Candor INC - PCB - Market Study

Candor - PCB technologies For India Table of Contents T007583 Market Study EXECUTIVE SUMMARY COMPANY OVERVIEW Technology Quality and environmental standards Expansion into India 4 7 7 7 8 PCB INDUSTRY ANALYSIS Electronics market Worldwide application of PCB in 2007 Computer & Peripherals Consumer Electronics Automotive Electronics Telecommunications PCB manufacturing (World) The Indian PCB industry Statistics Domestic Consumption Advantage India 9 9 11 11 12 12 13 14 16 16 18 ANALYSIS OF MAJOR COMPETITORS DOMESTIC AND FOREIGN Competitive landscape (2008) Chinese Imports 19 19 23 MARKETING PLAN Pricing Market promotion Identification of Relevant Trade Shows and Journals (Domestic) for Promotional purposes Trade Shows Trade journals 24 24 25 25 25 26 Viability Study For CIDA 1 September 2009 Candor - PCB technologies For India Proposed Marketing Budget SWOT Analysis Estimated and Net Income Revenues for the Initial years T007583 Market Study 26 27 29 Appendix Appendix 1 IBEF electronics Market Report Appendix 2 SEZ benefits Appendix 3 PCB Market & Opportunity Appendix 4 The state of the Indian PCB industry Viability Study For CIDA 2 September 2009 Candor - PCB technologies For India T007583 Market Study Viability Study For CIDA 3 September 2009 Candor - PCB technologies For India T007583 Market Study Executive Summary This report is a study on the viability of establishing a manufacturing plant in India. Candor Industries Inc. is private company registered under the laws of Ontario and a producer of advanced environmentally friendly PCB s (printed circuit boards). The company was founded in 1999 by its founding CEO, Mr. Yogen Patel. The companyoperates in a 22,000 Sq. ft rented facility in Toronto with state of the art equipment and a workforce of 40 members, including 16 female members. Candor Industries possess patented technology and processes that are both environmentally friendly and create value to its customers. On his recent visit to India, Yogen Patel noted that Indian manufactures of PCB s are using out-dated technology and processes and feels that a technology transfer from Candor Industries to India will be of great benefit to the host country. He also noted the current supply deficit in supply of PCB s in India. Total domestic demand is 2 billion dollars whereas domestic supply of PCB s is only estimated to be 400 million dollars, with China being a lead exporter to India. We start our PCB industry analysis with a brief look at the Indian electronics industry. It is one of the fastest growing segments in the country fuelled by growth in IT, Consumer electronics and telecommunication sectors. The electronics is growing at 20% CAGR. We attribute this growth and expectation of continued growth to India s rising income levels and low levels of penetration in the electronic market. The growth of the Indian electronics market is attracting OEM s (i.e. Nokia, Samsung, Foxconn) to establish manufacturing plants in India. This sudden influx of OEM s into India is causing the current demand of PCB s in India to spike and we expect a continued increase in demand due to the growth in the electronics market. Thus the expected industrial performance of PCB manufacturers in India is positive. In segment 2, we look at the application (Industries who are consumers of PCB s) breakdown in terms of revenues and China s market share. We take a closer look at the four leading consumers of PCB s who are Computer and peripheral manufacturers, Telecommunications, Consumer electronics and automotive electronics. In 2007, Computer and peripherals market is worth 514 billion dollars and consumes an estimated 14.7 billion dollars of PCB each year. This market is expected to experience a growth of 5.9% each year till 2013 and is expected to be valued at 720 billion dollars which translates to a 23 billion dollar global PCB market for computers and peripherals. In section 1, we noted that the computers penetration levels in India of only 0.8 PC s per 1000 households. With increasing income levels and demand for electronic goods, we can expect significant contribution from India (revenues) in the near future for this market. Due to this manufacturers (Lenovo, Sony and Dell) have located manufacturing plants in India and will require PCB manufacturers to initiate production. Viability Study For CIDA 4 September 2009 Candor - PCB technologies For India T007583 Market Study The global consumer electronics market consists of audio, video and game console products designed primarily for domestic use. This market is the 3rd largest consumer of PCB s ranked after computer peripherals and telecommunications. Consumer electronics market consumed 5.8 billion dollars worth of PCB in2007 and is expected to consume 7.6 billion dollars in 2012. Video products are the most lucrative of the consumer electronics segment and there are currently 213 CTV s per 1000 household in India. There is significant potential for growth in this segment and is likely to experience growth with India s rising income level. Samsung has established a CTV manufacturing plant in India to cater to this market. The Global economy consumed 75 million units of automobiles in 2007, with each unit contributing towards the 3.5 billion application segment for PCB s.There is a growing trend among car manufactures in creating highly sophisticated cars that require PCB s to function. India produces over 2.3 million units annually and consumes over 1.2 units domestically and is set to be one of the leading automobile markets in the world with global car manufacturer such as Audi, BMW and Toyota locating in India. The demand for automotive electronics is set to grow under these circumstances. Telecommunication generally involves the use of electronic devices for communication purposes. India has an estimated 140 million users of cell phones in 2006 from 100 million users in 2005. This translates to a 40% growth in subscribers in just one year. India is expected to currently estimated to have over 250.93 million subscribers which only translates to 1 in 4 people have a cell phone. This presents a enormous opportunity for OEM s to manufacture and cater to this market as shown by Nokia and LG in this segment. The outlook for telecommunication related PCB in India is positive due to the growth potential in this industry. We segment production into different geographic regions and establish that china and Japan are the leading manufacturers of PCB s in the World but China and other Asia (India, Australia and New Zealand) have the highest expected growth rates. We conclude that China s recent laws and policies have made it unattractive compared to India with its SEZ benefits, cheap and highly skilled labour force and export potential. We take a closer look at the domestic consumption patterns in India and identify major IT manufactures, EMS providers, Telecommunications manufactures and Automotive Manufactures. In Section 4, we identify the top ten PCB manufactures in India and provide basic information, such as production capability, production capacity and target market, on each of the competitor. We have a Preliminary cost structure analysis comparing Candor to a typical Chinese manufacturer. We arrive ata conclusion that due to Candor s patented technology, which maximizes real estate for customers, they can charge more per Sq.in than their Chinese counterparts. This translates to a higher net income than their Chinese counterparts allowing for Candor s continued success in India. In section 5, we have taken a pronged approach to pricing with the critical factors being competition and value based pricing. We were able to acquire the upper and lower price range of Chinese manufactures 5 September 2009 Viability Study For CIDA Candor - PCB technologies For India T007583 Market Study depending on the number of layers the PCB contained. We created a price structure for Candor at each layer and made it to be 20% above the median price of their Chinese counterparts and compared it to Indian pricing it is very competitive. The promotion aspect of Candor Industries will be handled by 1 marketing manager, 3 sales agents and 1 COD (customer order desk) representative. The promotion of Candor Industries will be done thorough the representation in the relevant trade shows and industry magazines. The marketing manager is the overseer of all activities and will handle large scale clients such as Nokia and Samsung. The 3 sales representatives will focus on a particular geographic/Industry region and will concentrate their efforts in acquiring orders for Candor. The COD will be a focal point for all communication between customers and Candor. The proposed Budget for Candor in the 1st year is 70,000 dollars and 10% increase in the following years per year. The Expenses will include the transportation cost, entrance fees and paid promotional activities. In the SWOT analysis we identified the major factors to be: Strengths - growing electronics market, benefits of locating in a SEZ, Candor s environmentally friendly technology and quick turn prototype production capability. Opportunities ability to create an export orientated company thus expanding into the neighbouring countries. Weaknesses every major manufacturer is expanding his capacity leading to high level of competition for new entrants and there are currently no trade barriers for PCB imports into India. Threats An unsuccessful Technology transfer due to work culture and the availability of machines replacement parts. Imports from China currently cater to the whole market and manufacturer may not switch to Indian producers due to existing relationship with their Chinese manufacturers or the switching costs (logistical changes). Part 2 of the SWOT analysis section deals with the ways in which the weaknesses and threats can be mitigated. An unsuccessful technology transfer has been mitigated due to the significant investment in workforce training and education. There are several advantages that domestic producers have over the overseas PCB producers including the 10 day delay the overseas manufacturers have to face in clearing customs. We can expect the cost of transportation incurred to transport the highly fragile boards to be greater than their domestic counterparts. To conclude we provide an estimated revenues and net income for the proposed plant in India for the first five years. Viability Study For CIDA 6 September 2009 Candor - PCB technologies For India T007583 Market Study Company Overview Candor Industries Inc. is a private company registered under the laws of Ontario in 1999 by its owner and president, Mr. Yogen Patel. Prior to founding this company, in 1980 Mr. Patel and 2 others founded a PCB manufacturing company in Toronto, Crimp Circuits Inc. However, His desire to develop advanced and environmentally friendly process did not meet with the approval of the other founding partners. This led to him establishing his own PCB manufacturing plant, Candor Industries Inc. Candor is a technology driven innovative manufacturer of double-sided and multilayer PCBs. It operates out of a 22,000 sq ft rented facility in Toronto with state-of-the-art equipment and with a compliment of 40 staff, including 16 skilled female workers. Technology The Company uses both unique and, in some cases, exclusive processes for lamination, plated through holes and imaging. Candor has also developed a technique for Even Heat Distribution during lamination of multilayer boards. This unique lamination process offers the tightest control of multilayer PCBs in the industry and uses a continuous copper foil system. Through a unique plated-through hole metallization process, Candor has developed an environmentally friendly graphite based process with no chelated chemicals, compared to the industry norm of using electroless copper, EDTA and formaldehyde. The Graphite process also uses about 2 gal/min of water flow, compared to the 20 gal/min within the industry, resulting in further environmental benefit. Quality and environmental standards Candor operates in full compliance with