“Most People Don’t Know We’re Doing Much Better Now” - Micromax Founder Rahul Sharma

Summary

The conversation explores the evolution of manufacturing in India, emphasizing the need for local production to reduce reliance on foreign suppliers. The speaker shares insights on building a competitive supply chain, with a focus on electronic manufacturing services (EMS) and component manufacturing. Highlighting the opportunities within India’s growing $500 billion market, the discussion encourages young entrepreneurs to tap into niche industries and take advantage of government incentives like the PLI scheme. The key takeaway is that the future of manufacturing lies in local sourcing and innovation to stay competitive.

Takeaways

• 😀 The importance of stopping burn rates: In 2009, the decision was made to stop burning money and focus on manufacturing to ensure long-term sustainability.
• 😀 Pivot to manufacturing: Micromax shifted from a brand-focused strategy to building factories and focusing on the supply chain and manufacturing in 2021.
• 😀 Access to the supply chain is crucial: Companies need direct access to key components, such as screens and processors, to stay competitive in the market.
• 😀 Alpha customers control supply chains: Larger companies like Huawei secure early access to technology by becoming alpha customers, blocking capacity and resources from smaller players.
• 😀 Stick to your core competency: Despite diversifying opportunities, the core focus should remain on technology and manufacturing, as these are the strengths that drive long-term growth.
• 😀 India's manufacturing landscape is growing: India is becoming an increasingly important hub for manufacturing, with multiple factories and an expanding component ecosystem.
• 😀 The challenge of competing with China: Competing with China in manufacturing is difficult due to their economies of scale, but niche components (e.g., glue for machines) can be produced locally.
• 😀 India’s growing market for components: India’s projected $500 billion manufacturing market by 2030 presents a huge opportunity for locally produced components, especially with initiatives like the PLI scheme.
• 😀 EMS (Electronic Manufacturing Services) is a key industry: The future of India's manufacturing sector lies in EMS, as it focuses on component production and local manufacturing capabilities.
• 😀 Local sourcing incentives: Local sourcing of components is incentivized by the PLI scheme and import duties, which reduce costs and create a more competitive market in India.

Q & A

What led the company to pivot from a focus on branding to manufacturing?

In 2009, the company realized that continuing to burn through funds in branding would lead to financial burnout, so they decided to stop burning money and focus on manufacturing. This shift allowed them to start building factories and focus on the supply chain.

How do companies like Huawei impact the supply chain in the tech industry?

Huawei, being an alpha customer for suppliers, blocks capacity by securing access to the latest technology, such as new screens or chipsets, for a certain period. This means smaller companies may have to wait for their turn to access the same components after the larger brands.

What is the importance of sticking to core competencies for businesses?

Sticking to core competencies, like tech in this case, allows businesses to focus on what they excel in. The company found that by staying within their expertise in manufacturing, they were able to build a strong foundation and grow their business in that area.

How does the process of building a supply chain in India begin?

The process starts with electronic manufacturing services (EMS), followed by developing the design, and then building the component ecosystem. This process ensures that everything from design to components can be sourced and produced locally.

What challenges do new entrepreneurs face when competing with Chinese manufacturers?

New entrepreneurs face significant challenges in competing with Chinese manufacturers who have the advantage of mass production, economies of scale, and established supply chains. It can be difficult to compete when trying to produce small quantities or specialized components.

What opportunity exists for manufacturers in India to replace imports with local production?

India's growing market offers opportunities to replace imported components with locally manufactured ones. For example, a 25-year-old entrepreneur could identify components that India imports, such as specific glues or raw materials, and start manufacturing them locally.

How does the PLI scheme incentivize local manufacturing in India?

The Production Linked Incentive (PLI) scheme provides financial incentives for businesses to manufacture components in India. It encourages local production by offering benefits to businesses that source and produce locally, reducing reliance on imports and creating jobs.

What strategy can a new entrepreneur use to start a manufacturing business focused on components?

A new entrepreneur can start by researching components used in products like mobile phones, identify which ones are imported, and then determine if they can manufacture those components locally. They should also consider gaining industry knowledge by working at an EMS company to better understand the supply chain.

What role does sourcing locally play in the cost structure of a business?

Sourcing locally helps reduce duties and taxes on imported components, lowering the overall cost of production. This can make products more competitive in the market, particularly when tariffs and import duties on foreign components are high.

How can Indian companies compete with Chinese companies in the component manufacturing sector?

Indian companies can compete by leveraging local incentives like the PLI scheme, improving their manufacturing processes, and focusing on building quality components with cost advantages. However, the challenge lies in matching the subsidies and economies of scale that Chinese companies benefit from.