By Design Alpha acquisition, AREL gains expertise in industrial design

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By Design Alpha acquisition, AREL gains expertise in industrial design

By Design Alpha acquisition, AREL gains expertise in industrial design

Articles
Jul 28,23

Electronic Systems Design and manufacturing company, Amara Raja Electronics Limited (AREL) sets a clear vision to become 1,000 crore company and increase export operations by FY 2028 tells Sajan Pulikottil David, Business Head, AREL in this interview. The company has recently invested in DFM Softech Solutions Pvt Ltd to expand its operations in electronics design landscape.

By Design Alpha acquisition, AREL gains expertise in industrial design

What significant role is Amara Raja Electronics playing in the E&E Industry of India?

Amara Raja Electronics, part of the $1.75 billion Amara Raja Group and over 16,000 employees, is a leading technologically progressive Electronics System Design and Manufacturing (ESDM) company based in India. Our core focus lies in providing a comprehensive range of services, specialising in end-to-end design, prototyping, sourcing, turnkey manufacturing, products, and systems integration. With a commitment to delivering superior quality and ensuring customer satisfaction, we cater to clients operating in various market verticals, including automotive, consumer, energy, healthcare, industrial, networking, and railways.

As a key player in the thriving electronics manufacturing sector of India, we leverage the country's emerging status as a hub for global electronics manufacturing. Our dedication to growth and development aligns with India's progress in all dimensions. AREL actively participates in this growth-focused journey, aiming to position itself among the top EMS companies in India while also serving global customers.

In your opinion, how PLI scheme and other such schemes are helping industry and companies to grow?

Amara Raja Electronics has not directly applied for or participated in the PLI Scheme. However, we have indirectly benefited from the scheme as some of our existing customers are operating under its provisions. This association with customers under the PLI Scheme has proven to be advantageous for us, as it has significantly enhanced our manufacturing capabilities in a robust and efficient manner.

By serving customers who are part of the PLI Scheme, we have gained exposure to cutting-edge technologies and industry best practices. We have been able to optimise production efficiency, reduce manufacturing cycle times, and ensure superior product quality. Additionally, being associated with customers operating under the PLI Scheme has opened up new avenues for collaboration and innovation.

Can you give us an insight Amara Raja Electronics’ overseas market?

As of now, India remains a key market for Amara Raja Electronics (AREL), contributing significantly to our revenue. However, we are also making significant strides in the global arena, with exports playing a crucial role in our business growth. Looking ahead, we anticipate further expansion in our exports as we witness increasing demand from various global markets for our diverse range of products and services. Currently, AREL is successfully exporting to prominent international markets such as Australia, Japan, and the United States. Our expertise and focus in the connected device space have enabled us to establish a strong presence and gain recognition in these regions.

As we continue to invest in research and development, upgrade our manufacturing capabilities, and foster strategic partnerships, we aim to position ourselves as preferred electronics manufacturing services provider on a global scale.

What challenges as a manufacturer do you see currently in the Indian market? What suggestions would you provide to overcome them?

As an accomplished ESDM player, AREL acknowledges that the Indian market presents several challenges, one of the most significant being the lack of a robust component ecosystem. This issue poses obstacles to the seamless and efficient production of electronic products in the country. To address this challenge and foster the growth of the electronics industry holistically, it is essential to implement targeted initiatives. One potential solution is for the government to introduce and expand schemes specifically aimed at promoting the manufacturing of electronic components and semiconductors.

The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Production Linked Incentive (PLI) Scheme have already shown promise in enhancing various aspects of the electronics manufacturing sector. Extending these schemes to include the component manufacturing space can prove highly beneficial. Nurturing a strong component manufacturing sector will lead to increased localisation and integration capabilities, ultimately benefiting ESDM companies like AREL. Additionally, streamlining regulatory processes and promoting ease of doing business will further accelerate the growth of the electronics sector and pave the way for India to become a global manufacturing hub.

What opportunities do you see in the Indian market in the coming 5 years? How is your company aiming to tap these opportunities?

The Digital India program and the Aatmanirbhar Bharat scheme has improved India’s market share in the global electronics manufacturing industry to 3.6 per cent in 2020 from 1.3 per cent in 2012. The PLI Scheme has enticed many international players as well as provided impetus to domestic manufacturers as well.

As per IBEF, the government aims to make electronics one of the top three export categories by 2025-26. A $1 trillion digital economy target is projected to boost demand for electronics, which may stand at around $180 billion by 2025-26. If India can accomplish the manufacturing goal of $300 billion for electronics, the local market requirement may be fully met by such manufacturing. India has clearly drafted its ambition to achieve $120 billion worth of exports by 2026.

The global Hardware Engineering and Design Services Market is projected to reach a value of $152.75 billion by the end of 2026, with an expected CAGR of 7 per cent. India's expenditure on engineering, research, and design (ER&D) solutions could increase to $120 billion by the end of the decade, compared to the current $36 billion, according to NASSCOM. India currently contributes 26 per cent to the global ER&D spending and is expected to reach 34 per cent by the end of the decade.

We have transitioned from being just an electronics’ manufacturing company to becoming an end-to-end design and turnkey manufacturing which is in line with the Indian government’s ambitious plans for this sector. Recently, we announced a strategic acquisition of a stake in Design Alpha (DFM Softech Solutions), which will position the company as a fully integrated ESDM company, unlocking numerous opportunities in the manufacturing business. By acquiring Design Alpha, AREL will gain access to expertise in industrial design, embedded and mixed signal electronics, power electronics, optical and photonics, firmware, and mechanical designs. This will open doors to partnerships with large multinational corporations.

What are your growth plans for the coming years?

We have ambitious plans for growth with a clear vision to become Rs 1,000 crore turnover company by FY’28. To achieve this goal, we are proactively investing in expanding our production capabilities through new line installations. Simultaneously, we recognise the importance of global competitiveness and are committed to keeping pace with the rapidly evolving electronic manufacturing and design landscape by investing in the latest technology.

While we aim to expand our presence in international markets and increase our exports percentage, we remain steadfast in our commitment to the Indian market. India will continue to be a vital component of our operations and strategy, and we are determined to strengthen our position in the domestic market.

The strategic balance between our domestic and international markets is of paramount importance to us. By investing in the latest technology, we equip ourselves to meet the demands of both domestic and international clients, providing them with high-quality and technologically advanced products and services.