Company Description: Globally
TE is a US $13 billion company, offering reliable, high performance, cost
effective and broadest range of connectivity solution across multiple industry
segments with over 500,000 live products in its portfolio. The company’s
biggest differentiator is the synergy and complementary products through
acquisition of great brands like Deutsch (harsh environment connectivity), ADC,
and XOL Technologies. TE also has a rich legacy (AMP, Raychem) which adds to its
credentials. The company produces approximately 8000 different electrical
components for the automotive industry in India. The company is leading the
innovation in hybrid/electric mobility space.
TE Connectivity has had a foothold
in India for nearly 20 years. How has been the growth story of the company in
the country?
In the initial years, TE
Connectivity’s focus was on telecomm, defense and also in the power sector.
Until the year 1995-96, we had a tough time in all the three fields. There were
sanctions so nothing much happened. The armed forces were predominantly using
Russian technologies which we being an American company could not cater to and
achieved limited success. Telecomm was also a slow boat because of fixed line
telephones, until mobile technology flooded the market. We, as a brand, shifted
our focus towards the automotive sector and networking. We started with the
enterprise networks, which involves campus networks. With this start in the
networks business our attention came back to telecomm. As a whole it has been a
mixed bag, we have grown multifold and we are very optimistic about our future
growth in this country with the numerous technological advancements happening
around.
Can you shed some light on the
company’s growth in the automotive segment specifically?
To start with, we were in the tier 1
harness business. We used to do harness for Tata Motors, Ashok Leyland and
Force One. We exit the business about 3 years back as that was not our global
competence and also we were competing with customers. We paid attention to the
component side other than harness business. Our strength lies in connectors,
relays, sensors, fibre optics, and cable assemblies and that is where focus has
been for the last three years with a growth of 30-40pc. The current year has
been the toughest so far, as it has been for all the other players in the
market. From next year, we want to be more cautious in our efforts. Year 2015
onwards we expect to be back on track with a healthy double digit growth.
Globally, the automotive business contributes to about 40pc of our total
business. In India, this contribution is close to 50pc.
How important is the Indian market
for TE Connectivity?
The Indian market clearly stands
very important for us. In terms of global revenue today it is at less than
10pc, but from a growth perspective it is one of the top 5 markets in the
world. The Automotive segment adds up to about 35pc of the total turnover from
TE Connectivity’s Indian operations. Segment wise division would put 70pc revenue
from passenger vehicles, 25pc through commercial vehicles and 5pc by 2-wheelers
and 3-wheelers. On the design side, we do a lot of work from India supporting
operations around rest of the world.
What kind of different products do
you offer in the automotive space?
TE Connectivity is the world’s
largest passive electronic component manufacturer. We manufacture connectors
which are used across a variety of applications wherever there is power and
signal. We also have relays, sensors and cable assemblies. We make specialised
cable assemblies for vehicles HVAC, engine, high temperature and other
specialised applications. Our expertise lies in the intense cable setups, for
example cable assembly for the airbag application which fires the airbag in
case of an accident. We are also working on the high current and high voltage
area as we have possessed a lot of experience in the AC and DC current. This
technology is implemented in the hybrid and electric vehicles which are getting
quite a lot of importance now. We work for nearly all of the OEMs like
Volkswagen, General Motors and Ford. Our
foothold is very strong in Europe and we have a good market share with Audi,
BMW and Volkswagen. They have very superior diesel technology and we have a
strong association with them. Volkswagen happens to be one of the biggest OEM’s
for us.
What different changes has that
company observed in these 20 years?
We came in India for the local
market but our approach shifted towards the exports because the local market
needed some time to mature. We had to export a lot to our group companies and
we invested on people, capability and technology. We mastered in our core
manufacturing processes, which are moulding, stamping and assembly, in the last
15 years. With all that knowledge and capability now we are well posted and
have started getting local projects. So our journey started with exports, which
has now shifted focus towards the local business. Our exports now account for
about 30-40pc, and the rest is domestic. This ratio might change based on the
future. The exports will continue, but the percentage might go down.
Can you walk us through the three TE
Connectivity plants located in Bangalore and Pune?
The two units in Pune are dedicated
to the automotive sector. One is a connector manufacturing facility which deals
with moulding, stamping and assembly whereas the second unit is concentrated on
making cable assembly. The Bangalore facility is a cross business unit where we
support all the different businesses of TE Connectivity. Apart from automotive,
we have aerospace, industrial, consumer and networks are all supported from the
Bangalore unit. Our engineering centre is also based in Bangalore. The
historical reason for setting up in Pune was partially down to Tata Motor’s plant
and the close proximity of Gujarat which is evolving as an automotive hub.
Apart from that Pune is a central hub for businesses and works very well in
terms of logistics as well.
What kind of localisation level do
you currently possess? What parts are being imported and not being manufactured
here locally?
Our current localisation level is
about 40-45pc which we plan to bring up to 60pc. The components which we have
to import are a bit more complicated to produce here and the demand volumes are
very small. If the utilisation of a certain component is less than 50pc, then
typically we do not manufacture it here and rather import it from the country
where it is being made. Consider an example, Hyundai vehicles contain a lot of
connectors which are imported from South Korea as they are designed and
produced there. Hence, it makes more sense for us to import it from Korea.
The industry is growing at a very
fast pace through technological advancements and the entry of newer brands from
across the globe. What are the challenges faced by TE Connectivity?
One of the challenges is the Free
Trade Agreement. When a vehicle gets imported directly from the parent nation,
the components also start coming at almost zero duty. We are optimistic, for
example, some of our customers are buying companies in Europe or North America,
and with that they want to bring the production here in India, which in turn
grows our business. Definitely we have to be leaner and meaner on the
manufacturing front, because if we do not have the cost advantage then we get
exposed to the ASEAN and the Far East companies bringing their products to
India. That is the reality and we have to compete with them. That keeps us on
the edge. And if there is no barrier, such as duty, then we ought to be really
efficient to stay in the race.
Can you give us a sneak peek at the
future investment plans that TE Connectivity is working upon?
We are already building a new plant
in Bangalore near the airport in the industrial park spread across an area of
280,000 square feet with an investment of 600crores. The plant will go into
full-time production in May-June of the year 2014. This campus will support all
our businesses like aerospace defense, networks and consumer. Some part of the
automotive business will be done here as well, but the major chunk stays
entirely in Pune. Further we are expanding in Pune also. New machines are being
bought in and hopefully a new building will be added by next year. Our
investment in India is continuous.
Lastly, what is your vision for the
company?
Primarily our goal is to grow at
three times the GDP growth. But in some markets where the base is yet small we
definitely want to grow faster and reach a more mature level. On the automotive
segment we would say that the current environment is a little bumpy. We want to
increase our current contribution of 35pc to the automotive sector to 45pc
market share by 2015. We think we will have to pass the next 12 months to reach
a more steady state. Even in the depressed market we continue to see growth and
we are very excited with the new launches. There are challenges like the
falling rupee and fuel prices going up, but the new launches keep the spirits
high. There are issues in the short term but we are bullish at the long term
and are committed to the Indian market.