it first shifted to Bengaluru, to 250 million in 2007-08. In 2008-09, it has acquired 320 million (provisional) and expects to touch 400 million in the next fiscal (2009-10). “We have maintained consistent growth ever since our inception and none of our customers has left us so far. This speaks volumes about the level of customer satisfaction we provide to our patrons. Our strength lies in our widespread customer base, due to which, we have managed to sail through the global recession. In fact, we expect to strike a 20 per cent growth in 2008-09,” says Goyal.

Digital Circuits uses new generation surface mount technology (SMT) lines from Yamaha and Juki comprising a Dek 248D solder paste screen printed, a Juki KE 2020L pick and place machine with tray feeder TR 4SN, a Heller lead free 7 zone reflow oven and a YV100XG pick and place machine. It also has a state-of-the-art lead free SMT line consisting of an MPM-precision solder paste printer with vision, a YV100XTg-high speed chip shooter, an MR 9339 zone lead free reflow oven from Vitrnics and a SEHO wave solder machine. Commenting on the criteria for choosing SMT machines, Goyal says, “The most important criterion is the after-sales or backup services provided by the vendor so that if the machine needs repairing, one doesn’t have to waste time by waiting for spare parts.”

The company has the capacity to carry out 1,50,000 placements and/insertions per hour and can produce 1 million units/assemblies per annum.

Impediments

An aspect of manufacturing that all producers find exacting is managing a large inventory in order to yield just-in-time services to customers. Furthermore, the electronic components base in India is frail and most components, specially semiconductor devices, have to be imported. Goyal throws light on the sourcing challenges in India, “We have to source our raw materials from all over the globe. We have a consolidator at Singapore who consolidates our small requirements locally and

supplies us in one consignment. However, trade barriers and procedural delays, coupled with poor infrastructure, lead to delay in sourcing.”

India has become a favoured destination for EMS, second only to China, with the easing of trade barriers. Most EMS global giants have already or are seriously contemplating opening shop in India, a development which has made Indian EMS players insecure. The international firms represent cutting edge technology and advanced services, virtues which will give rise to fierce competition. Digital has strategically upgraded and expanded its facilities and services in order to withstand contention from these global stalwarts.

Managing plants in different locations is also a cumbersome task. “We handle multi-location units by hiring professionals. We check purchases through our Sage ERP and visit the plant only once in two months,” says Goyal.

Speedy & flexible services

Digital Circuits has positioned itself strongly in the low volume–high mix segment of the EMS industry. “In this segment, we do not face competition from China like in other segments. We offer turnkey solutions to our customers, including final box build delivering end-to-end solutions,” states Goyal. Digital’s services include design, prototype development, global sourcing of inputs, PCB assemblies, automated testing, conformal coating, product integration, logistics and after-sales services.

Commenting on the operating principles of Digital, Goyal says, “We are a service company and believe in extending quality services to our customers. ‘Speed and flexibility’ is our operating principle. We adapt quickly to the changing needs of our clients by customising our solutions, thereby adhering to our motto, ‘customers first’.”

Speaking about the advantage of electronics manufacturing in India, Goyal points out that the massive league of English-speaking employees and the low-cost skilled manpower is an advantage. “Disadvantages include the cost of finance, power and capital goods, the rickety infrastructure, dearth of research and development (R&D), technical,and component bases. The other encumbrances are the high rate of taxation, procurement delays, frequent changes in government policies coupled with red-tapism and interference of government departments,” opines Goyal.

The bright future

The company is planning to invest in automation and technological upgradation of its existing facilities to meet volume demands. “In our Chennai facility, we will install fully automated conveyorised SMT lines with online automatic optical inspection (AOI) to cater to bulk requirements of customers like Nokia, Samsung, Motorola, etc. We also intend to increase production by training and motivating the existing work force,” reveals Goyal. “Our aim is to establish Digital Circuits as the preferred destination for turnkey EMS solutions,” he states.

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