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Toshiba Answers India’s Call

{complink 5648|Toshiba Corp.} has announced plans for a major expansion of its manufacturing operations, sales, and brand-marketing program in India, responding both to rising demand for digital products in the country and also to recent appeals from the government for local production of high-tech equipment in the world's second-most populous nation.

Over the next nine months, the Japanese company intends to nearly double its retail outlets in India to 6,000, from 3,500 currently, and plans to begin local production of LCD TVs, in addition to opening a new R&D center in the country. The goal of the design center is to “support product localization and development and advance innovation in unique products deeply reflecting local needs,” Toshiba said in a press release.

That objective is in line with what the Indian government has been advocating for years now. The government wants high-tech manufacturers to increase their investments in the country, although this time it wants them to focus on design, R&D, and manufacturing both for local demand and export. Recently, the government offered financial incentives to high-tech companies interested in establishing a semiconductor fabrication plant in the country. (See: Will Chipmakers & Investors Respond to India’s Request for Local Fab?)

I am not sure if chip makers will establish a fab in India; there are too many constraints, and the financial incentives offered by the government may not be attractive enough. However, it is obvious that India's push for localized production is getting a warmer reception from many electronics manufacturers. Toshiba's recent move is only the latest in a growing line of expansion plans that high-tech companies have introduced in recent years for India, although many of these have been in the area of software and R&D, rather than manufacturing.

One reason why India is becoming more attractive to high-tech manufacturers is the relatively low level of penetration in the country and the potential for huge sales growth. Unlike in many other parts of the world, Indians are still swapping their cathode ray tube (CRT) TVs and PC displays for digital alternatives. Also, while Indians have eagerly embraced mobile phones, manufacturers now consider the country a potentially huge market for smartphones as average selling prices for the product decline.

Toshiba admitted in its press statement that it wants to increase investments in India because of the potential for sales growth in the country. The company further justified its decision:

    India's economy continues to surge and key markets are recording dynamic growth. The laptop market will enjoy a compounded annual growth rate (CAGR) of 20 percent from fiscal year 2010 to fiscal 2013, growing from 3.8 million units to 6.5 million, and in TVs the figures are even more impressive: a CAGR of 59 percent from fiscal 2010 to fiscal 2013, with unit sales climbing from 3 million to 12 million units. This huge advance will be fueled by the transition from traditional cathode-ray-tube TVs to sleek LCD TVs.

According to Masayuki Ito, the vice president of Toshiba's digital products & services business unit, the expansion in India would help the company consolidate its presence in the country and help increase its local share of the LCD TV market to approximately 15 percent by 2013.

I believe Toshiba's moves will be beneficial in the long run for the company. Until now, most foreign OEMs in India have treated the country more or less as a sales outlet. They sell products there and do some basic R&D work, but manufacturing and critical design services are done elsewhere.

The Indian government initially signaled its displeasure with this approach rather quietly by simply touting the advantages of local manufacturing. However, the government has lately been loudly insisting electronics OEMs and even component suppliers should establish manufacturing plants in India. It has, in fact, indicated this might soon be a requirement for the sale of high-tech equipment in the country.

OEMs that fail to heed the growing clamor for local content (components or production) for information technology products sold in India may find themselves locked out of what could turn out to be a highly profitable, large-volume market.

27 comments on “Toshiba Answers India’s Call

  1. AnalyzeThis
    July 26, 2011

    I agree Bolaji, this does seem like a sensible move for Toshiba. However, I believe that trying to cultivate a more local presence in India doesn't make sense for many electronics companies; India itself is still a very questionable market for many of the higher-end products specifically. Given the additional logistical and infrastructure issues still common in much of India, I generally think — at this point — it only makes sense to invest in India if you're planning on aggressively pursuing the Indian market.

    Jokingly, I wonder if Toshiba has already outsourced their marketing department to India… have you seen their television ads lately? Inexplicably bad, in my opinion!

