Explained: The Significance of HP Manufacturing Desktops, Workstations Near Chennai

Last week, US-based IT company HP (Hewlett Packard) announced that it has begun manufacturing of personal computers, particularly desktops and workstations, from the facilities of Flex in Sriperumbudur, 60 km from Chennai

Ketan Patel, managing director, HP India Market, said in a statement that the new facility will help strengthen the company’s commitment to India and support the growth of the local manufacturing ecosystem.

The development comes as no surprise since one of its main competitors, Dell, also has a manufacturing facility at Sriperumbudur. Its other competitors - Lenovo and Acer - have their manufacturing facilities in neighbouring Puducherry.

A feature of HP’s announcement is that it has stuck to its schedule to begin the manufacturing of personal computers and workstations despite hurdles in the form of the novel coronavirus (Covid-19) pandemic.

In April, a HP official told a wire agency that it will begin manufacturing computers at Sriperumbudur from August. There were fears that the US-based firm might not be able to keep up with its promised schedule in view of the spread of coronavirus.

Chennai and its neighbouring districts Thiruvallur, Kanchipuram, where HP’s facility has begun operations, and Chengalpattu were the worst affected by the pandemic until a couple of weeks ago. The situation has improved now.

On the other hand, the coronavirus situation has led to a higher demand for personal computers, workstations and laptops as most companies are allowing their employees to work from home.

During the April-June quarter, shipments of notebooks for heavy office work doubled, while shipments of other notebooks increased 17 per cent, according to IDC data.

The other aspect of HP producing computers at Sriperumbudur is that they will be produced from the facility of the America-Singapore joint venture, Flex, formerly Flextronics.

Flex is a contract manufacturing company and the third-largest global electronics manufacturing services.

Flex has four manufacturing facilities in the region, besides six more in other parts of the country. The American-Singaporean firm has three manufacturing facilities in Sriperumbudur, neighbouring Walajabad and Poonamallee localities respectively. The fourth one is at Sri City, Andhra Pradesh, which is some 100 km from Chennai.

Flex’s latest contract manufacturing agreement with HP is in line with its search for more such contracts across multiple sectors such as mobile phones, wearables, Internet of things.

The company has invested “a couple of 100 million dollars” and looks to take full advantage of the Narendra Modi government’s “Make in India” policy.

Flex officials feel that India is a logical choice given the sheer scale of availability of labour and growing domestic economy, besides the “Make in India” policy.

As regards HP, it has a longstanding fruitful relationship with Flex in other parts of the world and the launch of manufacturing at Sriperumbudur is an extension of the relationship.

For the Tamil Nadu government, HP’s selection of Sriperumbudur vindicates its stand of promoting Chennai and its suburbs as one region that has enormous geographical advantage. It is one of the cities that is easily connected by air, sea and land.

Also, manufacturing of a product at Sriperumbudur means it offers a choice of at least three sea ports within 100 km and an additional one within 200 km.

Sriperumbudur is on the Chennai-Bangalore National Highway from where road connections are available to any part of the country. Also, HP has a facility to produce electronic parts at Electronic City in Bengaluru, which is less than 300 km from Sriperumbudur.

Chennai’s international airport is one of the few in the country that has direct flight facility to many destinations across the world, east or west. This is one of the reasons why investors from South Korea and Taiwan chose Chennai for their investments.

The infrastructure helps in sending the manufactured products to any part of the world quickly, while also easily facilitating import of components.

The launching of the operations has come when Tamil Nadu government has allowed all industries and export-oriented companies to function at full strength.

Tamil Nadu is also an apt choice as it ranks second in the country in the manufacturing of computer, electronics and optical products. It accounts for 16 per cent of the national production.

For HP, the new facility is in addition to its plant at Pantnagar in Uttarakhand that has been in operation since 2006.

It makes sense on the part of HP to start its second manufacturing unit as every third personal computer sold in India is its product. IDC, in its data for 2019, said that HP enjoyed a 26.5 per cent market share in 2019, slipping from the top slot it enjoyed in 2018.

HP has about 600 exclusive stores and a strong network of 10,000 partners and resellers in the country. Its annual revenue from the Indian business is around $2 billion.

The launch of the Sriperumbudur facility will create employment opportunities and also help take advantage of the Centre’s recent scheme for promotion of manufacturing of electronic components and semiconductors.

Thus, this is a win-win situation for all the concerned.