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Will the Indian manufacturing sector take another hit due to the ongoing COVID surge in China? According to ET Now, major manufacturing firms are cautious about the possible impact of rising COVID cases in China on their supply chains.
Shashank Srivastava, Executive Director at Maruti Suzuki India told ET Now that semiconductor shortage affected the company’s performance in December. “The total impact of the semiconductors on the production would have been around 5-10%,” Srivastava told ET Now. “The industry has achieved around 95% of the overall production levels since this problem of semiconductors came in August of 2021. But we still have this problem continuing for many of the models. And that 5% balance is where the challenge is going to be,” he said.
Talking to ET Now, Saurabh Gupta, the CFO of Dixon Technologies said that they have stocked up inventories for at least two months. “One has to wait and watch the situation after the Chinese New Year…whether factory production resumes, workers in China come back or not. Hopefully the COVID situation doesn’t get worsened there,” he told ET Now.
According to Gupta, if China sees lockdowns then the supply chains will get impacted after for the period of March and beyond that. “Supply chains can get impacted, which will lead to some non-availability of electronic and consumer-durable products somewhere during March, April, and May months,” he said. “One has to wait and watch and hopefully be cautiously hopeful that things get back to normal,” he adds.
Also Read | Budget 2023: Raghuram Rajan wants focus on sensible, sustainable reforms; questions success of PLI
Reliance on China & building ‘atmanirbhar’ supply chains
According to Gupta, India’s consumer durables industry is highly dependent on China, but the policies of the Indian government are slowly yielding results. “The dependency is quite high, especially in mobiles and LED TVs category,” he said. “In the lighting and washing machines category, a lot of substitution and domestic manufacturing has happened,” Gupta notes, adding that in the next couple of years this will increase.
“The government policy is clearly aligned towards creating a big components system in India. A big scale is getting created in manufacturing in India, and with scale, the competitive ecosystem also evolves,” Gupta told ET Now. “My sense is every year, the dependency on imports will keep getting diluted. Our vendor partners are also working on creating alternate sources within India. But yes, of course, in a short period of time, it’s difficult to create those alternate sources,” he added.
In the case of mobile phones, the Production Linked Incentive (PLI) scheme is likely to help create a component ecosystem in India, he notes. “The value addition in mobile phones should increase. It is imperative to build that over a period of time,” he said.
In the short term the dependency is very high, and it is difficult for firms and startups to diversify or de-risk the supply chains. However, Gupta believes that over a period of time, India will emerge as a decent manufacturing hub for components as well.
Shashank Srivastava, Executive Director at Maruti Suzuki India told ET Now that semiconductor shortage affected the company’s performance in December. “The total impact of the semiconductors on the production would have been around 5-10%,” Srivastava told ET Now. “The industry has achieved around 95% of the overall production levels since this problem of semiconductors came in August of 2021. But we still have this problem continuing for many of the models. And that 5% balance is where the challenge is going to be,” he said.
Talking to ET Now, Saurabh Gupta, the CFO of Dixon Technologies said that they have stocked up inventories for at least two months. “One has to wait and watch the situation after the Chinese New Year…whether factory production resumes, workers in China come back or not. Hopefully the COVID situation doesn’t get worsened there,” he told ET Now.
According to Gupta, if China sees lockdowns then the supply chains will get impacted after for the period of March and beyond that. “Supply chains can get impacted, which will lead to some non-availability of electronic and consumer-durable products somewhere during March, April, and May months,” he said. “One has to wait and watch and hopefully be cautiously hopeful that things get back to normal,” he adds.
Also Read | Budget 2023: Raghuram Rajan wants focus on sensible, sustainable reforms; questions success of PLI
Reliance on China & building ‘atmanirbhar’ supply chains
According to Gupta, India’s consumer durables industry is highly dependent on China, but the policies of the Indian government are slowly yielding results. “The dependency is quite high, especially in mobiles and LED TVs category,” he said. “In the lighting and washing machines category, a lot of substitution and domestic manufacturing has happened,” Gupta notes, adding that in the next couple of years this will increase.
“The government policy is clearly aligned towards creating a big components system in India. A big scale is getting created in manufacturing in India, and with scale, the competitive ecosystem also evolves,” Gupta told ET Now. “My sense is every year, the dependency on imports will keep getting diluted. Our vendor partners are also working on creating alternate sources within India. But yes, of course, in a short period of time, it’s difficult to create those alternate sources,” he added.
In the case of mobile phones, the Production Linked Incentive (PLI) scheme is likely to help create a component ecosystem in India, he notes. “The value addition in mobile phones should increase. It is imperative to build that over a period of time,” he said.
In the short term the dependency is very high, and it is difficult for firms and startups to diversify or de-risk the supply chains. However, Gupta believes that over a period of time, India will emerge as a decent manufacturing hub for components as well.
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