Will the increasing demand for electronics, along with favourable government policies, be enough for fast growth of the connectors sector in India?
By Sneha Ambastha
Wednesday, June 18, 2014: With the increase in demand for miniature electronics equipment and the focus on safety concerns, the connectors and terminals industry has grown significantly.
According to a report by Bishop & Associates, the connectors industry in India is estimated to reach US$ 1.2 billion by 2017. The shift in the market from communication connectors to industrial connectors, in the past two to three years, is thought to be the reason behind this projected growth. Bishop & Associates expects India to be among the top three fast-growing markets in the world, for this industry.
The communications market in India is moving towards high density, high speed connectors, transceivers and active optical cables. Another trend that’s been observed now is that communication connectors are finding new potential use in industrial sectors due to advancements in industrial activities and evolving technological requirements. Some examples include the remote monitoring of solar farms, energy monitoring devices and medical diagnostics.
There is also growing demand for miniaturised connectors as industrial requirements are shifting towards low pitch connectors for more real estate on the PCBs. The consumer market is also driving this development as smartphone and tablet usage continues to proliferate in India and this contributes significantly to the demand for miniaturised connectors.
For standard products with high volume of sales, cost remains one of most sensitive factors for the buyers. However, buyers are ready to invest heavily in high-end, innovative solutions that are niche or customised and not high-volume.
Factors fuelling demand
The growth of the connectors and the terminals industry is directly linked to that of the electronics industry. If we look at the key trends in the electronics subsectors, connectors are becoming increasingly vital for the electronics industry.
The high demand for human-patient simulators in the medical training field, for instance, is a good example of how robotic systems are playing a bigger role in many sectors, which is fuelling the growing requirement for compact, rugged and flexible connectors and cables. Today, there are various other uses of connectors in the medical sector.
There exists a huge opportunity for connector players in telecom and data communications, with the government’s ambitious plan for a National Optical Fibre Network (NFON) and the Reliance 4G rollout. Moreover, India’s defence sector is poised for growth, and the country is expected to be one of the top five markets in the world for defence equipment by 2015.
Demand is also increasing for high-end interconnection solutions from global customers due to India’s advantage in labour costs, freight and exchange variations.
However, if we consider the military or the aerospace markets, the growth of the connectors industry has been poor in the last two years. The year 2012 saw a contraction of 0.8 per cent while 2013 saw an overall growth of just 1.4 per cent. How the connector and cable assembly industry fares in this sector is highly affected by the budgets, policies and the government of a particular region.
The combined annual revenue of the global market for electronics interconnects was approximately US$ 4.24 trillion in 2013, which shows an overall increase of 0.8 per cent over 2012.
The Indian Railways’ contribution to the rail system requirements in the Asia-Pacific region has been growing at a CAGR of 9.6, in keeping with its Vision 2020 railway agenda. The growth in the manufacture of diesel locomotives and electrical vehicles has enabled India to become an exporter to other developing countries, thus increasing the consumption of connectors.
The demand for connectors is also increasing due to a growing gross domestic product (GDP) and increase in the labour cost in Far East (Asia), which in turn has led to the re-location of manufacturing facilities to India.
Moreover, new government initiatives that promote manufacturing and emerging sectors, such as solar and e-mobility, are playing a vital role in industrial growth.
If the Indian electronics manufacturing sector does grow into a US$ 400 billion industry by 2020, as claimed by the government, it will increase the demand for connectors and terminals. There also exists a significant opportunity for connectors in sectors like consumer electronics and solar photo-voltaics.
Challenges faced by the connectors industry
Just as any other market, the connectors and terminals industry also faces many challenges linked to the inadequate manufacturing ecosystem.
The designers in the industry are currently in the nascent stage of customisation and enhancements of connectors. Minimal new product development is another challenge faced by the connectors industry.
The other challenge is the manufacturers and distributors from China and Taiwan who dominate this market with cheap solutions. Hence, both the new manufacturing units and existing manufacturers are in trouble.
Says Rajesh Arakkal, general manager, FCI OEN Connectors, “Even for FCI, we sell technologically advanced products in much larger volumes abroad, compared to what is sold in India. However, some of our core products, such as wire-to-board, board-to-board connectors and PCB interconnects, are sold in high volumes in India.”
Challenges of rising raw material costs
The market is very cost-sensitive, particularly for standard products bought in large volumes. The pricing of connectors varies with each application. Several factors, such as quality, specifications and volume of production, determine the cost of a product. But considering the various factors, such as exchange rate fluctuations and increasing raw material costs, it has been a very challenging task for domestic manufacturers to offer competitive prices.
The cost of a connector is directly affected by the price of the raw materials used to manufacture it, such as copper, gold, silver, tin, plastic and resins, which are generally following an increasing trend.
Solutions being implemented
Since connector manufacturers find it difficult to hold prices down, there is a constant endeavour to explore newer materials and manufacturing technologies to remain competitive. They also try and match product lifecycles to constantly support their customers in terms of technology and market dynamics. It has been noticed that customers are ready to invest in high-end, innovative, customised interconnection solutions that are not high volume.
However, there have been instances where prices have gone down slightly for certain types of connectors, when the increase in the number of users drove up volumes.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