Canadian Quality and Environmental Standards, and has the following accreditations: Performance Standard: IPC-6012B Safety Standard: UL 94(V-0)and UL-796 Quality Standard: ISO 9001-2000, AS 9100B Environment Standard: ISO 14001 Viability Study For CIDA 7 September 2009 Candor - PCB technologies For India T007583 Market Study Expansion into India On his recent visits to India, Candor President Mr. Yogen Patel has observed that PCB manufacturers there are generally using out-dated technology and processes that are not environmentally friendly. He has also noted that the domestic production of PCB s in India is an estimated 400 million USD while domestic consumption 2 billion USD (source The Economic Times). Mr. Yogen Patel feels that expansion into India is a viable business opportunity and feels that a transfer of Candor s advanced technology will be immense benefit to the host country. This will also enable Candor to take advantage of the fast growing Indian PCB segment without affecting its North American operations. At the same time, the management of Candor will ensure that its proposed operation in India will be conducted in a socially responsible manner with proper regard for important aspects such as the environment, promotion of gender equality, business ethics, ETC. Viability Study For CIDA 8 September 2009 Candor - PCB technologies For India T007583 Market Study PCB Industry Analysis Electronics market (Sourced from the IBEF report Appendix 1) The electronics hardware market in India is currently valued at 20$ billion dollars and growing at a rate of over 20% CAGR (Compounded Average Growth Rate). It is one of the fastest growing segments in India driven by growth in the IT, Consumer Electronics and Telecom sectors. Electronics segments growth is creating opportunities for component manufactures in India, as more and more MNC s are capitalizing on the strategic value of locating their factories in India, especially in Chennai, Tamilnadu. Global OEM s such as Nokia, Samsung, Elcoteq and more have entered the market and located in Chennai, also known as the Detroit of Asia . The growth in the electronics market is also spurring growth in the PCB market. The estimated demand for PCB products in India in 2008 is 2 billion USD (source: The Economics Times) while production is only estimated to be 400 million USD with India being a net importer. China being the leading exporter of multilayered PCB s to India. Growth in the PCB market is correlated with the growth of the electronics manufacturing in India, which in turn is dependent on the electronics industry. The following is brief look at the electronics Industry. The Electronics Industry in India is expected to be growing at healthy rate of 20% CAGR over the next 5 years. This is not surprising given the current low levels of penetration in the electronics industry and growing income levels of the Indian population. The following is a list of segments that have particularly low levels of penetration Electronics Segments White Goods Refrigerators PC CTV Cars No. of units per 1000 households 319 161 0.8 213 50.2 Source: IBEF report the Electronics Industry Viability Study For CIDA 9 September 2009 Candor - PCB technologies For India T007583 Market Study The Indian Client PC market remained flat at 7.98 million units, this translates to an estimated 0.8 PC s per 1000 households. This indicates enormous potential for growth in the Laptops and PC market segments. By the end of this decade India is expected to have a population of 1.175 billion people with 63.6% of the population in the working class. India s current income per capita is US$1149. This is currently classified under the lower middle income bracket and is expected to be under the upper middle income ($ 3856 - $11905) bracket by 2015. Export of the electronics has been growing at a healthy CAGR of 22% between the periods of 2002-03 to 2007-08. The Growing Exports are a tell-tale sign of the cost advantages India has to offer, in both the availability of necessary technology and the availability of cheap skilled labour that are essential in production of highly technical electronic goods. With the combination of strong potential domestic demand and low levels of penetration in the market; we can expect a stable growth in demand for electronics goods and consequently the PCB segment. Viability Study For CIDA 10 September 2009 Candor - PCB technologies For India T007583 Market Study Worldwide application of PCB in 2007 If we are to understand the global PCB market, it is important to segment the market into various parts. The following is a segmentation of the PCB market with respect to various Industries the PCB s cater to: Application PCB (Billion $ ) Share(%) China s market share (%) Computer & peripheral 14.70 29.0 28.2 Telecommunication 12.30 24.3 34.6 Consumer electronics 5.80 11.4 19.6 Military/ Aerospace 4.95 9.7 3.1 Industrial Electronics 4.83 9.5 2.1 Automotive Electronics 3.75 7.5 6.9 Instruments/Medical 3.32 6.5 3.0 Office Automation 1.05 2.1 2.5 Total 50.70 100 100 Source: IPCA report PCB market and Opportunity, Dr.Hayao Nakahara, Appendix 3 Computer & Peripherals (Source: http://www.alacrastore.com/storecontent/datamonitor-premium-profiles/ohcc0016) The Global computer and Peripherals market was worth 514.3 billion dollars USD in the year of 2007 and has experienced a growth of 5% to be valued at 540.1 billion dollars in 2008. The PCB aspect of this market was worth 14.7 billion dollars. The average Gross margin for a manufacturer in this industry is 10% - 15%. We estimate that 90-85% of revenues for the global computer and Peripherals market are in the cost of producing the product. We can now calculate the percentage dependence of the computer and peripherals market on the PCB market. Computer and peripherals market value/ cost of producing computers and peripherals 14.7/ (0.875*514.3) = 3.2% 3.2% of all cost for producing computer contributes directly to the PCB revenues or a $100 growth in computer and peripherals market corresponds to $3.2 increase in