Leverage TN’s labour arbitrage to replicate auto success in electronics, says MeitY secretary

CHENNAI: Ford Motor’s exit from Tamil Nadu created a lot of heartburn, but not many care to highlight that the auto giant also has a state-of-the-art global capability design centre in Chennai, which employs 15,000-plus people compared to the 3,000-odd on its factory (erstwhile) floors, S Krishnan, Secretary of the Ministry of Electronics and Information Technology (MeitY) said on Saturday.

Underscoring the importance of global capability centres (GCCs), while delivering the 10th G Ramachandran Endowment Lecture, organised by the South India Chamber of Commerce and Industry (SICCI) and the Madras School of Economics here, he said the design workforce reflects the inclusive DNA of our country, especially the state of TN.

He pointed to the evolution of the role of GCCs from back-end office to specialised skills to one of supporting their headquarters and global operations by mentioning that they are no longer a “sweat shop”. GCCs need to be promoted, and this is where Artificial Intelligence or AI offers tremendous opportunities. While the designs are done out of India, it is the intellectual property that it needs to focus on, he said, citing the case of Apple. Out of the $1,000 iPhone, only $200 belongs to India, whereas the rest goes to the brand’s headquarters in California.

Digital products are increasingly being used as intermediary inputs in a large number of industries, he said, dwelling on the ongoing study by ICRIER which is funded by MeitY.

Making a case for India’s digital economy, including core digital sector and its upstream industries, Krishnan said given the current 8-10 per cent growth, it has the potential to hit the $1 trillion mark, when the country touches the $5 trillion figure. Therefore, to record 17-18 per cent growth shows the critical area of importance that digitalisation offers, especially at a time when shifting of manufacturing components to India is on.

The value addition to mobile phones is at 18-20 per cent, whereas China accounts for 40-45 per cent by sourcing inputs globally. So, it is necessary to pick those elements of components, where India has the advantage in order to double the figure, rather than trying to cater to every aspect of the supply chain. Krishnan spoke at length about the necessity to focus on value-added manufacturing at least in certain states due to their ability to generate large-scale employment. Foxconn and Pegatron are some of the brands that have made this possible but the assembling exercise primarily should evolve to high end work such as component manufacturing. The labour arbitrage of Tamil Nadu must be leveraged so that the state can replicate the automobile success in the electronics manufacturing services industry also.

The Tatas and Murugappas have already taken a lead in this direction, he said, highlighting the need for many more participants in the EMS sphere. While the efforts of bringing in semiconductor giants to our country hogs the limelight, it is note-worthy that one-third of the human resources across the world for design are located out of India. Even the design work of fabless companies such as AMD is done out of India, he sought to point out.

Krishnan also cautioned against the pitfalls of a digital economy, as he cited the example of the billions of dollars being stolen in the 2016 heist at Bangladesh Bank.

Emphasising on reskilling and upskilling, he said the approach to AI has to change moving away from the mindset of it being responsible for job losses. A visit to the State University of New York at Albany showed this differentiated approach where AI courses would be taught in every department, be it art or culture or education or healthcare and not merely confining it to computer science.