Building an asset lite ODM/Brand Stack

The recent acceleration in India's manufacturing sector is undeniably impressive, with companies going public and securing substantial funding. In fact, India is expected to become a global manufacturing powerhouse, projected to contribute $1 trillion to the economy by 2025, largely driven by initiatives such as the government’s Production-Linked Incentive (PLI) schemes and ongoing reforms.

However, this rapid growth presents both opportunities and risks. The trajectory is reminiscent of the early days of India's IT services boom, where giants like Infosys and TCS built global empires. Yet, despite their scale, these companies faced challenges when it came to innovating and producing world-class products. The IT services sector became highly profitable, but innovation in product development lagged.

A similar risk looms in India’s manufacturing sector. The pressure on large manufacturing firms to meet quarterly targets and focus on short-term profitability may limit their capacity to move up the value chain. Higher-value activities such as product design, research, and Original Design Manufacturing (ODM) could suffer, hindering India from establishing itself as a leader in innovation-driven manufacturing.

Here are a few tailwinds indicating the

Learning from the IT Sector: A Path Forward for Manufacturing

Much like the IT sector's evolution, where risk-taking professionals eventually left service firms to establish globally successful companies, the future of Indian manufacturing may not rest solely in the hands of large firms. The real opportunity lies with local brands and design houses. Rather than waiting for large manufacturers to drive innovation, these smaller, more agile players can leverage India’s burgeoning manufacturing infrastructure to build a layer of design, R&D, and product development. This approach would allow them to create scalable, high-value products, while the larger players focus on what they do best—manufacturing at scale.

Consider China as a case study. While the country established itself as the “world’s factory,” its transformation didn’t stop at manufacturing. Companies like Huawei, Xiaomi, and Lenovo began as Original Equipment Manufacturers (OEMs) but eventually evolved into world-class innovators and global brands. Huawei alone invested over $20 billion in R&D in 2021, demonstrating how design and innovation became the real differentiators. ODMs such as Wingtech Technology and Huaqin Technology are now dominant players, designing and manufacturing products for global giants like Samsung, Xiaomi, and Google

Tailwinds Supporting Design-Led Growth in India

1. India’s Manufacturing Boom and PLI Schemes Are Creating a Solid Foundation India’s manufacturing sector is on a steep upward trajectory, bolstered by government initiatives like the PLI schemes, which are expected to generate $520 billion in manufacturing output over the next five years. This manufacturing scale-up is the bedrock for the next phase of value creation: product design and end-to-end development services. Just as China moved from OEM to ODM to global brand-building, India is poised to follow a similar path. But for this to happen, design-led growth must be prioritized.
2. The Shenzhen Parallel: India Needs a Design Ecosystem In discussions with chipset companies and local brands, one recurring theme has emerged: India needs its own version of Shenzhen—a hub where design, R&D, and manufacturing come together. Shenzhen didn’t become a tech powerhouse overnight; it evolved as companies recognized the need for ODMs that could not only manufacture but also design innovative, tailored products. ODMs such as Huaqin and Longcheer have thrived in Shenzhen, producing smartphones and consumer electronics for global players. India must embrace a similar model, where ODMs work closely with brands to design and manufacture products that cater to specific customer segments.
3. Learning to Build for Global Markets Collaborating with private labels, both in India and internationally, is more than just a revenue opportunity. It’s a chance to understand global market nuances and refine product development processes. Through these partnerships, Indian design houses can build the capability to compete globally as both an ODM and a brand. For example, Indian firms working with brands in Europe and North America are gaining insights into global consumer behaviour, enabling them to design products that cater to diverse markets. This learning curve is critical if Indian firms are to follow in the footsteps of Chinese companies like Xiaomi, which expanded globally after mastering domestic manufacturing.
4. Adopting a Software-Like Approach to Hardware Design To stay competitive, India’s ODMs must adopt a more modular approach to hardware design—similar to how software platforms like Android or iOS work. By creating a core platform with standardized components, companies can build multiple variations to suit different market needs. This approach not only drives economies of scale but also ensures flexibility and speed to market. Chinese ODMs such as Wingtech and Huaqin have perfected this model, allowing them to serve a broad range of brands while maintaining efficiency. By standardizing key components, Indian ODMs can compete more effectively with Chinese counterparts, offering faster customization without sacrificing quality.
5. Keeping Production Independent of Facilities Another critical factor is ensuring that production can remain flexible and independent of a single facility. By developing standardized processes and test equipment, Indian ODMs can ensure that production quality remains consistent, even when shifting between manufacturing locations. This flexibility is crucial for scaling operations across different regions without compromising quality.

A Final Thought: Design is the Future of Growth

India’s manufacturing growth is undeniable, but the true frontier of value creation lies in design and innovation. Over time manufacturing will be a commodity led by low-cost labour arbitrage. By leveraging our manufacturing capabilities to build high-value, design-led systems, India can move beyond being just a manufacturing hub to becoming a global leader in product development. The opportunity for local brands and design houses to collaborate and lead this shift is enormous. Now is the time to capitalize on the foundation that has been built, ensuring that Indian firms don’t just follow but lead the next wave of global innovation.