revenues for PCB manufactures. The Computer and peripherals market is expected to be growing at a rate of CAGR 5.9% till 2013. This means the computer market will be valued at 720 billion in 2013. The Computer and peripherals application market will be value (assuming the same correlation) at 23 billion dollars USD. Computers are becoming increasing involved in our everyday lives as new application are being found in business, education and government severy day. In section 1, we noted that the penetration level of computers in India is 0.8 computers per 1000 households. Computers have yet to make the social Impact, in term of communication, education, and business activities as they have made in OECD countries. In addition to India s growing income (shift from lower middle income bracket to upper middle income bracket) we can assume significant potential for market growth in India. Viability Study For CIDA 11 September 2009 Candor - PCB technologies For India T007583 Market Study Global computer manufacturers such as DELL, Lenovo and Samsung are locating in India to meet the latentdemand. Candor can cater to these companies as they are newly established and have not had enough time establish long term partnerships with PCB manufactures. Consumer Electronics (Source: http://www.researchandmarkets.com/reportinfo.asp?report_id=312405) The Global consumer electronics market consists of total revenues generated through the all of audio, Video and Games console products designed primarily for domestic use. The Global market is currently valued at 199.6 billion dollars USD in 2007and is expected to grow at a CAGR rate of 5.05% per year till 2012. This will lead it to be valued at 260.7 billion USD in 2012. The PCB application segment is currently valued at 5.8 billion dollars USD. The Gross margin for consumer electronics is expected to be 10-15% depending on the Price range of the manufactures. Total consumer electronic COGS - ((1-0.125)*199.6) = 174.65 billion USD. We can now calculate the percentage of COGS that PCB s contribute to: Market value of PCB production in consumer electronics/ total COGS in Consumer electronics (5.8/174.65) = 3.32% The Consumer electronics segment contributes towards 3.32% of the COGS in the consumer electronics segment. In 2012 the consumer electronics segment of the global PCB manufacturing will be valued at around [(260.7*0.875)*0.0332] 7.6 billion USD. The mostlucrative of all the consumer electronics is the video segment. Referring back to section 1 on the CTV (color television) penetration levels in India, we note that there are 213 CTV per 1000 households which pales in comparison towards the north American market which has an average of about 2 CTV per households. Samsung has recently 2008 established a CTV manufacturing plant in India, Tamilnadu to particularly cater towards this market. As stated before the electronics market is growing at a rate of 20% CAGR in India, which makes Candor expansion in the Indian PCB market a lucrative endeavour. Automotive Electronics (Source: http://en.wikipedia.org/wiki/Automobile_industry_in_India) In the year of 2007 the global economy consumed 75 million units of cars with each unit contributing to the 3.75 billion dollar automotive electronics segment. In the year of 2011 the annual production is estimated to be 88.8 million units which translate to a 5.3 billion automotive electronic market. The Automotive segment provides enormous opportunity for growth as the automotive consumption of PCB per car is increasing i.e. the LS600Lh Hybrid cars has an estimated 3.5 m2 of PCB s. Designers are increasing requiring higher layered PCB s as their functionality requirements are also increasing since 12 September 2009 Viability Study For CIDA Candor - PCB technologies For India T007583 Market Study automotive systems such as infotainment and multimedia, engine and emissions controls and systems require electronic component to operate. India is the ninth largest car producer in the world and produces over 2.3 million units annually and consumes over 1.2 million units annually (primary exporter is Hyundai with240,000 units). India is expected to one of the Major automotive economies in the world in the coming years with domestic consumption set to double by 2010. With the enormous growth potential of the domestic market for automobile consumption and the increasing use of PCB per car, the growth/demand outlook is positive. Candor can effectively compete against other manufactures in this segment due to candor s environmentally friendly technology. Many foreign automotive manufactures have environmental impact expectation of their supplier to fulfill in order to supply to them. Telecommunications (Source:http://news.cnet.com/Cell-phone-subscriptions-surge-in-India/2110-1037_3-6059482.html, http://www.idc.com/getdoc.jsp?containerId=IDC_P6032) Telecommunication typically involves the use of electronic devices such as the telephone, television, radio and computers for the purpose of communication. The telecommunications sector was estimated to have revenues exceeding 1 trillion dollars in the OECD countries alone. The Global PCB consumption for the telecommunication industry is 12.30 billionand is set to grow as BEM s (Big Emerging Markets) such as China and India continue to take bigger share of the global consumption. In 2006, India had an estimated 140 million telephone subscribers which grew from 100 million users in 2005. In 2008 , India is currently estimated to have 250.93 million subscribers with growth rates exceeding China and north America. This translates to a 40% growth rate in one year, which averages to about 3.3 million subscribers per month in the year of 2005-2006. India has a population of 1.3 billion people, where 1 in 4 people currently have a cell phone. This presents an enormous growth potential for the telecommunication industry in India. The growth potential for telecommunications has attracted global OEM s such as Samsung, Nokia, LG and various Chinese manufactures to enter and compete in India. Viability