With more than 220 million households in India, it is surely becoming a sought-after destination for many electronic products. In 2008, India had more than 115 million households owning televisions (however, only 10 per cent of this use set-top boxes at the moment). So one can imagine the kind of potential that lies in the set-top box (STB) business in India.
By Atanu Kumar Das
Wednesday, May 20, 2009: Last year, some 7.2 million direct-to-home (DTH) STBs were shipped to India, making the country one of the world’s fastest-growing DTH markets. The total represented a three-fold increase over the 2007 shipments. With half a dozen major players hard at work to promote DTH, and another one being launched now, the public is getting the DTH message loud and clear. New entrants, such as Sun Direct, Reliance’s Big TV, Bharti’s AirTel TV, as well as Zee’s Dish TV and Tata Sky and Videocon’s D2H+ service are all helping educate the market. By 2010, the demand for STBs in the country is expected to reach 9-10 million, worth approximately Rs 18,000-20,000 million. This is really a fast-growing market and more and more players are now entering this domain to get themselves a share of the pie.
The limitations
According to an industry source from Jabil, who wished to be anonymous, “Manufacturing of STBs is very limited because customers prefer to import them from China and Korea. They are under cost pressure from operators, who look for STBs at the lowest possible cost. The biggest challenge is of the supply chain. You actually need a very strong supply chain if you have to build high volumes in India. Obviously, one needs daily inbound shipments from overseas as there are no local component (active devices) manufacturers.”
Atull B Lall, deputy managing director, Dixon Technologies (India) Pvt Ltd, says, “There is a software development skillset in India, which is the main input required for STB manufacturing. However, an adequate ecosystem has to be created for the development of this industry. This requires intervention of the government, the software and components industries and the electronic manufacturing services (EMS) manufacturers. Presently, not even 1/10th of the demand is met by Indian manufacturers.”
Lall adds that at present there is an inverted duty structure in the STB arena, as on completely built up (CBU) import there is zero per cent duty and also 4 per cent additional duty is refundable against payment of value-added tax (VAT). However, when one manufactures the sets in India, there are various components on which there is an import duty, acting as a significant disability factor. Also, as excise duty is now on maximum retail price (MRP) and there is also central value added tax (CENVAT) overflow in domestic manufacturing, there is a cash loss.
There are other issues such as customs clearance and lack of a local components base, which also prove to be deterrents for STB manufacturers in India. “Given the difficulties in customs clearances, etc, it is really tough to manage the supply chain and yet keep costs down. While we do have local vendors for mechanicals, electromechanicals and packaging, that is generally not enough,” adds the industry source from Jabil.
The right moves
The government needs to open its eyes to the concerns of domestic manufacturers and make a tax structure which supports domestic manufacturing.
“The government should introduce some incentives for local manufacturing or stipulate that the operators buy 25 per cent of their goods from domestic manufacturers. This way, some manufacturing will at least start in India and jobs will be secured by local talent. As the number of subscribers grow, component manufacturers will set up warehouses to meet local demand and thereby, the entire ecosystem will fall into place. This would ultimately lead to cost competitiveness of Indian players. Who knows, maybe Indian OEMs will sell STBs the world over if they can manage price points in the Indian market,” says the source from Jabil.
Manoj Tyagi, Kortek India, says, “The last two to three years have seen a three-fold growth in the market and we expect this to continue for the next couple of years. Most of the STB penetration has only taken place in the metros, so the rural penetration is yet to happen. This means great market potential for domestic manufacturers. We sincerely hope that the government revises the tax structure to ensure growth of indigenous manufacturing.”
“In spite of the duty disadvantage, we strongly feel that STBs can be manufactured in India at a cost lower than the CBU price of China and Korea. Also, there is a huge supply chain advantage in local STBs. We are also offering servicing backup on pan-India basis. It is extremely sad that the government does not realise the potential of this industryThis is a labour-intensive industry, capable of generating jobs for thousands of workers. Since this industry is in a stage of infancy, there should be a small duty of 5 per cent on CBU set-top boxes,” adds Lall.
The government needs to act fast to ensure that we have a process in place where vendors do not merely import STBs but concentrate on producing them instead. To make our country self-sustaining, it is imperative to have a manufacturing base.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine
