‘Make In India boosted our smartphone manufacturing biz’

American manufacturing major Flex (previously Flextronics) that raked in over $25 billion in revenue last year has been operating in India for two decades, but it was the government’s flagship Make In India that gave it the desired impetus to rapidly grow its base here in 2015. The firm - that now trails only the Taiwanese giant Foxconn in terms of scale in India - is now pulling up its socks to double its manufacturing revenue in five years. RICHARD HOPKINS, senior vice-president for Flex’s consumer devices segment and head of India operations, shares its plans with Arnab Dutta. Edited excerpts:

How big is your India operations?

India is one of the top 10 countries for Flex globally, whether it is headcount or floor area or revenue. More importantly, India gets a lot of focus because it is a strategic market. It is impossible for our customers to ignore a market that is the size of India's.

Currently, we are operating four out of the six global divisions from India. The largest is manufacturing in the consumer devices space - mobile handsets, displays, personal computers, among others, in four factories. Of the 20,000 people employed by Flex in India, 13,000 are working in three plants near Chennai and one in Sri City (Andhra Pradesh). We have served nearly 50 top brands from India and currently 30-40 per cent of that we manufacture here is being exported. In electronics manufacturing, there are few foreign multinational corporations that are now larger than us.

We also have our global services and solutions, based out of Bengaluru, and they do a combination of forward logistics where they are moving material in from ports, in from overseas, and getting them to the right positions for manufacturing. Our third area of focus in India is a business,

based in Hyderabad. They manufacture and install solar panel trackers. The fourth component in our footprint in India is what we call our global business solutions. This is a backoffice function and a shared services located in Chennai and Pune. They do a lot of the backoffice work, supporting the 100 or so manufacturing sites we have globally.

What is Flex’s expansion plan in India?

Currently, manufacturing smartphones is the largest business for us here, but we want to diversify into other areas like information technology hardware and telecommunications (telecom) gears. We have already secured approval under the production-linked incentive (PLI) scheme for that. For telecom, we have filed our application under the PLI. We are going through an evolution as we diversify the product portfolio. Maybe in two years, it is going to be fairly even, split between mobile and a combination of infrastructuretype products. For example, 5G along with computing products, whether they are desktops, laptops or even servers.

What is the extent of investment that Flex has done in India in recent years?

We have made nearly $200 million (~1,500 crore) since 2015, when the revolutionary Make In India vision was adopted by the government. Within weeks of the scheme, the changes were made, driving the localisation of mobile phone manufacturing. We were contacted by pretty much every one of the major mobile brands globally looking for a solution for India. We went through significant growth through 2015 through to 2018, and what that left us with was a heavy focus on consumer products, particularly mobiles.

We began manufacturing mobile handsets locally as ease of doing business improved significantly. There's been a definite push towards computers and telecom. We have seen a lot of interest in areas around the component ecosystem getting deeper, in things like liquid crystal displays and camera modules. Within a five-year period, we can have a $2-billion operation in the manufacturing division - double of what we have now.

How is India placed against China, in terms of manufacturing potential?

The cost of labour in India is cheaper, but India is yet to build a supply chain ecosystem and a lot of the components are still being imported. This is something the Government of India is aggressively attempting to improve, with some of the incentives that are being put out there for the requirements around localisation and local value addition in the country. However, it shouldn't be a surprise because China started its journey 30-40 years ago. It is logical that India will take a little bit of time to catch up. While a decade ago, we used to import most of the material, now a majority is sourced locally. We will have more and more global brands entering domestic manufacturing.

Since the Covid-19 pandemic began, shortage in supply of components has impaired electronics manufacturers. Is it over now?

I think the worst is still ahead of us. Over the next few months, we will see the most constrained supply. I think there are two things going on: there is a constraint capacity. For sure demand is outstripping supply, but on the other side, I think supply is overstated. Many large enterprises loaded up in anticipation of supply shortage. But now, if somebody over-orders, they are going to have excess inventory before too long. So, I expect by mid-2022 we will start to see equilibrium return.