India’s manufacturing ecosystem has not been working for over a month now, which has affected plans for various brands like Xiaomi, Samsung and Oppo and among others. The country has managed to get more than 100 brands to set up their manufacturing units over the years, but since mobile phones were not put in the essential category, all of them are facing uncertain times, as the business has come to a standstill.
It’s hard to forget these brands represent the ambitious Make in India program of the Indian government, but ever since the lockdown has been imposed, the machinery has started to catch some dust. So what happens to these brands, their production and how much of an impact will they be facing post the lockdown? We spoke to a few industry experts, and they agree that most phone manufacturers will asses the market demand first, and then start their production outlay. Tarun Pathak from Counterpoint, speaking in this podcast mentioned the plants will operate in aphased approach, where some of the units will be open, while others remain closed.
Faisal Kawoosa from TechArc also points out that initially, brands will start with 30 to 40 percent of their production level and gradually increase the supply, depending on the demand in the market. Pathak mentioned the 100-odd plants in the country are directly responsible for hiring close to 130,000 employees, who are entrusted with producing 700,00 to 800,000 units on a daily basis. But during the lockdown, these people have moved back to their home town, and the production capacity has come down to zero.
However, Faisal opines that having a limited number of the workforce will not affect production cycle in the initial period post the lockdown is lifted. “It is relatively easy to get production back running, lack of labour may not affect them in the initial months,” he added.
The lockdown has put a serious dent on the make in India program, with Pathak suggesting the impact could be around $3 to $4 billion for the manufacturing sector. One of the biggest original equipment manufacturer (OEM) to be affected by the situation is Samsung, which not only manufactures for the domestic but is heavily reliant on its Indian setup for exports as well.
The worrying part is the figure doesn’t include the impact on the indirect business that works parallelly with the phone manufacturers, something that many accessory brands confirmed to us a few days ago.
Will things improve post lockdown?
The pandemic has wreak havoc on many sectors in the country, which has lead to businesses laying off people or not paying their employees. And experts believe the manufacturing companies will have to realign their focus and production strategy to keep it effective and safe at the same time.
“The manufacturing will seriously consider moving to automation (across the globe). Earlier, brands in India utilised cheap labour to fulfil their production goals, but that will be replaced with robotics in the near future. “This will surely add to the CAPEX of the company, but it’ll be an essential part of their budget going forward,” Faisal explained.
As of now, the state governments have extended the lockdown till May 3, and companies will be hoping to kickstart manufacturing to make up for the lost time.