Component sector upbeat despite 20% downturn

While slowdown in business of other segments of the electronics industry has reached 50 per cent, the electronics component sector has witnessed a downturn of 20 per cent. S K Nangia, proprietor, H K S Enterprises affirms, “Recession has affected upto 15-20 per cent of the component manufacturing market and has had upto 10 per cent impact on HKS’ business.” However, companies that are heavily involved in exporthave been impacted in a big way. “Companies that are exporting upto 60 per cent to regions like western Europe and USAarefeeling the pinch, butas far as the domestic market is concerned, there is only marginal retardation in business,” says Rooshad Patel, director, Hi-Tech Resistors Pvt Ltd.

V Rajiv, proprietor, Precision Elec­tronic Components Mfg Co, comments, “The extant economic torpor is biting everybody and the pressure is immense on component suppliers because the stream of orders has thinned from cus­tomers across the world. Anybody who is more focused on export will face a higher degree of impact as the infliction of recession is more harsh abroad.”

By Himanshu Yadav

Varied strategies

When assessing the effects of recession in terms of expansion and acquisition plans, there is a mixed response from companies. While some are reluctant to expand, others deem it wise to uti­lise this period for further diversifica­tion of business and exploration of new markets, hitherto uncharted. The growth process may have become stagnant for a while and enterprises have, in fact, deferred investment plans but are not entirely averse to bringing variation in their product portfolios or finding new business models, in terms of im­proved deals and technology. Some companies are making their opera­tions more competitive by increasing efficiency in every aspect of business conduct, while others are concentrat­ing on merely staying afloat in these economically turbulent times.

Dinesh Banka, director, Novoflex Marketing Pvt Ltd, states, “We are utilising this period for consolidation and expansion of our capacity in order to meet future demands, which will ensue once this phase has passed.”  Karanjit Singh, technical direc­tor, Kaytron Components Pvt Ltd, feels otherwise, “We are reluctant to expand as we do not know how long this trend will last.”

Firms feel it is better to play safe. They are adopting various methods to conserve money for future busi­ness plans. Patel reveals, “We have not incurred any substantial losses but have taken cost-saving measures like reducing our inventory and ra­tionalising production processes in order to get the maximum benefit at the minimum cost.”

Singh adds, “We have pared our budget for advertising and participation in trade shows.” Rajiv further adds, “Trade exhibitions are not lucrative in the current scenario as companies have slashed their travel budgets and fewer companies participate in them as a con­sequence. So, in order to keep abreast, it is better to invest in new applications and find better product deals.”

Retrenchment, last resort

Unlike the West, Indian companies have forborne employee layoffs. While some have reserved it as a last resort to save resources, others feel that they are potent enough to sustain themselves without distributing pink slips. Rajiv explains, “Laying off employees is very difficult in India. Currently, we do not feel the need to trim our workforce. Nevertheless, if this economic trend continues over the next 3-4 months, pressure will build up to reduce work­ing hours.” Nangia adds, “We have curtailed hiring and are utilising the present manpower.”

Not all companies are halting their hiring processes and few view it as an opportunity to source the avail­able talent in the market. Banka says, “There has been no retrenchment in our company. In fact, we are hiring talented and skilled staff.”

Patel says, “We’re in good health and have not let anyone go. We are focusing on improved training of our staff, so when better times come, we will take advantage of them.” Going by the trend, it’s evident that companies are upbeat about their growth and not wounded by recession. Their prime self-preserving strategem is reduction of operational costs without making360degreechangesincompany conduct and practices. Rajiv concludes, “This is a phase of contraction, where one has to manage costs, as well as inventory better in order to mitigate the impact of recession.”

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine