Firing up Tech Factories

For a while, India has been the preferred offshoring destination for software and services and Chi na the manufacturing king. This neat division is beginning to blur now. Leading telcos like Nokia, Motorola, LG, Samsung and Ericsson have set up manufacturing plants in the last couple of years. Many of them have attracted their component suppliers to set up facilities here. Seven out of the top 10 worldwide electronics manufacturing services (EMS) players including Foxconn, Flextronics and Jabil Circuits have set up their manufacturing facilities. PC bigwigs like HP, Lenovo, Dell, Acer, HCL, Wipro and Zenith already have their assembly lines here.

Take Nokia facility in Chennai, for instance. It showcases Indian IT and electronic hardware manufacturing prowess. Nokia’s factory in Chennai is among the largest, employing 40,000 people and houses close to 10 component vendors for mobile handsets in the same park.

Nokia exports about 70% of its production, according to industry estimates. The factory has a total production base of 5 lakh cellphones per day. Story at other telecom bigwigs like Motorola, LG, Samsung and Ericsson is not very different.

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Falling Re raises computer prices

You'll have to shell out more for a laptop or desktop now, as most hardware companies have raised computer prices by 10%-13%. The price hike is attributed to rupee depreciation and increased taxes that have hit hardware companies.

Most manufacturers like Hewlett-Packard, HCL Infosystems, Lenovo, Dell and Acer have production units in India. These units largely look at product configuration, value added distribution & customer services and reverse logistics in India, and the major components, like memory and LCDs, are imported. The rupee has fallen 8.3% in 2008 since January, the worst fall since 1993, when it depreciated by 8.75% in the same period. It was trading at Rs 39.90 to a dollar on March 31, 2008, but has depreciated to Rs 42.90 per dollar. According to analysts, the hardware companies have tight profit margins and therefore have been in a wait-and-watch mode on prices. They are slowly pushing the burden of rupee depreciation on channel partners and end consumers. Analysts also add that firms might factor in the increased cost of logistics, due to inflation, in price revisions.

Another important factor contributing to the price rise is the greater adoption of LCDs and levy of taxes. Sumanta Mukherjee, manager, computing products research, IDC India, says, "The increase in the average sale value (ASV) of desktop PCs is on account of an increasing adoption of TFT/LCD monitors and a change in tax regulation-the levy of excise duty on MRP rather than on the ‘street price' or the market operating price."

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