Japanese manufacturing companies continue to make great strides forward India, as the country is experiencing significant economic growth and population growth. As geopolitical risks in China escalate, so does the need for alternative production bases. This further increases the value of capitalizing on India’s growth.
This two-part series will delve into the essentials of capitalizing on India’s growth opportunities.
first of two parts
A row of industrial machines is carefully arranged, busily forming parts and placing them in blue boxes. Once a certain amount has been collected, autonomous delivery robots collect them, leaving the vast floor virtually devoid of human presence. The scene took place at the Panasonic Holdings (HD) factory in the Sri City Industrial Park in Andhra Pradesh, southern India.
The factory, which specializes in the production of wiring equipment, will begin operations in April 2022. The factory is equipped with state-of-the-art equipment and has an impressive automation rate of over 95%.
“In order to meet India’s expanding demand, it is essential to increase productivity through automation.” These are the words of Kato Yoshiyuki, head of Panasonic India’s electrical materials subsidiary. His goal is to make Panasonic HD’s overseas electrical material business, especially wiring equipment, the basic pillar of Panasonic HD.
Since the successful launch of Konosuke Matsushita’s two-socket plug, the company has a technological heritage of about 100 years, accumulating extensive know-how in wiring devices such as power sockets and switches. Known for the high reliability of their products, these devices still hold the largest market share in Japan, India, Vietnam and other Asian countries.
Contribute to Panasonic’s success
The surge in demand for cabling equipment in India is reflected in Panasonic’s impressive 83.6 billion yen ($594 million) in revenue for fiscal 2022. And this growth rate is nearly 1.5 times higher than the previous three years. It is driven by population growth and strong economic expansion, leading to a housing construction boom, among other things.
Notably, operating profit is about 20% of sales, double that of Japan.
Central to this revenue dynamic is the Sri City factory. With an annual output of 530,000 vehicles per employee, the plant is four times more efficient than the 30% automation rate at the Haridwar plant in northern India.
The Sri City factory has ambitious plans to increase its total production from 120 million units per year to 300 million units by 2030. In addition, Kato said, this was achieved while minimizing the increase in labor.
Improve quality with AI cameras
Panasonic HD isn’t the only company using advanced technology to improve quality. For example, Kubota is working to improve quality by adopting AI-powered cameras at its tractor production plant in Haryana, India. The center will begin operations in 2020.
Typically, when Japanese companies set up factories overseas, experienced Japanese personnel travel to oversee the installation and start-up of production facilities. However, the COVID-19 pandemic has prevented Kubota employees from traveling.
These travel restrictions have also led the company to monitor factory settings remotely using webcams. Amazingly, this situation gave birth to the idea of building a cutting-edge production system.
The system they developed involves capturing employee behavior through cameras. They then use artificial intelligence to assess their adherence to the instruction manual. AI is able to visualize unwanted movement and changes in task completion times. Seiji Fukuoka, vice president of Kubota’s India subsidiary, explains that this has yielded valuable insights to improve quality and productivity.
Kubota also plans to fully implement this system in the near future. Currently, it is going through an additional verification process.
outpace China’s growth rate
Taku Hiroki highlighted the drive of Japanese companies to increase production in India through cutting-edge technology. He is Director of Research at the New Delhi office of the Japan External Trade Organization (JETRO). He emphasized that India’s market attractiveness has significantly increased due to the increase in the income of the Indian people.
According to UNFPA estimates, India’s population will reach 1,428.6 million by mid-2023. It has surpassed China to become the most populous country in the world.
In fiscal year 2022 (April 2022 to March 2023), India’s real gross domestic product (GDP) achieved an astonishing growth rate of 7.2% compared to fiscal year 2021, surpassing China’s growth rate of 3.0% in the same period.
In response to growing domestic demand, Japanese companies have entered the Indian market one after another. As of 2021, about 1,439 Japanese-owned companies are operating in India. Most of them are in manufacturing. This is according to a report from the Japanese embassy in India.
The increasing “China risk” caused by issues such as Sino-US trade frictions has highlighted the need to diversify supply chains away from China. Hence, India has become an attractive option as an export hub.
In response to this trend, Panasonic HD also strategically chose India as its export base for electrical components trade in East Africa. Meanwhile, Kubota is actively exploring the possibility of exporting tractors from India to Europe and other western countries.
Continuing with Panasonic’s venture into India, part two.
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(reading report Japanese.)
Author: Hiroto Kuwashima