Study For CIDA 13 September 2009 Candor - PCB technologies For India T007583 Market Study PCB manufacturing (World) Total PCB production output for the world(USD Millions) expected figures Region Americas EU Europe Others Japan China Taiwan 2006 4,718 3,547 554 11,288 12,100 7,350 2007 4,694 3,511 583 11,685 14,160 7,645 2008 4,650 3,490 585 12,115 15,300 7,875 2009 (e) 4,700 3,475 587 12,120 17,200 8,150 2010 (e) 4,720 3,480 600 12310 19,650 8,300 S. Korea 5,198 5,750 5,745 5,630 5,870 Other Asia 3,080 3,621 3,850 4,350 5,170 World Total 47,835 51,649 53,610 56,212 60,100 Asian Share 81.5% 83.0% 83.7% 84.5% 85.3% (Source: IPCA report PCB market and Opportunity, Dr.Hayao Nakahara, Appendix 3) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 America Japan China Other Asia World Total 2008 2009 2010 Viability Study For CIDA 14 September 2009 Candor - PCB technologies For India T007583 Market Study % Growth Rates of the PCB market from the previous year (data from the above table) 2( Region 2006 2007 2008 (e) -1 -1 0 4 8 3 0 6 2009 (e) 1 0 0 0 12 3 -2 13 2010 (e) 0 0 2 2 14 2 4 19 Americas EU Europe Others Japan China Taiwan S. Korea Other Asia 4,718 3,547 554 11,288 12,100 7,350 5,198 3,080 -1 -1 5 4 17 4 11 18 As shown by the Table the growth prospects lie strongly in China and other Asia (India, New Zealand/Australia) with Japan and Taiwan experiencing relatively modest growth. China and Japan are clearly the dominant countries in PCB production with China ahead of Japan. The North American and European market are static, showing little or no growth and shrinking in the years of 2007 and 2008. Continued expansion into the North American market will only result in zero-sum competition. Expansion into China seems obvious on the surface but recent trends have forced expanding manufactures to locate away from China even though it possess an excellent ecosystem for PCB manufacturing and exporting, due to Income tax increase from 15% to 25% Tougher environmental legislations Increasing wages and new labour contract laws Rising value of the Yuan relative to the dollar (exports are taking a hit) (Source:IPCA report PCB market and Opportunity, Dr.Hayao Nakahara, Appendix 3) With India booming consumer electronics and telecommunication industry, there is set to be strong demand for PCB manufacturing in India. India seems to be the ideal location for a PCB manufacturer to locate given the current advantages it presents. Viability Study For CIDA 15 September 2009 Candor - PCB technologies For India T007583 Market Study The Indian PCB industry Statistics Domestic Consumption Domestic Consumption in their respective sectors (In USD millions) Sector 2005 Consumers 144.31 Industrial 43.82 Computer 129.44 Comm. & B.cast 204.98 Strategic 25.6 Total 547.85 (Source: IPCA report, PCB Industry Market Study) 2006 159.75 50.22 167.84 258.62 29.13 665.56 The total domestic consumption of the industry as of 2006 is USD$665.56 million and was estimated to be at 2 billion in 2008 by The Economic Times. This translates to a growth of approximately 300% growth over the 2 years. This could be seen as the result of the continued FDI into India due to the governments successful SEZ policies. B) India is now major location for IT manufacturing with global players establishing manufacturing plants to cater to the domestic and global market. The following is power list of IT hardware manufacturers, EMS providers, telecommunication companies and automotive makers currently manufacturing/competing inIndia. IT ardware Manufactures C P i pro IBM TVS-E D- i nk ACE Samsung Flextronics solectron eP Flextronics Solectron Source: IPCA report PCB market and Opportunity, Dr. ayao akahara, Appendix # Viability Study For CIDA 16 September 2009 ¡ £     § ¥ ¨¥ ¡     ¥ ¤ ¢   ¦   ¡ EMS Telecommunications Automotive (Electronics Service Providers) Manufactures Manufactures onhai/Foxconn abil Circuits Elcote Celectica Sanmina Motorola Ericsson o kia Alcatel Siemens FC Bharti Samsung BE ITI Audi BM Bajaj Auto t d Chevrolet Fiat Ford e neral Motors onda yundai Mahindra Toyota Volkswagen £   ¡   §¡ £ Candor - PCB technologies For India T007583 Market Study IT Hardware Manufactures India s IT Hardware market was 8.2 billion USD in the year of 2007. It is one of the fastest growing manufacturing segments in India and one of the largest consumers of PCB s for the production of Computer and peripherals.Leading manufactures such as DELL and Lenovo are expanding into the Indian market by establishing manufacturing plants in India. Telecommunications Manufactures India has one of the largest domestic markets for cell phone consumption with over 30 million subscribers each year. There are an estimated over 200 million subscribers currently in India. Growth levels do not show any signs of slowing down. EMS (Electronics Manufacturing Services) Chennai, named the Detroit of Asia, is EMS manufacturing hub of India. This recent trend of manufactures locating in India only supplements the growing electronics market and domestic manufactures. Viability Study For CIDA 17 September 2009 Candor - PCB technologies For India T007583 Market Study Advantage India Taxation The Indian Government has initiated a set of incentives to encourage FDI in the country. For Units in SEZ locations Labor (Source: IPCA report, Mr. Munisamy Anilkumar, Appendix #) Indian labour cost for unskilled labour 50-70 per month and semi-skilled labor is 90 120 per month. This level of wages is cheaper than China, Indonesia, Vietnam and Thailand. The wage levels are estimated to be stable due to the demographic profile of the country. Increasing number of people entering the job market is keeping wages competitive in India. India has one of the largest skilled English speakinglabour pools in the world. On average India produces 600,000 engineers, 8.5 million graduates of various disciplines and 12,000 PHD s per annum. The number of patents registered in India has steadily been on the rise since 2003. The Legal system is based on the British system as opposed to China s free market socialism. Export Potential India s enormous potential domestic consumption and geographic proximity to other major markets has MNC s setting with an orientation towards exports. Candor s ability to compete against (pre-emptive analysis) low-cost Chinese imports will allow them to export their higher grade PCB s to neighbouring PCB markets such as Singapore and Malaysia. 