How can the ‘Make in India’ agenda be successfully delivered? There are easy ways of doing this. One way is to import components and subassemblies and assemble them in India to come out with the finished product. This can involve shipping entire assembly plants from countries where running them has become unviable because value addition is low and manufacturing wages have gone up. This is how semiconductor plants first went to China and thence to Malaysia.
Greater value addition can be achieved by making some of the components in the country, which also involves a process of assembly, and then using them in the putting together of the final product.
Or, the entire process of manufacturing can take place in the country itself, from scratch to finish. This happens when from foundries to assembly, the whole process of manufacturing semiconductors takes place in a country, as is the case with semiconductors manufactured in Taiwan and China.
But value addition is higher when the chip is designed in the first place in the country itself. This takes place in some high-tech firms in Bengaluru, but they mostly execute assignments given to them as contract designers. This is unless the work is taking place in the captive unit of a multinational which conducts the entire process of design to final manufacturing at various locations across the world.
The highest value addition takes place when the idea of the product is conceived in the country and given shape through a process now called design thinking and then the manufacturing is done either in-house or contracted out. The critical aspect of this is that the intellectual property rests with the company. Apple’s iPhone 8 Plus has a bill of materials tag of $288.08 – according to IHS Markit – and eventually sells for $799. No wonder Taiwan’s semiconductor manufacturers, once viewed with awe for making some of the most high-end microprocessors, have lately been complaining that their margins are low compared to what the likes of Apple make by using the microprocessors made for them in Taiwan or China.
Start to finish
STEER, located in Bengaluru, falls in the ‘Apple’ category of companies who design and manufacture, or out-license some of the manufacturing while owning the intellectual property. It has been around for 25 years (was set up in 1993) and in some ways represents the holy grail of value addition and what ‘Make in India’ is trying to achieve – conceiving, designing and manufacturing their machines.
Its founder and managing director, Babu Padmanabhan (51), after graduating in production engineering from the PSG College of Technology in Coimbatore, Tamil Nadu, went on to secure a doctorate in mechanical engineering from Virginia State University in the US. Thereafter he briefly worked with the US’s space and aeronautics spearhead, National Aeronautics and Space Administration, and NTTF in Bengaluru and went on to set up STEER.
Padmanabhan says: “We transform materials physically and chemically by combining them. That is our space. We realise that all material, one way or the other, is a part of nature. Being aware of the entire ecosystem is what drives our programme. We started with a simple vessel which cleaned itself as it functioned. It also performed physical functions like stretching, twisting, folding.”
The materials transformation is carried out through an extruder which controls temperature, time and heat. This is the flagship platform product of the company which is designed and manufactured by it. A platform is materials development technology compressed into a single unit which is guided by design intent, that is the end use. It is a combination of the domains of the digital, biological and material like moving a bionic arm for someone who does not have an arm.
Its twin-screw extrusion system which is marketed globally is made in Bengaluru. It has an annual capacity of 150 extruders and has so far produced 625 extruders. It has three factories in Peenya and one in Coimbatore. Plus there are applications development centres in Japan, China and the US where extruders are customised for clients. STEER is present in 39 countries through five global and 16 satellite offices.
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It has 60 patents and other than technology platforms is into the manufacturing of components, peripherals, elements and applications.
STEER has so far been a business to business (B2B) company. The materials derived by it from plastics go into automobiles, aerospace and consumer durables. In pharma, it is trying to change the way medicines are made and taken. “Pharma manufacturing has till now ignored automation. By initiating automation by seeking to shift pharmaceutical manufacturing from batch processing to continuous processing, there is a gain in both quality and efficiency,” explains Padmanabhan.
In getting ready for the business to consumer (B2C) segment, bringing medicines to the market, it is looking at drug delivery as a platform. “One of the platforms we have worked on is drug delivery for HIV through solubility enhancement. For this we treat it in a bio-polymer and make it bio-available. We have been working on this for almost nine years now. We intend to make a better quality of HIV medicine and operate in the market.”
There is also an effort to make a medicine into a sparkling drink which no child will refuse. For effervescence, shelf life has been a big question mark. If you can solve that, you can make a 600 mg tablet into a drink which helps both the paediatric and the geriatric.
“Another B2C area we can talk about is addressing anaemia in expecting mothers and new born children through a dietary supplement as the normal diet is not able to provide it. Fortification will not work, only a supplement will. Here manufacturing technology comes in and the product has to be commercially feasible and affordable.”
STEER has an annual revenue of Rs 200 crore and spends Rs 6-8 crore on R&D. It clocks a net margin of 12-15%. It began 25 years ago by putting in Rs 15 lakh and getting Rs 60 lakh from Karnataka State Financial Corporation. It first achieved a turnover of Rs 15 lakh. “We have spent a couple of million dollars in each geography. This squeezes our margins. We operate globally to service and integrate, all to lay a solid foundation,” explains Padmanabhan.
STEER is at an inflection point. After mastering the process, it is now moving into providing technology for use in pharmaceuticals, food, beverages and bio-solutions. It looks forward, in particular, to achieve a paradigm shift in pharmaceuticals by moving from batch to continuous processing, thereby reaping a gain in both quality and efficiency.
It has the early mover advantage in India where there is no competition. It is the biggest in the country in terms of the number of extruders deployed in plastics moulding. Globally, it competes with pioneers from Germany, Italy and Japan like Coperion and Berstorff.
V. Ravichandar, chairman, Feedback Consulting, sees Padmanabhan in the mould of “an inventor and innovator. He could have remained a researcher but has gone on to crack the applications challenge. India does not recognise the role played by such solid building blocks of the ‘Make in India’ effort.” Ravichandar compares STEER to a “software company which is into products, whereas Indians remain more fascinated by services exporters.”
Now that software services exports have become a mature industry and the focus has shifted to innovating for the customer, the design, patent and manufacture ethos of STEER puts it at the forefront of the manufacturing space.
Subir Roy is a senior journalist and the author of Made in India: A study of emerging competitiveness (Tata Mcgraw Hill, 2005) and the forthcoming Ujjivan: The microfinance frontrunner (OUP).