Laptop Manufacturing - what does it mean to localise?

Laptop Manufacturing - what does it mean to localise?

The past week saw the announcement from the GoI restricting the import of laptops and other IT products into the country. Such imports will henceforth require a license and though that does not mean a ban on imports, it does add a new checkpoint into the system that can be utilized to drive the objective that such a restriction aims to achieve.

The response to this announcement has been mixed, with OEMs definitely concerned about disruptions to business (that should be avoided), consumers concerned over increase in prices (quite likely) and local manufacturers hoping that this will enable local manufacturing opportunities from the global OEMs (aspirational).

Let me break this down into what it means to localise a laptop. For this, first lets take a look at a typical laptop BOM (bill of materials). The BOM comprises of (approx):

1. PCBA/Motherboard - around 15% of the cost of the product
2. CPU/Processor - around 20% of the cost
3. Display - around 20% of the cost
4. Storage - SSD mostly now a days and 15% of the cost
5. Memory - around 10% of the cost
6. Battery - around 5% of the cost
7. Housing+Keyboard+other thermals, Plastics - around 10% of the cost
8. Everything else (camera, antennas, speaker et. al) - around 5% of the cost

Of these the Motherboard is further comprised of 100's of electronics components many of which cost just a few cents per unit. There are multiple sub items in each of the other major items as well. Thus in summary a complex number of items and its associated suppliers/supply chain.

When we expect localisation of such a product, the key questions to ask are :

1. Is the product designed from India with knowledge of the possible BOM components that can be sourced or manufactured from India?
2. If designed outside India, does the designer of the product know what part of the BOM has components/items from India that can be spec'd into the product design?
3. If this product is being designed by Independent Design Houses (IDH) in TW or China - do they have any Indian suppliers in their Approved Vendor List (AVL) whose components can go into the product?

Without answers to these questions, the localisation of laptops when faced with an import restriction will follow the assembly route where a knock down kit will be assembled in India with the assembler having very little say in the BOM of the product.

Needless to say, introducing a new item into a BOM also involves extensive qualification and testing. Adding a new supplier into an AVL is not easy.

Coming back to the BOM:

1. PCBA/Motherboard - PCBA can be assembled at an Indian EMS's SMT line but all components will continue to be imported
2. CPU/Processor - will continue to be imported as no Fabs in India product Intel or AMD chips
3. Display - display assembly possible currently with imported panel sheets
4. Storage - assembly possible with imported memory modules
5. Memory - assembly possible with imported memory modules
6. Battery - pack assembly possible with imported lithium cells
7. Housing+Keyboard+other thermals, Plastics - no designs generally available
8. Everything else - no designs generally available

Additionally, while these are all manufacturing capabilities that exist, there are hardly any Indian product companies in the business of making these as products. India can only contract manufacture for a existing product company in that absence.

So, while the GoI shows a bold intent and support to local manufacturing through its policies, what does industry need to do to unlock the opportunities that it can potentially provide?

1. Invest in creating Independent Design House (IDH) capability through which products can be designed with an India sourced BOM. It may be small to start with but will grow as volumes get added
2. Invest in creating product companies for the BOM components as against only doing contract manufacturing for someone else's design
3. Invest in creating Indian IT product brands that will innovate and create products locally at price points and features unique to the Indian market for education, SMEs, Govt. and households
4. Invest in taking Indian brands global to provide market and reach to the local ecosystem to get the volumes that are needed for competitive manufacturing
5. Increase adoption of IT products to further strengthen the domestic market

Disclaimer: All views expressed are personal and do not reflect the opinion of the author's employer, academic associations or industry affiliations.