It will take India a long time to match up to China in manufacturing: Revathi Advaithi, CEO, Flex

I haven't been able to come and meet the India team since the pandemic started. We have two parts in our India team. One is our back office, which is our shared services team. It is the largest for the entire company. It's kind of the backbone. During the pandemic, our shared services team kept the company going, with no hiccups. We also have a very big supply chain team here, as part of the shared services, and it has helped us significantly through the supply chain crisis. So I wanted to meet the team and thank them for carrying us through the last few years. That is a big part of my agenda. And then I went to the factory to see what was going on there too.

Q. Most of Flex’s sales comes from the US, Mexico and China; and in Asia, after China, there is Malaysia and Singapore. Where does India stand?  

We have a very significant manufacturing presence in China, Mexico, and parts of Eastern Europe. India has a pretty big presence for us too, though I do not know its ranking. We do not give [out] revenues as per geographies. What is important in our India strategy is, where do we go from here? We have seen a lot of change in content, incentive schemes, and that is helping spur manufacturing growth in India. And we're hoping to piggyback off that, and support our customers to drive growth.

Flex's India strategy has matured in the last five to seven years, where we started accelerating our overall growth. The India business was consumer-focussed, but we are moving to make it focussed also on industrial and automotive segments, where we have good design and manufacturing capability. Most of our customers want us to support them in more complex products in India.

A lot of our customers want to have a ‘Made in India’ strategy to support domestic growth. And because of that, we're seeing growth, particularly in the segments such as tech, automotive, and industrial.

Q. Who are your clients in India?

We do not name our clients because of confidentiality, but we participate in the consumer sector like laptops and cell phones, the cloud enterprise communication (CEC) sector, and we're seeing growth with automobiles, particularly electric vehicles (EV), in which we have a really good presence globally. We want to also focus on sectors like industrial, which is a big business for us globally.

Q. In India, technology and automobile sectors dominate in manufacturing. Is it likely to change in the next few years?

I expect CEC to continue to grow, because for the Indian market, having local storage and server capabilities is going to be important, and our customers will push for manufacturing it here. I expect both automotive and industrial to also grow. We do not have a big presence in India’s medical manufacturing field and have to think about what that’s going to take. We are also focussed on the circular economy or services sector, with more vertically integrated solutions. So it is not just manufacturing, but taking back the product, refurbishing and shipping it again.

Q. What percentage of products you manufacture are for use in India, and how much is exported?

In the automotive segment, electric two-wheelers and four-wheelers, all of those for domestic consumption. We make laptops in the country, and some cell phones, but not as much as some other people do. We make set-top boxes. So it's quite a very diverse set of products that we make in India. Most of what we manufacture in India is for India. There's not a lot of export that's happening from India today. Most of our customers who are manufacturing in India are really focused on the domestic market.

Q. India wants to be the next global manufacturing hub after China. What is its potential?

Now that things are looking different with China, every country is thinking about the role it can play to be the world’s manufacturing hub. You have to start with the fact that the efficiency that sits in the Chinese manufacturing sector is significant. That takes time to build up.

But there are some pluses in India. One, the demographics are in favour. India has a big workforce, and now it has to become skilled. There are not many countries that have that capability. Even if there's growth happening in Malaysia, Vietnam, Poland or Romania, demographics don't support that type of growth. If you can convert India’s demographic to skilled labour, it will be a huge advantage.

Second, things like the production-linked incentives (PLI) have definitely helped, because they have started the process of incentivising manufacturing to start showing growth. But you have to look at it from an end-to-end supply chain perspective. It has to start from assembly and test, to the next phase and then the rest of the bill of materials for the manufacturing process to be really productive and efficient. So it will take time to build in India.

If you compare like-for-like with China, it is not the same. The cost structure is not the same. The PLI provides a leg-up to make those differences more palatable. It doesn't become fully cost effective.

Also read: Why India isn't a global manufacturing hub

Q. How can India match up to China in manufacturing scale?

It took China a long time, and it is going to take India a long time. China wasn't built up overnight in terms of their capability, and the things China got right was availability of lower cost of capital, a very focussed workforce training programme, providing hubs for growth. All those happened over decades. It'll take the same amount of time for India too, but I see more progress in the last few years in India in terms of providing the right strategies, minimising approvals and bureaucracy, providing new incentive schemes. So the conversations are the right ones. But it will take time.

Q. How will surging inflation impact manufacturing?

We're seeing inflation everywhere. Labour inflation is significant across the world, material costs have risen dramatically, whether it's for semiconductors, or resins or plastics, or metal, freight and logistics. The person who pays for inflation is the end consumer.

Flex takes the inflation, passes it on to our customers, and then they pass it on to their customers. It's a difficult place to be in. We are watching all the interest rate changes globally, particularly in the US, and we're all hopeful that there will be some slowdown in overall inflation. The continued management of interest rates is critical to bring down inflation, and we are very supportive of that.

Q. Why did you decide on a career in manufacturing?

I became a mechanical engineer because it was more hands-on. When the world was moving to IT and software, that just wasn’t my thing. I stuck with manufacturing because the factory gives me a different kind of energy and passion… to rethink or be able to change how something is made, and to physically bring it together, that was interesting for me.

When I landed in BITS [Pilani], I was the only girl and mechanical engineer. There was one girl ahead of me and none after me. When I went to the US, it was apparent that women don't end up in manufacturing. But it never bothered me. It required me to work differently, work harder. But I loved what I was doing.

Q. Are there lessons from your earliest days in the sector that still help you?

My first leadership experience was my first job as a shop-floor supervisor in Oklahoma. And leading a group of 40 to 50 men, shop-floor employees, was a different and humbling experience. Because it did not matter what your education was, how smart you were. How you motivated somebody to do what they were doing required a different skill-set… for you to understand what they were, what was important to them. And those are not necessarily the things that were important to you. My first lesson of leadership, being in a team, and what it takes to get people excited about what you are doing came from that time. I quickly learnt that who you are and what’s important to you has no relevance. You have to find a way to make it important to the person you are working with. And that has stuck with me for all these years.

Q. How have things changed, particularly with respect to participation of women in the sector?

I have worked in the US’s Midwest, the heartland of its manufacturing industry, then moved to England, went back to the US, and went to China. I would say that everywhere in the industrial sector, it doesn't matter where in the world, there are not too many women. Interestingly, in the factory environment, we are seeing more women who are leaving home and coming to work. That wasn’t the case when I was working. But women in leadership roles are a very small population. Because most women end up going into computer science. I do not see that shifting anytime soon. It is still a tough sector for women to be in. And it’ll take time and effort to push girls to want to be in this space.

Q. Do you have plans to expand and hire more people in India?

It’ll be driven in segments, but as our customers push for domestic manufacturing, we expect that to continue to happen.