  2. Houngbo_Hospice
    July 26, 2011

    @DennisQ,

    Every manufacturing companies would like to tap into the India growing market if they could. That is what Toshiba is willing to do and it perfectly makes sense. Local manufacturing of Toshiba products will surely help save money and help increase Toshiba's presence in the Indian market, which is a very promising market.

  3. Nemos
    July 26, 2011

    Great news,great move from Toshiba.It is more than clear that this move it is a  trojan Horse   move. It is the best way for Toshiba to dominate in Indian market.

    “there are too many constraints,”Can you please analyze this?  What are these constraints which blocking India to be a wafer manufacturing country? 

  4. Anna Young
    July 26, 2011

    This could turn out to be beneficial for Toshiba in India. There is potential for huge sales growth and the fact that there is currently low level penetration of high tech manufacturing company in India makes sense.

     

     

  5. mario8a
    July 27, 2011

    Could be a good strategy move to satisfy local needs, however is safety of goods a concern for Toshiba?

     

  6. prabhakar_deosthali
    July 27, 2011

    With the korean giants LG and Samsung having strongly established their base in India and having captured a majority of market share in Consumer Electronic products in India , I wonder how much this move by Toshiba will succeed. Both of these Korean giants have displaced the earlier popular brands in Inda such as Philips, Sony, Akai and Sharp. It may be a tough battle fo Toshiba.

  7. Taimoor Zubar
    July 27, 2011

    I think one of the biggest advantage for Toshiba will be the availability of cheap labor in India. There's a large pool of skilled and unskilled labor with a high rate of unemployment. With Chinese labor becoming expensive lately, India may become the next big attraction for manufacturers. I think the Indian government needs to work on ensuring stable domestic conditions in terms of security and infrastructure to further encourage foreign investment in the country.

  8. Himanshugupta
    July 27, 2011

    Toshiba is not playing in the right sectors. It will be very difficult to enter smartphone and LCD TV unless they market agressively. They will still need 5-10 years to displace currenly popular brands such as LG, Samsung, Sony, Philips etc. I also do not know if Toshiba makes smartphones/TV?

  9. saranyatil
    July 27, 2011

    They can shine in the Laptop, Tablet, netbook sector. In India i have seen a lot of craze in these sectors.

  10. Jay_Bond
    July 27, 2011

    Toshiba is the first of most likely many companies to commit to India's call for manufacturing. I think many global companies are going to wait and see how well Toshiba's investment in India works out before they invest more money in the country. India has huge potential to become a standard thought when looking to build or expand manufacturing facilities. India still has infrastructure problems they need to work out before companies fully embrace the idea of setting up shop over there. With the Indian people looking to upgrade major amounts of electronics, Toshiba should do well.

  11. electronics862
    July 27, 2011

    It will good turn for toshiba, even though LG and Samsung secured a top positions in the sales. If toshiba comes with a new technology goods it will top the market in a little time as people are know already toshiba products are reliable.

  12. HM
    July 27, 2011

    It is a very valid point made about infrastructure consideration before investing. Infrastructure issues will definitely add to the cost or unforeseen expenses. But I think Toshiba will be able to cater to the price needs of the local market if they are present right in India for production/manufacturing.

  13. Ashu001
    July 27, 2011

    Bolaji,

    In a lot of ways this feels very,very similar to the Chinese strategy of ensuring that all Western Manufacturers not just manufacture locally but share their technology with their “partners” as well if they wish to do business in China.

    China has used this strategy to become the undisputed Numero Uno in this area.In that sceanario what chances(if any )does India have of competing with the Chinese Manufacturing colossus which already is known as the workshop of the world???

    However there is no disputing the fact that Growth in Semiconductors driven products(especially as they are coming of a low base) are expanding very,very fast in India.

    Regards

    Ashish.

     

  14. Eldredge
    July 27, 2011

    Requiring manufacturing investment as a precursor to business opportunities has been used by many other countries in the past – and as long as the giva and take is fair, it is probably reasonable. After all, the populace needs sources of income in order to have disposable income.

