Indian Startups Favour China Over ‘Make in India’

Two years after Prime Minister Narendra Modi urged Indian entrepreneurs to ‘Make in India’, many have not been able to heed his call. While a few international giants have shown interest in the Modi government’s flagship plan, Indian entrepreneurs continue to find it difficult to make in India.

Indian hardware tech startups have come up with innovative solutions, but are finding it difficult to convert designs in the shape of a usable product. While India has its own manufacturing hubs, places like Shenzhen in China and countries like Vietnam and South Korea are the preferred destination for Indian entrepreneurs.

China – Cheaper and faster

“The most important aspect for a startup is, support in building the product. Most of the young entrepreneurs have never developed a commercial product before so it is more crucial for us to get some commercial help,” says Soundrex cofounder, Shrey Goyal. Soundrex is a wearable tech startup innovating in the field of audio solutions and is poised to launch first of its solutions soon.

The founders found Shenzhen to be a “faster and cheaper” option for a startup which has neither time nor money to waste. “It is operationally faster in China to develop a product, especially in electronics there are a lot of checks which are inherently available in China,” adds Goyal.

Wafer Electronics is another hardware tech startup that chose Shenzhen over India because of the agility and the ease of manufacturing in China.

“Some parts like induction moulding only take a week to produce in China while Indian manufacturers take a minimum of month. Also, it is easier to source other parts in China because the original equipment manufacturers (OEMs) help in sourcing the parts as the entire ecosystem is very supportive,” says Nagarjun Kinare, founder at Wafer Electronics.

The founder chose to come back to India for his second product but the path has been riddled with delays. Kinare is now working at a smart street lighting project with the Goa government. “The project was supposed to be launched last October, but not much has moved from the government’s side,” says Kinare.

China losing, India not winning 

While some startups like Nimble have picked India over other manufacturing hubs, however the going has been anything but easy.

“China has its own line of issues. The quality checks are not done for the whole lot so while the samples you receive are fine; there are faulty pieces in the lot. In order to avoid this, you need a quality check person sitting in China which only adds to the cost,” says Harshit Shrivastava, cofounder of Nimble – a smart ring to control home devices.

With several reports in the last few years highlighting China’s fast receding cost advantage with rising labour costs, some like Nimble have chosen to stick to India to have better control over their manufacturing line, but the decision has not been fully rewarding.

The main hardware in our product is PCB manufacturing and plastic casing. In the Indian ecosystem, it is difficult to find good manufacturers who can make good moulds. We have not been able to get the quality we wanted and therefore, had to change our design twice to get the desired quality. This ended up in reducing our margins,” adds Shrivastava.

Low volumes, high expectations

However, this advantage is again being mislaid by Indian manufacturers when they insist on bigger volumes by their startup clients – something a very few of them desire or can afford. When Lechal, a wearable tech startup, found it difficult to convince Indian manufacturers to produce their product, the founder decided to set his manufacturing unit, which needless to say came with its own set of challenges.

“There are no manufacturers in India for low volumes. This is what drove us to set up our own manufacturing line. We grew the hard way. We are a highly innovative tech product and not all parts were available in the country so we had to depend on foreign partners. However, as volumes started stabilising, we found it more economical to do it in India,” says Lechal.

It is, however, not feasible for most startups to set their own manufacturing units to produce the kind of products they have designed at the volumes they want.

“Not just manufacturing, units here are not willing to accept a packaging batch of 2,500 products. The minimum volume that Indian companies demand is around 10,000 while Chinese companies are willing to pick an order as small as 500 units,” says Kinare.

Despite China losing its most coveted cost advantage, the Chinese manufacturers have succeeded in attracting many startups which prefer to take their business off shores. Short on time and low on money, these startups will only pick India if the country’s manufacturers offer an enabling ecosystem for their products to thrive.

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