Building the Future: Aequs Ecosystem as the Modern- Day Keiretsu

Building the Future: Aequs Ecosystem as the Modern- Day Keiretsu

"It takes a village to raise a child," goes a traditional African proverb emphasizing the importance of community in developing a child into a good citizen.

Likewise, when it comes to raising an industry, it takes more than an entrepreneur to make it a successful business—it takes a whole community in fact, nurturing it with care, guiding it with wisdom and supporting it with a shared vision for the future. In other words what it needs is an entire ecosystem that is efficient and has a common goal.

Participating recently in an invigorating industry roundtable on Nurturing Electronic Components and Sub-assembly Manufacturing recently, this was just the thought that came to my mind. But before I dwell deeper on why, some context is in order.

The India Cellular and Electronics Association (ICEA), which is delivering a yeoman’s service to the electronics sector in the country, hosted the roundtable. It comprised a diverse group of decision-makers, industry participants, and other stakeholders, all of them with considerable skin in the game.

The discussion was being held in the backdrop of a recent report by the NITI Aayog titled ‘Electronics Sector: Powering India’s Role in Global Value Chains” with the stated objective to identify key strategies and interventions to boost India’s competitiveness in the sector and facilitate its integration into global value chains.

The premier think tank has envisioned a policy scenario where India should be able to achieve US $500 billion in electronics production by 2030, with $200-$225 billion of it coming through exports. India should not only become a net exporter of electronics, but also increase its DVA (Domestic Value Addition) to over 35%, up from the current 15-18%. This is expected to result in the generation of 5.5 million to six million jobs by then.

But the moot question to ask, is will India be able to achieve this laudable target even by 2050, leave alone by 2030?

The Problem

First and foremost, the participants agreed that component and sub-assembly manufacturing needs significant attention from government and other stakeholders. Focus over the last decade has been on assembly of cellular phones, it was observed. To be profitable, self-reliant and risk free, we need to develop a widespread capability for component assembly across the electronics value chain—semiconductors, displays, mechanical parts, motors, speaker, and microphones among a host of others. There would still be some components that will have to be imported to enable the export of finished goods.

Hearing the dialogue, one may have easily concluded this to be an onerous task, some of which to give due credit to the NITI Aayog, are also highlighted by GVC report:

  1. High capital costs in India critically impact capital-intensive electronics sector.
  2. India lags competitors by 20 years, leading to a 15% cost disadvantage.
  3. Most high-tech equipment must be imported due to limited domestic manufacturing.
  4. India lacks expertise in high-precision component manufacturing, particularly in machining (metal and plastics), stamping and molding.
  5. We lack knowledge in advanced surface treatments and coatings.
  6. We face significant skills shortages in key expertise areas.

 

The participants voiced these and several more issues. Rather than meeting customer needs and running their businesses efficiently, entrepreneurs are bogged down by tertiary issues that take-up most of their time and energy.

Suddenly, it dawned upon me, I was hearing a remarkably familiar grouse and something that has been addressed largely within the Aequs ecosystem.  This thought prompted me to bring up the Aequs Playbook which hinges on the fact that there is no problem that cannot be solved. It only needs time and understanding, just the way you need to nurture a child. And of course, the right investments at the right time.

At the risk of sounding immodest, I dare say that Aequs was already making in India to be Atmanirbhar, much before the terms became buzz words. It is to the credit of Aravind Melligeri, founding Chairman & CEO of Aequs who came up with the concept of Ecosystems of Efficiency®, way back in 2008 to meet the requirements of the global Aerospace industry. The result was the Belagavi Aerospace Cluster (BAC), India’s first precision engineering SEZ, now globally recognized and much awarded for its unique industrial innovation. Since then, Aequs has taken giant strides for a similar approach for two other segments resulting in the Hubbali Durable Goods Cluster (HDC), for durables and consumer electronics. HDC replicates BAC’s proven formula of developing clusters or entire ecosystems, rather than just factories.

The Solution

It is no secret that in India business owners spend 30-40% of their valuable time in the least to troubleshoot issues which do not add value to their business or products. Fellow participants at the roundtable vouched for this.

Some typical concerns voiced in this direction included:

1.    Power issues

2.    Water scarcity – vital for semi-conductor industry

3.    Dearth of skilled labor, labor issues – training and skilling of labor

4.    Logistics and warehousing; Timely Custom clearance

5.    Employee wellbeing – Occupational Health, transportation, canteen etc.

6.    Environmental clearances

7.    Government permissions

But this is not so with units within the Aequs clusters. For instance, among the thirty odd manufacturing units, including third party entities, located within the BAC, not a single unit owner will perhaps tell you he had to spend time running around for permissions. Similar is the case with units at the HDC.

Team Aequs leverages the knowledge and relationships nurtured over years with suppliers, vendors, government agencies among a host of others, to efficiently to run the clusters. The bottom line is to make life easier for individual unit operators who can focus on what happens within the four walls of the factories and on improving customer value.

You can say the Aequs Ecosystem model is the modern-day version of the Japanese Keiretsu or the Israeli Kibbutz, recognized world over as the personification of successful clusters.

What Aequs brings to the table is a symbiotic manufacturing infrastructure and manufacturing services platform, including administrative and skilling organization, by creating a vertically integrated ecosystem that enables the shortest gestation from groundbreaking to production time.

Incidentally, these ecosystems also turn out to be the most sustainable operations leading to the lowest carbon footprint for every component or product made there thanks to the collocated facilities and extreme vertical integration within.

Having heard about the Aequs Ecosystem Playbook, it is but natural that anybody would agree that the cluster approach is the way forward, be it greenfield or brownfield clusters like those of Aequs, for India’s shot at being a global consumer electronics hub.

It was indeed a pleasure to hear the Chief Guest, Shri S Krishnan, Secretary, MeitY and Guest of Honor, Shri Sushil Pal, Joint Secretary, MeitY, agree with the proposal wholeheartedly and express readiness to support the same towards this goal.

 


 

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