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Epcos to relocate European operations in India

Fakir Chand in Bangalore

Epcos AG, the world's largest broad-liner in passive electronic components, is relocating some of its manufacturing operations from Europe to India.

The company plans to capitalize the expertise available in the sub-continent and reduce production costs by as much as 90 per cent.

Though the Rs 85-billion German company has a strong presence in India with two major manufacturing facilities at Nashik in Maharashtra and Kalyani in West Bengal for rolling out capacitors and ferrites, respectively, in joint partnership, it will shift its dry core power capacitor plant from Germany to Nashik.

"We are also expanding the existing production facilities at both the units to meet the growing customer needs in the domestic and international markets. In the long-term, both the plants will emerge as centers of excellence in their respective domains," Epcos chairman Klaus Ziegler told rediff.com in Bangalore on Monday.

Sold under the brand name PhaseCap, the products that would be shifted to India are used for power factor correction in industrial electronics to improve their quality. The relocation involves shifting the entire machinery and material to India by this year-end.

"Epcos will also transfer production of capacitors for radio-frequency interference suppression from Spain to Nashik. "In the long-term we want to convert the Nashik facility into a center of competence and a main production plant for our worldwide requirements," Ziegler stated.

Likewise, production of metallised film capacitors for consumer electronics, telecommunications, and lighting applications is also being relocated from Spain to the Nashik plant.

Similarly, the ferrites plant capacity is being expanded to step up production and widen its product portfolio. Operated by International Ferrites Ltd, in which Epcos has a majority shareholding, its new production line for ferrite cores went into operations last month.

"All these ongoing-cum-future expansion plans entail an additional investment of Rs 3 billion," claimed Epcos India Ltd chairman T Misra, adding that continuing investment and technology transfer would enable the Kalyani facility to manufacture a broad range of ferrite components for telecommunications, industrial, and consumer electronics.

Keeping in view India's high growth potential, especially in electronics, Epcos is positioning itself to serve global as well as local customers by offering them a one-stop shop with innovative and customized products, made in India. For instance, the Kalyani plat will make customer-specific ferrite variants for the Asean and mainland China markets.

Apart from utilizing the abundant skills available, the company's plan is to not only bring down the production cost to one-tenth of what it incurs currently in producing the same capacitors back in Europe, but also outsource designs and development of components from India.

"We believe the cost benefits that can be obtained from manufacturing in India combined with the wealth of expertise available locally will give us a competitive edge and bring us nearer to the goals set," Ziegler affirmed.

As a wholly-owned subsidiary of Epcos AG, the Rs 2.5-billion Epcos India Ltd owns the Nashik facility, where as its second manufacturing facility, the International Ferrites Ltd at Kalyani is a joint venture, with ACC holding 35 per cent, and the West Bengal Electronics Industries Corporation having 5 per cent equity stake in the Bengal plant.

"In a Rs 12-billion passive components' market in India, Epcos commands market leadership with 40 per cent share in industrial electronics, 30 per cent in telecom, 20 per cent in consumer electronics, and 10 per cent in other segments, including IT and agriculture," Misra claimed. It also exports half of its production to its parent company for supplying to its global customers.

Even though Epcos does not make a single end product, its passive components are yet virtually present in all the industrial, consumer, entertainment, and electronic gadgets ranging from mobile phones to computers; home appliances to TV sets; automobiles to trains, and wind-driven plants in the form of capacitors, ceramic components, surface acoustic wave components, and ferrite cores.

A joint venture of Siemens and Matsushita of Japan with 12.5 per cent of equity holding by each, Epcos is listed on the Frankfurt and New York Stock Exchanges, and was added to the DAX index of German's top 30blue-chip companies in 2000.

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