  15. elctrnx_lyf
    July 28, 2011

    I think this is really a great move by Toshibha to built a manufacturing plants with in India to serve the needs of India. The demand for consumer electronics is very high which will help Toshibha easily recover the investment with in no Time. Is more companies are in line for this?

  16. Himanshugupta
    July 28, 2011

    True Saranyatil, Toshiba has already good presence in laptop, netbook sector. for dominance, they need to capture the cheaper segment of the market. So they need to break the cost somehow. China is already cheaper manufacturing destination. The only benefit by moving manufacturing to India can be to get some government subsidy and help.

  17. SunitaT
    July 31, 2011

    Also, while Indians have eagerly embraced mobile phones, manufacturers now consider the country a potentially huge market for smartphones as average selling prices for the product decline.

    Bolaji,

    I would say smartphone usage among Indians is already on the rise. Samsung galaxy mobile which costs in the the range of 250$ is big hit among Indian consumers. Nokia which was once the favourite among Indian consumers lost badly by sticking to symbian OS. Needs to be seen what strategy Apple will implement to tap this huge market.

  18. SunitaT
    July 31, 2011

    @Himanshugupta,

    You absolutely right that very difficult to enter smartphone and LCD TV unless they market agressively.  I feel Samsung and Sony which are favourite brand among Indians had early move advantage. Needs to be seen what strategy Toshiba would use to compete with them.

  19. Himanshugupta
    July 31, 2011

    @tirapur, i believe that marketing has not much to do with the quality of the produce but quality certainly helps. If a product can achieve a critical mass sale then the rest of the sale is self-fullfilllng prophesy. I remember that marketers used sports (cricket as it is vastly popular) to reach masses by sponsoring the events. Toshiba can probably learn from that. Apart from that market through popular figures such as movie stars.

  20. Himanshugupta
    July 31, 2011

    @tiralpur, Also India is bifurcated market in itself as there are rich, middle class and poor. Smartphones are popular with the first two category only as there is a huge gap between this category and the poor. Nokia surely is popular but it has been hit hard by Chinese cheap phones (sometimes even competing with smartphones). It will be interesting to see how companies woo poor people as price is the major factor for them. 

  21. bolaji ojo
    July 31, 2011

    Tirlapur, Is the iPhone now available in India and if so, how well is it doing relative to mobile products from vendors like Nokia and Samsung?

  22. Ms. Daisy
    July 31, 2011

    The cost will naturally come down with demand and the elimination of shipping cost of finished product into India. The market is there in India. This is a win-win for Toshiba and the Indian people.

  23. Himanshugupta
    July 31, 2011

    Bolaji, iPhone is available in India but the trend i see is that only rich or high-middle class people can afford it. Also, as these people often go to USA/Europe they buy their mobiles or other high end gadgets there. But for sure iPhone is popular. As for Nokia and Samsung are more affordable, people tend to buy mid-range phones from these manufacturers.

  24. electronics862
    July 31, 2011

    There is a huge competetion in india electronics market which already reduces the prices a lot. If Toshiba comes with a manufacturing unit in india definitely it will grab large ratio of the market sales.

  25. SunitaT
    August 3, 2011

    @Bolaji,

      iPhone is available in India, but its not as popular as Samsung. Samsung is the clear winner in smartphone segment. People who used to buy Nokia N-series mobiles are opting for Samsung/HTC android mobiles. 

  26. _hm
    August 15, 2011

    Many vendors do come to India for local manufacturing. But Indians are quite dissapointed with them. Reason is that they dump old technology in developing country. Toshiba may not manufacture latest state of the art product which Indians want but they will give them very few option of old technology which Japan, USA and Europe is not interested. This happens so often. We have similar feeling even in Canada. As compare to USA, Canadian have much less option in these white good market or they may get them only after few months or year.

    I wish Toshiba is sincere and brings best technology to India.

  27. itguyphil
    August 15, 2011

    tirlapur,

    What makes Samsung the leader in India?

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