100% income tax exemption for five years. Exemption from indirect taxes, excise, sales and service tax. (full list of benefits for locating in a SEZ in detail is attached at the end of the document) appendix 2 Preferential land pricing from Government Infrastructure/Utilities are provided separately and secure Viability Study For CIDA 18 September 2009 Candor - PCB technologies For India T007583 Market Study Analysis of Major competitors Domestic and Foreign Competitive landscape (2008) List of the Top Ten Manufactures in India (Turnover) Rank 1 2 3 4 5 6 7 8 9 10 Company AT&S Shogini Technoarts Circuit systems India Ltd. Ascent circuits Pvt. Ltd. Epitome Components Ltd Sonic technology CIPSA RIC India Pvt. Ltd Fineline Circuits, Mumbai Akasaka Electronics Ltd HI Q electronics Turnover in USD (millions) 40 13.3 12.2 11.55 11.10 9.3 8.0 6.6 6.6 5.3 (Source: IPCA report, Mr. Munisamy Anilkumar, Appendix #) AT&S Description An Austrian owned MNC located in India. AT&S is a wholly owned subsidiary. Capability The second Plant is capable of single, double and multi-layered production Production the second plant has a production capability of 50000 Sq.m/ year. Target Market The second plant is to cater to the Medical, automotive and industrial application sector Note - The New plant is said to strengthen AT&S s leading position by offering multilayered and double sided PCB production. Viability Study For CIDA 19 September 2009 Candor - PCB technologies For India Shogini Technoarts T007583 Market Study Description Is one the leading local Manufactures of PCB s established in 1979. Their Factory is located near Pune, Maharashtra. Capability Capable of single, double and multi-layered manufacturing. Capable of upto 6 layers Production Annual production of 100,000 Sq. Meters Target Market Telecommunications, Power electronics, Process control, Office Automation systems and energy meters. Note - Shogini has developed lead free finishes to comply with RoHS regulations. Plans on increasing capability to 8/10/12 layer PCB¶s. Plans onincreasing technology to allow PCB manufacturing with Blind & Buried Via holes and impedance controlled PCB¶s. Circuit Systems India Ltd. Description is a local PCB manufacturer located in Gujarat Capability Prototypes, Multilayered (24 layers) and double side Production 52260 sq. Meters in Double Side manufacturing and 23400 sq. meters in multi-layered manufacturing. Target Market Telecom industry, Automobile sector, process control, Industrial applications and various R & D establishments Note Ascent Circuits Pvt. Ltd Description is a local PCB manufacturer with a factory is located in Bangalore, Karnataka Capability manufactures Single, double and multi layered PCB s Production annual Production is 41,000 sq meters Target Market is High-end application such as Telecom, military, aerospace and microwave & RF applications. Note - Environmental policy - A zero discharge company. All chemical effluents are treated and water is re-cycled. 80% of re-cycled water is used for production after RO filtration process. Solid wastes are disposed as per local government regulations. Viability Study For CIDA 20 September 2009 Candor - PCB technologies For India T007583 Market Study Technology ± ³reverse Pulse Plating´ claims to increase the reliability of PTH. Epitome Components Ltd Description Has an established plant in Pune, Maharashtra. Capability - capable of producing Single, double and Multi layered production. Production Annual production of 72,000 Sq. Meters Target market caters to the consumer electronics such as CTV s, computers, Telecom and home appliances. Note - Has acquired a plant near Pune to setup a plant capable of double and multi layered manufacturing. Epitome is a leading supplier to top brands such as LG, Videocon and Samsung. Sonic technology Description manufacturing facility is located in Gujarat, India Capability capable of single, double and multi layered manufacturing Production Target market Note Capable of special quick turn prototypes with a lead time of 3 weeks CIPSA RIC India Pvt. Ltd Description is an Indo-Spanish-Italian venture Capability -capable of single, double and multi-layered PCB s. Production Target Market Telephones, Switching & transmission, Automotive, Medical systems, Computer & peripherals, Industrial Automation and Power Supply. Note Fineline Circuits, Mumbai Description Capability single/ double and multilayered PCB s. also manufactures high copper boards and backplanes PCB s Viability Study For CIDA 21 September 2009 Candor - PCB technologies For India Production 56400 sq. meters in annual production as of 2007 Target Market Note An export and medium volume production orientated company Akasaka Electronics Ltd Description Capability Single side PCB production. Production 480,000* Sq. Meters T007583 Market Study Target Market PCB s for TV s, Audio, Automobile lighting and appliances Note HI Q electronics Description- has a modern facility located near Bangalore Capability Capable of single and double sided PCB s and multi layered manufacturing. Capable of producing up to 24 layers. Production 20,000 Sq. Meters Target Market NoteCandor s Proposed Plant Descriptions the facility is to be located in Tamilnadu/Karnataka Capability capable of single, double and multilayered production using environmentally friendly practices. Production 36000 Sq. Metersper annum Target market is leading OEM manufacturers such as Nokia, Tata, Ford Motors and Motorola. Viability Study For CIDA 22 September 2009 Candor - PCB technologies For India T007583 Market Study Chinese Imports It is widely acknowledged that Chinese imports are 15-20% cheaper than PCB s produced in