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In 2014, Delta Electronics Inc, a Taiwanese electronics manufacturing company, announced investments of $500 million in India to develop its manufacturing capabilities for catering to exports and domestic markets. The company considers India as a pillar of its strategic long-term growth plans. “We believe India has a lot of potential and opportunity, and for Delta, we anticipate 20 per cent greater growth in India in 2023,” says Niranjan Nayak, Managing Director, Delta Electronics India, in this interview, where he elaborates on factors contributing to the growth of India's manufacturing sector.
What are your priorities for Delta Electronics India at present?
India stands for as a pillar of Delta’s strategic long-term growth plans, as this is ascertained by the huge investments that Delta is putting in India. Back in 2014, we announced investments up to $500 million to develop our manufacturing capabilities in Krishnagiri, which shall be catering to exports and domestic businesses. Delta is bullish on the Indian market and on its human capital resources for skilled R&D and manufacturing. Also, within Delta now, India has been made a Region to sharpen our focus as well as our dedicated efforts and resources. As India gradually becomes one of the world’s major economic and manufacturing engines, Delta’s highly diversified portfolio of energy-saving products and solutions, which from 2010 to 2021 helped our worldwide customers save over 35.9 billion kWh of electricity and reduce over 19 million tons of CO2 emissions, are capable of helping the country fulfill its industrial and environmental goals.
We have cumulatively delivered over 7,000 electric vehicle (EV) chargers to customers in India, a substantial milestone to foster the country’s e-mobility transition. We have identified three areas. First one is infrastructure, including telecom, data centre and energy infrastructure. The second focus area is automation – industrial and building automation. The third focus area is mobility, including charging infrastructure for EVs and the power supply solutions for vehicles. Apart from this, we also plan to focus on future energy technologies like hydrogen etc. There, the focus is to develop power electronics for green hydrogen production. We are planning to invest heavily in both expansions of operations and R&D. We are already building large factory operations in Krishnagiri, Tamil Nadu. These operations will focus on both local supply and exports. We are also building a huge R&D lab in Bengaluru which will house around 2,000 engineers. This focus on investments shows that Delta management is looking at India as one of the strongest regions for growth in the future.
What is the contribution of the three key business areas - power electronics, automation and infrastructure solutions - to the turnover of Delta Electronics India? How do you analyse the potential of these 3 businesses in terms of new opportunities & growth rates?
Delta Electronics India operates in three business categories: automation, power electronics, and infrastructure. It has a legacy of serving in India with market leadership in telecom power solutions, renewable energy solutions (solar inverters), and display solutions. It is also a leading provider of industrial automation solutions, UPS & datacenter solutions, EV charging solutions, rail transportation solutions, energy storage solutions, DC fans & blowers, and components.
These are all major sources of revenue for Delta, both globally and in the Indian market. These are the emerging growth areas for the next ten years. Whether it's EVs, 5G, or automation solutions, Delta is riding this massive tsunami of demand expansion. In the next ten years, we project that our revenue will increase several-fold.
Telecom: In telecom, we are the pioneer in providing power solutions to the majority of telecom infrastructure in India, supported by our world-leading position. Our solutions are completely 5G ready, and we are more than prepared to support 5G growth in India. 5G will intensify the infrastructure requirements across network layers. The 5G network topology will demand more and more small cells/in-building solutions to deliver services with a last-mile connectivity approach. Delta is geared up with a power-efficient portfolio, large capacities to meet roll-out targets and one of the largest service networks with 800 engineers across India to provide after-sales support.
Industrial automation: We, at Delta, have been a major player in automation solutions and have further expanded into factory automation, process automation, robotics solutions, vision solutions, camera solutions, and even other gantry solutions using our motion products. We also cater to end-user segments like water, wastewater, pharma, plastic, cement, steel, infrastructure, and the building of smart cities.
The growth prospects of industrial automation are huge, with demand from all sectors of the industry. As I mentioned, the growth in exports is also a major factor that contributes to this. Learning lessons from the pandemic, business owners are doubling down on replacing labour with automated processes wherever possible. We expect the growth in double digits to continue.
Datacenter: We are one of the major players in the datacenter market, and our business in India has grown leaps and bounds in the last few years. We added many prestigious customers to our clientele and are very esteemed to have delivered many successful projects across India. We are constantly striving to have sustainable and even higher efficient solutions for datacenter. With everyone’s focus on the data centre industry, the biggest edge that Delta has is that it is a strongly R&D-driven organisation with over 8 percent of its global sales revenue allocated to research and product innovation.
How are massive capital investments in infrastructure, power, railways/metros, electric vehicles, renewable energy, etc leading to increase in demand for Delta Electronics’ products & solutions?
Every industry that is getting investment presents business opportunities for us. More supply-side reforms are required for quicker development in order to reach the $5 trillion economic target by 2025. Raising India's competitiveness and attaining this goal will depend on developing new infrastructure and modernising current infrastructure. Because infrastructure is so important to manufacturing competitiveness, it will be especially important for the success of the "Make in India" program. Short-term as well as the potential rate of GDP growth are boosted by the supply expansions brought about by infrastructure development. Additionally, building infrastructure absorbs labor, which increases economic output in the form of revenue and employment and improves domestic demand. Improved infrastructure capacities also create efficiency gains through improved logistics and networks, which would improve the competitiveness of the economy. This can help kick in a virtuous cycle of higher investments, growth and employment generation in the economy.
We are very much aligned with Atmanirbhar Bharat. We are putting a lot of focus on increasing the localisation in India. In the next 1-2 years, we will make India an export hub for Delta worldwide. Also, our businesses like Data Centre and Telecom power solutions are the main fundamental stones for the Digital India campaign. We are striving to have more efficient and environment-friendly solutions to strengthen Digital India Campaign.
What is your analysis of the Indian manufacturing industry at present?
India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $ 1 trillion by 2025.
The manufacturing sector in India is steadily moving toward a more automated and process-driven manufacturing, which is projected to raise the efficiency and boost production. India is making progress toward Industry 4.0 thanks to government initiatives like the National Manufacturing Policy, which aims to raise manufacturing's GDP share to 25 percent by 2025, and the PLI scheme for Manufacturing, which was introduced in 2022 to bring India's core manufacturing sector up to par with international manufacturing standards.
PLI programs and the Make in India push have greatly boosted India's manufacturing industry. As automation technologies advance, we are well ahead of other developing nations in the world. Our domestic automation and digitization solutions are on par with those of industrialised countries.
How can the manufacturing sector propel its growth in the coming years?
As I mentioned before, the next decade or 15 years will be the years of Delta. We will see India emerge as the global hub for manufacturing. India’s domestic demand is stupendous but India will become the hub for exports as well. We have a great demographic advantage, a vast skillset and abundant resources to support that kind of leap growth.
It is a great opportunity for Indian manufacturers. Given the magnitude of Chinese exports, India will have big opportunities. While we have to compete with other countries on this, in core manufacturing sectors such as auto and auto components, engineering-related products and chemicals, a new world of opportunities has opened up. Global companies cannot avoid India as they have to look at derisking their supply chain. Cost advantage of manufacturing in India is still a significant factor from a lower-cost sourcing point of view for global firms.
Exports have seen tremendous growth over the last two years. India has reached $418 billion of manufacturing exports in the fiscal year 2022 (FY22) with rapid growth over the last 2 years. Though India contributes 3.1 per cent of GDP, our export contribution to the world has been a mere 1.6 per cent only and looking at the current opportunities, it has immense scope, potential and triggers to grow. By 2028, it is expected that India will reach 1 trillion of manufacturing exports. Manufacturing’s share of GDP in India is estimated to increase from 15.6 per cent currently to 21 per cent by 2031—and, in the process, double India’s export market share. The government also launched an interest equalisation scheme to make credit available for cheaper exporters in India.
How to empower SMEs, which contribute majorly to India’s manufacturing sector?
SMEs (Small and Medium Enterprises) play a significant role in the Indian economy. They form the major contributors to the country’s GDP and also as the employment hub of the country. The MSME (Micro, Small, and Medium Enterprises) are gradually empowering their role in the manufacturing sector as well. The importance of the SMEs in the manufacturing industry of the nation is due to the immense quantum of industries and units that fall under this category. Around 90 per cent of the country’s industries fall under the manufacturing sector. Therefore, this sector plays a pivotal role in the development of India’s economy.
The small and medium sized enterprises (SMEs) play a central role in driving India’s economic growth and development at the regional, national and the global platform. The SME sector in India has demonstrated remarkable resilience in the last few years to sustain the annual growth rate of 10 per cent even in the face of global and domestic economic slowdown.
The sector plays a pivotal role in employment generation, usage of technology, industrial developments across rural regions, use of traditional inherited skills, mobilization of local resources and has low capital requirements. As more than 65 per cent of population resides in rural and semi-rural areas, small businesses are a major source of income for local residents and after agriculture, small business in India is the second largest employer of human resource generating over 100 million job across the 49 million units in India and contributing 45 per cent to country’s manufacturing unit.
During the recent years, the government has launched various initiatives to improve the ease of doing business and to make micro, small and medium enterprises (MSMEs) more globally competitive. These initiatives include ease of doing registration of the business in the form of Udyog Aadhar Memorandum framework to revive sick MSME, promoting innovation in rural entrepreneurship.
With sustainability becoming important for global businesses, what kind of challenges & opportunities it presents to Indian engineering industry?
Although businesses currently have a significant impact, there is still much more they can do. Leading businesses base their actions on three deliverables:
Additionally, the percentage of companies disclosing their knowledge on climate-related risks and opportunities has increased. However, we passionately urge more enterprises to use a framework for revealing climate-related risks and opportunities in order to speed up this process. Finally, we must work to standardise the ESG data that companies use to inform investors and other stakeholders. Businesses should start by studying the ESG standardization efforts of the World Economic Forum (WEF). The fragmentation of KPIs, reporting systems, surveys, ratings, and standards currently in use makes it impossible to compare information, which renders it ineffective.
There is still a lot to do. Businesses must step up their efforts and let governments know that they require ambitious policy goals in order to feel confident enough to invest in a future free of carbon emissions. Building a wealthy and sustainable low-carbon future is a task we must accept. In order to accelerate climate action and transition to a carbon-neutral economy, businesses and governments must demonstrate greater ambition.
Your “Vision 2025” for Indian manufacturing sector...
As a result of several government initiatives, India is projected to raise manufacturing's present 16 per cent contribution of the economy to 25 per cent by 2025. The government's numerous initiatives to make doing business easier, to foster an atmosphere that is favourable to manufacturing operations, to improve industrial policy, and to promote FDI will all help to revive the manufacturing sector.
Last year the Government of India released the draft National Policy on Electronics (NPE) which has envisaged creation of a $ 400 billion electronics manufacturing industry in the country by 2025. Additionally, basic customs duty on various parts/components used in electronics industry has been exempted to boost manufacturing. The implementation of GST has created the single largest market the world has ever seen and it is a boon to the manufacturing sector as it gives a huge captive domestic market.
The ease of doing business could probably be the most important factor in making India a hub for manufacturing. India moved to the 63rd spot in the World Bank’s Ease of Doing Business global rankings due to sustained business reforms. India also figures in the top ten most improved countries in the world for the third consecutive year. From being ranked 142 in 2014 to 63 in 2020, it has been a significant upward journey for the country in a rank list that is an important input in the plans of global investors.
With the Government’s continuous efforts to promote India as the manufacturing hub globally and the commitment towards ease of doing business, another initiative in this direction has been taken by the Central Board of Indirect Taxes (CBIC) is allowing import of raw materials and capital goods without payment of duty for manufacturing and other operations in a bonded manufacturing facility. When the raw materials or capital goods are imported, the import duty on them is deferred. If these imported inputs are utilised for exports, the deferred duty is exempted. Only when the finished goods are cleared to the domestic market, import duty is to be paid on the imported raw materials used in the production. Import duty on capital goods is to be paid if and when the capital goods are cleared to the domestic market.
What are your long & short-term growth plans for your company in India?
We are currently implementing an investment of around $ 500 million in Krishnagiri for an upcoming new manufacturing facility. Further, we are also investing in a new R&D building and headquarters in Bengaluru. In the short-term, we wish to accelerate our top-line growth driven by key segments like EV, data centre, and industrial automation, which have abundant potential in India. We are already pioneers in telecom power solutions and display solutions, indeed. Furthermore, we also wish to enter into new segments and businesses in India as we have a strong inheritance of cutting-edge technology and power electronics from Delta worldwide.
The new plant will provide us with state-of-the-art technology and on-field training to cater to global demand. Our investments in Tamil Nadu are in-line with the company’s vision to boost India’s development while supporting the “Make in India” initiative.
The new factory in India is an important project for Delta. It not only supports Delta’s commitment to India’s economy but also presents a significant opportunity for our strong growth in India. Overall, India’s infrastructure and logistics are ideal for our company’s operations. We are focused on the current progress and are also observing developments in the EV industry in India keenly. We are also looking to offer charging solutions for e-buses and e-two-wheelers, but I won’t be able to give an exact number. Our goal is to reach a 40 per cent market share in India. We believe India has a lot of potential and opportunity, and for Delta, we anticipate 20 per cent greater growth in India in 2023. We expect to see more growth in India when compared to other regions, and the country presents a large market size for Delta to grow in next year.
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