Micromax scaling up its “Make in India” portfolio

At the beginning of July 2015, Counterpoint Research was invited for a visit to the Micromax local assembling operations in Rudrapur, Uttarakhand. After a long drive from Delhi of around seven hours we reached the facility and were given a warm welcome and brief on the factory unit by the local team. Below is the quick summary and observations during the day-long tour of the factory:

How Micromax is scaling “Make in India” ?

  • The factory is named as Bhagwati Products Limited, it is a 100% subsidiary of Micromax Informatics Limited situated in Rudrapur City, Udham Singh Nagar District in the Indian state of Uttarakhand.
  • The factory spans across two hectares of land (20,100 Sq. Meters) employing around 5000 people working in two shifts.
  • It is accredited with ISO 9001 and ISO 14001 certification. More than 4/5th of the employees are local residents.

MMX1Image 1 : Micromax Unit in Rudrapur, Uttarakhand. Source: Micromax Informatics Ltd.

  • It started its operations in late 2012 with assembly of tablets, mobile accessories and LED TV’s. That was the time when the tablet market in India was at its nascent stage and Micromax, along with other players, became first movers to start local assembly of tablets. Most of the tablets assembled were aimed at only consumer segment.
  • Assembly of Mobile phones and 3G/4G dongles started during Q1 & Q2 2014 resp.
  • As of now there are 16 assembly lines for mobile handsets with a production capacity of close to 2 Million per month. The factory assembles over 30 Micromax mobile phone models of most of which are smartphones and involves assembly of kits of parts in a Semi-Knocked-Down (SKD) process.
  • The production capacity for mobile phones is likely to go up  mostly due to increase in the number of assembly lines and the addition of new machinery to enables automation of certain manual processes like soldering and packaging.
  • Two of the mobile phone assembly lines are dedicated to the latest Yu brand for both of its “Yuphoria” and “Yureka” models.
  • The lines are flexible enough to assemble any of the models depending on the market demand.
  • The production capacity for the tablet and television devices is 100k per month while the production capacity of dongles is 200k per month across both 3G and 4G dongles.

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Image 2: Assembly lines for TV. Source: Micromax Informatics Ltd

  • However the overall growthof dongles and tablets as a product category in India has been modest for the last couple of quarters. This will likely see the volumes remain, at best, flat over the next quarter from the factory.
  • Almost all of the models for TV’s, tablets and dongles are assembled locally.
  • It takes less than 72 hours from the arrival at point of entry to India of an SKD kit to finished product. Which is i mpressive given the various infrastructural issues that are still common in India.
  • In terms of packaging it has already started eco-friendly Biodegradable boxes for YU products and will expand it to other devices as well going forward.

Conclusion:

  • Micromax’s assembly operations in Rudrapur definitely have scale and competency to reduce the dependency of company on imports of finished goods. It is now second after Samsung in terms of production output and as Micromax plans to grow further we can expect it to scale the local assembling operations going forward. It has also plans to set up new units in Telangana, Hyderabad and in Bhiwadi, Rajasthan.
  • As far as overall Mobile Handset Industry is concerned, almost five to six vendors have now started their mobile handset assembling operations in India. According to Counterpoint Research’s India Market Monitor, close to 1/5th of the total mobile phone sold in India were assembled locally during Q1 2015
  • Currently the duty differential and state incentives might confer a few hundred rupees cost advantage per device to locally assembled product – a significant cost advantage when margins are already slim. However companies which don’t have scale will continue importing their finished products or go for contract manufacturing route.
  • A full scale manufacturing in India for the Mobile Handset Industry needs a complete component ecosystem within India. The manufacturing of components will lead to the rise in domestic value addition for manufacturing of mobile phones which can further reduce import costs as long as electronic components are concerned.
  • Creating a component manufacturing in India is still twelve to eighteen months away but initiatives like “Make in India” with various incentives around taxation and investment allowances can facilitate the process. In that scenario players like Samsung, Micromax and others which leap-frogged in terms of assembling processes will have a competitive edge over others.

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