India. Mr. Yogen Patel on his visit to India commented on the use of out-dated processes and technologies used by the Indian producerscontributingtowards India s inability to compete against cheaper imports from China. With the use of Candor s advanced technologies, the company will be able to compete against cheaper imports from China in low cost market. The following is a typical cost structure a Chinese manufacturer, followed by a comparison to Candor Industries Inc. Estimation- cost structure of PCB manufactures in China and USA (assuming similarities to Canada) USA (%) Candor (%) China (%) Gross sales 100 100 100 Cost of Goods sold 85 76 84 Material cost 40 41 Direct Labor 16.3 3.5 Depreciation 6.3 8.3 Maintenance 2.5 1.8 Waste treatment 2.5 2.5 Utilities 2.3 3.5 Other Mfg overheads 15.1 23.4 Gross profits 15 24 16.0 G&A cost 12.5 8.4 Sales cost 3.5 3.5 Management 6.2 2.2 Other expenses 2.8 2.7 Operating Profit 2.5 8.4 Other Net Costs 2.6 1.7 Profit Before Tax -0.1 7 5.9 (Source:IPCA report PCB market and Opportunity, Dr.Hayao Nakahara, Appendix 3) Candor s has advanced technologies which allow customers to maximize real estate on their boards. This in turn allows Candor s technologies to charge a higher price for their PCB s while providing better Value for their customers. Candor s COGS as compared with their revenues is only 76% whereas north American competitors have COGS of 85% and Chinese manufactures face 84%. This is evidence of the Higher value Candor can provide its customers through value creating technologies. Candor s Core strength of Quick prototype productions of 24hrs to 5 days for small and medium sized Productions are not matched by any of the top Indian manufactures. Fastest quick prototype manufacturer in India Is Sonic Technologies with a lead time of 3 weeks. Viability Study For CIDA 23 September 2009 Candor - PCB technologies For India T007583 Market Study Marketing Plan Candor Industries will manufacture PCB s in India to help increase its production and availability in the host country, where supply falls short of demand but merely locating in India does not merit orders from our potential customers. We must price and promote our product correctly. Pricing The Price of the product should be competitive and profitable. Pricing has to be correlated to the value we bring our customers rather than the cost of producing the PCB. In the following we estimate a cost structure of our competition (domestic and foreign) in an attempt to price ourselves competitively against Chinese multi-layered manufactures while accommodating for the value we bring our customers through our patented technologies. Note- Indian Manufactures are expected to be 17% more expensive than their Chinese counterparts. This assumption is the basis for the Indian MLB prices estimates. Candor price estimation is based pricing the PCB s 20% above the median price of Chinese manufactures to account for the value created through our patented technologies. N. fla rs o ye 20 d 07In ia In ia d C in ha C in ha Cn o ( stimtio ) a dr a n P e(C n -lo e p r .Inh P e(c n -h h stp r .InhP e(C n -lo e p r .InhP e(c n -h h stp r .Inh(c n p r .Inh ric e ts) wst e c ric e ts) ig e e c ric e ts) wst e c ric e ts) ig e e c e ts) e c 7 2 These prices are extremely competitive against domestic Indian Manufactures. We consistently rank in lower uartile of manufactures priced for MLB. This will be crucial in the initial years when we will need to establish as many contacts/ customers as possible and entice potential customer to switch to Candor. Viability Study For CIDA  1 0 1 2 1 1 24 September 2009             2    . 7 7 . 1. 0 1.1 2.1 1 2 . 7 . 7 . 2 .07 1.0 2.1 1 12 .1 . 7.0 2 . .2 . . 1 2 1 2 2 0 . 7 .7 1. 2 1  ©                                    .1 1 7 . 1. 1 1.2 2. 2 .7 2 . Candor - PCB technologies For India T007583 Market Study Market promotion In the Viability study Candor has expressed its intentions to employ 1 marketing manager and 4 personnel for sales and customer service. All of Candor s promotion in India will be carried out by the marketing manager and his team. Since the promotion is B2B they will be visiting a major Trade shows for the relevant industries, advertise in the respective trade journals and industry specific literature. The following is break down of each person s duties and responsibilities along with the marketing budget The Marketing manager Is the overseer of all activities and will personally handle all large scale clients such as Nokia and Samsung. He is expected to manage his subordinates to represent the company in the respective trade shows and promote the company through the relevant media mentioned. Sales agent 1, 2 and 3 each sales agent will segment the market in an industry/geographic segment and will call on prospective clients in their respective segments and industry. They will also represent industry specific trade shows and establish contacts with potential customers. COD customer order desk a full time employee is to monitor all customer complaints and order enquiries. Identification of Relevant Trade Shows and Journals (Domestic) for Promotional purposes Trade Shows Hardware India - is an exclusive show of hand operative tools, Hardware items and DIY products, Building materials including paints, electrical fitting etc. The event is likely to be the years¶ most important meeting place for the buyers and Sellers from India and abroad and will therefore provide the right platform to the Indian as well as overseas companies to present their services and products. International Printed Circuit & Electronics Assembly Fair ± International Printed Circuit & electronics Assembly fair for circuit & electronics Industry. The event provides a opportunity to meet all the electronics supplier, products vendors and downstream customers, manufactures under one roof. The exhibitions will showcase latest innovations for circuit and electronics industry. Electronica India and Productronica India ± formerly known as electronicIndia are the most important events for the electronics Industry in India. The 10th Edition of this show is all set to serve the special needs of this industry. Electronica India ± International Exhibition and conference for electronic components, assemblies and materials and productronica India ± International Conference and Exhibition for Electronics Production technologies is a trade fair of excellence. This trade show will encompass visitors from the automotive industry, Information Technology, Medical technology, consumer technology, Machinery and plant construction, communication technology and quality control. 