Flex CEO Revathi Advaithi on How India Can Become a Global Manufacturing Hub

While the world was going into a lockdown in March 2020 because of the Covid-19 pandemic, US-headquartered Flex had to accelerate production. After all, the world’s largest contract manufacturer made products such as smartphones, laptops, data centre infrastructure and healthcare equipment, among others—for which demand suddenly went up. Leading Flex through those challenging times was Revathi Advaithi, who had taken over as CEO in February 2019. The $24-billion Flex has operations across some 30 countries, 100 manufacturing locations, and has 165,000 employees on its rolls. Advaithi, 54—who is based in San Jose and is a mechanical engineer from BITS, Pilani, with an MBA from Arizona State University’s Thunderbird School of Global Management—joined Flex after stints at power management firm Eaton and technology major Honeywell. In an interaction with Business Today’s Nidhi Singal, the Flex CEO talks about India’s manufacturing story, the government’s production-linked incentive (PLI) scheme, and skilling, among other things. Edited excerpts:

Q: Flex has six manufacturing facilities in India. Where does the country stand in the company’s scheme of things?

A: We have our presence in and around Chennai for manufacturing. We also have big infrastructure [facilities]—I don’t like to call it back office because it’s really not back-office support for our teams based in India. We have 18,000 employees in India in manufacturing and in the kind of support side of [the business that we] need for [our] global requirements.

The way I think about our presence in India in terms of manufacturing is mainly around the consumer devices side of the business. And then [we are] developing more into the infrastructure side—the CEC (Communications, Enterprise and Cloud) infrastructure side of the business. Those are the two big areas of presence that we have today in India.

The growth in India has to come from your customers and [they need to] see value for the [services] provided; [and] are they willing to pay for that value? And can we be competitive to provide that value? So things like the PLI scheme really help; because as you’re trying to build a local economy... and as you’re trying to help build a manufacturing sector in India, you need those kinds of support structures to really develop it to get scale [so that] it’s competitive and has its own legs. So I’m very supportive of those types of incentives and infrastructure support that the Indian government is providing today for things of scale. Our customers are taking advantage of that. We are partnering with our customers to take advantage of that.

But I think India still has work to do, to build a holistic infrastructure. Because it’s not just about [whether] you can build cell phones or laptops—those are just assembly and test [facilities as a] lot of the materials for these products still come from places like China. So to build a vertically integrated supply chain and to add more [products], work has to be done. Because things like capacitors and resistors that go into electronic products are still very competitive, coming out of areas like China. And that’s going to require continued investment by the Indian government to build that kind of supply chain infrastructure. Companies will stay here for global production only if it makes sense to make in India and ship from India. The good news is that [there is] enough domestic consumption and again a support group for the local infrastructure itself, but to be globally competitive there has to be a public-private partnership (PPP) to build a vertically integrated supply chain that can be resilient for the long term. That’s really important.

Q: Companies which are manufacturing in India are eligible to apply for the PLI schemes. Have you applied for these schemes, and if so, in which sectors?

A: Yes, we partner with our customers to do it [apply for PLI schemes]. And we’re doing that for cell phones and laptops today. Those are the top two that we’re working on right now.

Q: You are present in many segments, including healthcare and data centre infrastructure. Do you have any plans of expanding beyond the consumer segment in India?

A: The way I like to think about things is, don’t get attracted to the next new shiny bicycle before you make things first. So scaling, just in this space itself, has so much opportunity for us. And like I talked about the infrastructure side, which is our next big focus, whether it’s 5G or things like that, which are important to India. So we really want to focus on going from consumer to infrastructure. And those are the two big areas that we want to scale in right now. For India, I’d say, one more [area] which closely follows is automotive, particularly things like electric vehicles. The medical [area], I think not yet, because we don’t have a big commercial presence in India for medical, and getting the manufacturing setup and support is pretty tedious and pretty long-term. So we want to focus on these sectors first and build scale and presence in the country.

Q: India is trying to position itself as a global manufacturing hub. Do you see this happening?

