Uma Pingali, managing director, Arrow Electronics India, sees significant opportunity for growth in India.

India has a lot to offer Arrow Electronics and the customers and suppliers Arrow supports. It’s one of the fastest growing markets in Asia Pacific—expected to grow at a compound rate of 28 percent from now until 2015, according to business research firm Frost & Sullivan. It has become a magnet for information technology businesses, and increasingly, for electronics manufacturing, in large part because of a tremendous pool of highly educated, highly skilled labor – particularly in design and engineering. And, it’s the second most populous country in the world, representing a large consumer market. Arrow India, a division of Arrow Asia/Pacific, is well positioned to succeed in this very attractive market.

India’s total available market (TAM) for electronic components is estimated at $1.2 billion dollars for 2006. The portion addressed by distributors – the DTAM – is estimated between $700 and $800 million. Business opportunities abound, especially from contract manufacturers (CMs) serving the telecommunications, automotive, consumer electronics, industrial and utility infrastructure segments. Major telecommunications equipment companies such as Motorola and Ericsson have established manufacturing operations and design offices in India, as has auto parts maker Delphi.

Arrow serves more than 450 customers with more than 75 employees, a 5,200-square foot warehouse, and now, five sales offices, the newest opened in Pune in July. Arrow’s business is 90 percent semiconductor, but that is changing. The managing director of Arrow Electronics India, Uma Pingali, says, “Our passive, electromechanical and connector (PEMCO) business has a lot of opportunity to grow. Our ability to satisfy customer needs for PEMCO products will be a differentiator for Arrow.”

India’s industrial sector has been the strongest customer market. But Pingali sees significant opportunity in telecommunications infrastructure. “The number of new phones being connected in India is the highest in the world. It took nearly 40 years to install six million phones. In the last five to 10 years, almost four times that number have been installed, if you include wireless networks. That explosive growth requires substantial infrastructure. The big telecommunications equipment companies are here in force, and we’re in an excellent position to serve them.”

Another high growth market is consumer electronics, especially digital appliances such as MP3 players, digital cameras, camcorders and high-end, flat screen LCD and plasma TVs. The automotive market in India is picking up as well. Almost every major car manufacturer has a plant in India. According to another Frost & Sullivan study, 1.2 million vehicles were manufactured in India in 2004 and that number is projected to be 2.8 million units in the year 2010. According to that study, India is also one of the world’s largest producers of two wheelers, having produced 6.5 million motorized bikes and scooters in 2004, and will produce an estimated 12 million in 2010.

Arrow India is seizing these opportunities. Pingali says, “Large CMs with advanced manufacturing operations worldwide are manufacturing in India and exporting to their home countries and elsewhere. We support them with product and with supply chain programs and tools.”

Mid-tier customers rely on Arrow for assistance in demand generation. Pingali says, “We support their R&D at the component level and with total solutions, using our own engineers and the independent design houses we work with.” Arrow serves smaller customers with telephone sales and support, and Web-based transaction systems.

A major challenge in India is a weak public infrastructure. Airports and highways are not world class. When transportation infrastructure problems prevent products from reaching factories on time, production gets disrupted. When, because of unreliable utilities, there isn’t power in the plant, manufacturing stops. However, given the business interest in India coming from all over the world, the government has invested heavily to fix these problems and make life better for manufacturing companies and those who supply them.

Arrow also helps customers overcome challenges presented by currency exchange and complex tax regulations when they try to import components for production and then sell end products locally. Arrow has secured licenses to buy components in U.S. dollars and bring them into India and then, after paying the necessary taxes, sell the end products to customers in India in the local currency.

Ultimately, Pingali finds a lot of excitement and opportunity from doing business in India. “India is a comparatively small market today,” says Pingali. “But, there is a huge, growing middle class. The GDP has grown more than eight percent in the last couple of years, to where the economy is now close to a trillion dollars. All this translates into a lot of purchasing power for a lot of different products, which in turn translates into a lot of opportunities for us and our customers.”