25 September 2009 Viability Study For CIDA Candor - PCB technologies For India T007583 Market Study China Medical Equipment fair spring 2008 ± is Asia¶s largest medical equipment fair. In this event all the top manufactures will showcase their products. Trade journals IPCA publications Automotive Trade journals Auto Bharti is service provider of trade magazines on automobiles, automobile trade journals Proposed Marketing Budget Year Proposed Expenses Travel Expenses Petrol flight travel Trade journals/literature Trade shows 1 2 3 4 5 9000 10000 20000 20000 11000 70000 9900 11000 22000 22000 12100 77000 10890 10000 24200 24200 13310 82600 11979 10000 26620 26620 14600 89819 13200 10000 29300 29300 16060 97860 Medai advertisements Discreationary spending Marketing Budget Note assume a 10% increase per year over the years Viability Study For CIDA 26 September 2009 Candor - PCB technologies For India T007583 Market Study SWOT Analysis- Candor s proposed Plant in India Strengths 1) A growing electronics market and a shortage of supply allows for new entrants in the market to establish themselves. 2) Candor s patented environmentally and value creating technology is not matched by any of the current manufactures in India. 3) SEZ location with resultant benefits 4) Candor s commitment to CSR and environmentally friendly approach to PCB production will place it on the approved list of suppliers for leading Companies who posses similar levels of corporate morality. 5) Quick turn prototype production with a lead-time of 2 days to 1 week, currently unmatched by Indian competitors. Weakness 1) Global leaders in PCB manufacturing such as AT&S have already located in India and are well established with leading customers of PCB s. 2) Every Major Domestic and foreign PCB manufactures is currently expanding operations to meet the shortageof supply. This translates to a excess of spare capacity among domestic PCB manufacturers. It will likely lead to a high level of competition for domestic consumers of PCB s. Opportunities Threats 1) Strong Potential for expansion due to growth in the complementary goods market(electronics segment). 2) To become leading pioneer in CSR and environmentally friendly manufacturer in India. 3) Capable of creating an export orientated production unit and thus expanding into the neighboring countries. 1) There are currently no trade Barriers to import and export of PCB. Low cost/high quality PCB manufacturers from China have already flooded the market. 2) An unsuccessful technology transfer to India is visible threat due to a) Work culture/employee capability in India compared with what Candor is accustomed to in Canada. b) Machine maintenance and availability of spare replacement parts. 3) Imports from China currently cater to all the excess demand in India. They are low cost; we must provide incentive for Indian importers to switch to Candor s domestic production. Viability Study For CIDA 27 September 2009 Candor - PCB technologies For India Mitigating Identified weaknesses and threats Weaknesses T007583 Market Study 1) Competitions against global manufactures are unlikely to affect Candor due to differing scale of operation each company operatesin. Candor annual production is in India 36000 m2 compared to AT&S operational capacity 50000m2 at the second plant alone. Candor is likely to compete for different contractsby catering to different niches in the market. 2) The electronics market is growing at an estimated CAGR of 20% annually with more and more electronics manufactures locating in India. This level of growth is the reason manufacturers are currently expanding their operational capacity; but with the current shortfall in production with respect to demand and the growing electronics market coupled with foreign electronics manufactures locating in India. We can assume domestic production will not meet domestic demand in this decade. Although there will be significant competition in PCB market, survival of new entrants is unlikely to be in question due to industry related factors. Threats 1) Steps are being taken by Candor to ensure the successful transition of its technology to India such as: a. Significant investment into workforce training and education b. Identification of possible threats to complete transfer of technology to its Indian operations in India. 2) Domestic producers have several advantages over their overseas competition in India. a. In India, it takes on average 10 Days to clear customs; the time of delivery is more reliable than overseas producers. b. Cost of transportation of highly fragile boards is expensive over long distances; domestic producers would be expected to incur less cost. In Conclusion, while there could be negative impacts to Candor s expansion into India, in this study we have identified various ways in which Candor will fully mitigate such weaknesses. Viability Study For CIDA 28 September 2009 Candor - PCB technologies For India T007583 Market Study Estimated and Net Income Revenues for the Initial years e ar of p e ration Note- for the sake of a preliminary study all cost are assumed to be ariable with production. Viability Study For CIDA 29 September 2009 ) # ) 0 " ) e t income 0000 80000 2 2500 # " " "" p e rating E p e nse s 2500 2 0000 2 0000 90000 20000 " " # " ross Profit 72500 390000 " """ Cost of goods sold 577500 0000 " " e e nue s 750000 500000 750000 277500 72500 3500000 2590000 9 0000 # " e ar of output ! 2 3 5 5000000 3700000 300000 700000 00000 ' %$ ! ( &