Zetwerk charts ₹1,000 crore game plan for electronics manufacturing

“We have planned an outlay of ₹1,000 crore for the near future to look at expansions judicially and into critical areas. A company from India entering this segment is important at a time when globally there’s a Y2K moment for hardware happening, and India will be the first pick with the newer policies coming,” Josh Foulger, who joined as president of electronics business at Zetwerk in February, told Mint in an interaction.

The former country head and managing director of Bharat FIH, the India arm of Taiwan’s Foxconn Technology Group, said Zetwerk could potentially make iPhones in India and capitalise on the growth in smartphone exports, driven by Apple. As of January, India produced iPhones worth over ₹1 trillion, a majority of which was for the exports markets.

“I’m happy for them (Apple) to be in India, very happy that they’re choosing Indian companies. That gives an opportunity for us in the future.” He was referring to iPhones being manufactured by Tata Electronics Pvt Ltd, which had acquired iPhone maker Wistron’s India operations last year, marking the first instance of an Indian company assembling iPhones domestically. 

The Tata group company is currently in talks to acquire the India operations of another iPhone maker, Pegatron, Reuters reported on Monday.

“We have to get some more scale. It’s still an open field,” Foulger said, adding that there was opportunity for more players in the smartphone EMS segment where most of the supply was concentrated with a handful of companies. 

Foxconn’s Bharat FIH and Dixon Technologies, along with a few others, are large EMS players, which are adding capacities, as India aims to become an export hub for mobile phones.

Foulger said Zetwerk’s factories in the US and Mexico could provide the agility required by global value chains that are looking at India for supply chain alternatives to China, making the US market its biggest go-to for exports, especially after the US elections later this year. 

Former President Donald Trump has indicated the likeliness of reinstating duties on foreign goods if he wins the presidential elections. During his first term, in 2019, Trump had threatened to levy tariffs on China-made phones, laptops and other products. India’s position as a friendly nation of the US could help Indian companies, he said.

“The US market is going to be a huge opportunity for India for devices like phones and hearables. Today, it (phones) is exempt from tariffs, but it may not be by the end of the year. I will slot India in the ‘friendshore’ category and I think we have the capacity for that. That’s a blue ocean when we look at the total addressable market,” Foulger added. Zetwerk is close to getting its first export orders for smartphones from the US, he added.

The Middle East and Africa will be the other exports markets for 4G and 5G smartphones, as well as featurephones . Presently, Zetwerk makes 2 million phones a month – featurephones and smartphones combined – for local brands. It is planning to scale up to serve international brands as well. The combined capacity for mobile phones, hearables and wearables, will be at 4 million units a month, across its six factories.

It already makes over 1 million hearables and wearables, including true wireless headsets, neck bands and smartwatches. “This will be another huge export category. The other will be televisions, but a PLI scheme for that without any categorisation of local or foreign (players) would be good,” he noted. The company makes 2.4 million televisions a year at its Noida factory.

However, the bulk of the investment will go towards setting up capacities for laptops and servers, and other IT hardware products under the production-linked incentive (PLI) scheme. Foulger added that the Indian government’s decision to stop imports of these categories would benefit companies like Zetwerk.

“We will begin with laptops. We will do all the categories barring desktops that are covered under the IT hardware PLI. A lot of sensitive products in these categories’ like laptops and servers are imported, which should not be the case. We will expand our capacity. The potential for exports for laptops is very high. They’re also currently exempt from tariffs,” he added.

Zetwerk specialises in manufacturing services for electronics, aerospace, defense and renewables. It will also look at expanding products in the telecom equipment category, supplying printed circuit boards to enterprises that are part of the PLI scheme for telecom. It may look to supply equipment such as GPON, set top boxes, routers and mobile base band units.

Zetwerk, which has raised $650 million till date, including a recent $20 million round from IndiGo co-founder Rakesh Gangwal, will also apply for the PLI scheme for mobile phones, electronics and telecom products, either directly or through third party manufacturers, Foulger said. 

He, however, advocated for a phased manufacturing programme (PMP) to enable component manufacturing in India, along the lines of mobile phone assembly capacity back in 2017. 

To encourage local mobile phone manufacturing, customs duties were levied on imported parts, incentivizing brands to establish units in India. This resulted in 96% of phones being manufactured domestically, accompanied by a significant decline in imports.

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Published: 10 Apr 2024, 06:30 AM IST