A: We have to be optimistic. I see India first moving in the direction of being a manufacturing hub to support local domestic consumption, which itself is significant. Just think about the domestic consumption in India and how much is being brought in through imports [and] that itself is a pretty significant manufacturing presence to build. So if India just built self-sufficiency for local consumption, that itself would be pretty significant. That’s a big first step for India to achieve. The second would be to become a global manufacturing hub where you can export to the rest of the world.

Building scale for domestic consumption is a good step in the right direction, because what people are looking for is a resilient supply chain—they’re looking for a supply chain that’s cost effective by land, is resilient and vertically integrated. India has work to do on that. Just like I talked about capacitors and resistors, and all of that are not easily manufactured to scale in India today. So building those kinds of things is going to take a lot more time.

But I think the right first step is building up scale for local manufacturing and domestic consumption, and that is going to lead to making your supply chain more productive, efficient and resilient for global manufacturing. So it depends on the end product. I’d say that [is what] we’re trying to achieve here. Cars are a great example just for the number of cars that are being manufactured in India, and what’s required in building big automotive infrastructure in India itself is pretty significant; and then taking that to a global scale and exporting them becomes a reality.

Q: Flex has been operating in the country for the past many years. What are the key pain points for a contract manufacturer like you in India?

A: Let’s first talk about what’s good. India has a very skilled labour force. And that’s fantastic because we’re able to find the kind of people we need for the work. That’s very important for us. Without skilled labour, we can’t do anything. So India is a place we feel comfortable in our ability to attract and hire people, and have a workforce that we are proud to have. The second thing that we like a lot is in terms of the complexity of engineering, resources and all of that to bring in automation to scale. That’s very [readily] available in India today.

In terms of pain points, the biggest thing I would say would be that we still have to bring in a lot of products into India to make fully assembled products, because the supply chain is not fully developed. So, that always adds complexity. In a bill of materials, if 50 per cent is procured from outside the country, then it is complex in terms of managing that value chain versus putting it together locally. The continued focus on building an end-to-end supply chain fully really helps, moving forward.

Q: There is a fear amongst some of your peers that a change in government would introduce many more changes and India is not very stable when it comes to setting up or expanding operations. What is your view?

A: Almost in any country in the world, any [change in] government and [lack of] stability never helps these conversations. But in India, I feel, to some extent that story has progressed forward. And it would be hard for almost anybody to come into power in India and not continue to support and accelerate these policies that have started. Whether it is to reduce the bureaucracy, whether it is to make things easier to apply for, it’s hard to take a step back. So I’m quite optimistic that any government that is in power in India will continue to support these kinds of movements in the right direction.

And the way the world is today, it is very obvious and [they] have to make those improvements to build infrastructure in India. And so I feel very confident that future governments will continue to support these schemes or these processes that have started to reduce bureaucracy. And will continue to accelerate.

Q: With the adoption of technology, manufacturing—which used to be labour intensive—is evolving rapidly. Would we see the employee count in the manufacturing sector falling across the world in the next decade?

A: I am very optimistic in my thinking on this. I started at a factory floor 30 years ago. A lot has changed from a technology automation standpoint. But the human element of it, the way it has changed is in terms of having a different set of skills. I am a big believer that the upskilling of the manufacturing workforce will continue to happen because it has happened in front of my eyes. It’s a very different set of skills—which are more technology focussed, which know how to deal with things like bringing up a program to a digital twin that I never imagined 30 years ago. Upskilling of the manufacturing workforce is just an exciting place to be. Learning new things and learning new techniques and making yourself more applicable to technology today are good things, and manufacturing will go through that upscaling in a pretty significant way. But at the end of the day, manufacturing will be all about human beings designing, developing and deploying, and that is not going to change in any way. It is all going to be tied together in a different way and the skills you’re going to need are going to be different.

In terms of the availability of labour or what type of labour you need, everybody wants to make manufacturing products closer to that of a home base because the complexity of supply chains has increased significantly. And you can’t have local manufacturing and local production without really increasing the number of people available for making that happen. So, manufacturing will continue to be the hot topic for every economy in the world and providing the right kind of labour, whether it is about high technology simulation or for being able to run your complex equipment today, it will still be a significant part of the country’s resource strategy.

@nidhisingal