Dixon Tech’s Forward Thinker

IN A SWANKY BUILDING in Noida’s Sector 16, about 650 Dixon Technologies employees in anti-static blue, yellow and green checked jackets and hats are working in the afternoon shift. In the printed circuit board (PCB) segment, machines assemble reels of tiny components such as resistors, capacitors, inductors and technicians perform quality checks. On a separate floor, rows of workers put together cameras, speakers, screens and other components to make smartphones, which are then packed in colourful boxes for shipping to Bangladesh, Sri Lanka and the U.S., apart from the Indian market. The unit produces 22,000-27,000 Motorola smartphones everyday. This is one of Dixon Technologies’ 21 facilities in the country which make everything from mobile phones, LED TVs and washing machines to security surveillance systems and lighting solutions for some of the world’s biggest consumer electronic, mobile, lighting and home appliance firms such as Samsung, Xiaomi, Philips, Panasonic and Bosch.

Now, the electronic component manufacturer is scaling up further with a larger facility in Sector 68 Noida, which will make phones for Xiaomi. The 3,00,000 square feet unit has been built at an investment of ₹250 crore (total expected investment is ₹400 crore) in the first phase and will employ 5,000 people. It is expected to make 2-2.5 million units every month. The company expects revenues from the new unit to start coming in from October-December quarter. In FY23, phones and electronic manufacturing service (EMS) accounted for 43% revenue.

The unit fits into chairman Sunil Vachani’s ambition of making the 30-year-old company a big player globally. He also wants to capitalise on a large domestic smartphone market and government push for electronic manufacturing in India. “There was a time when entrepreneurs would think of setting up a factory to meet, say, 5% domestic demand. The mindset is changing. We at Dixon think this is time for mega factories where you employ a large number of people in a single location and have economies of scale. When mindset changes, a lot of things follow,” Vachani tells Fortune India.

Dixon, founded by Vachani in 1993, started with colour televisions in 1994 and is now one of the largest EMS providers in India. The company, which went public in 2017, grew consolidated revenue from ₹2,858 crore in FY18 to ₹12,192 crore in FY23. Revenues rose 14% in last financial year. Vachani now wants to increase exports and set up factories outside India. “Last year, about 10% turnover came from exports. Over a period, it is going to be 30-40%. It can be a big opportunity. Vietnam exports $100-110 billion worth of electronic goods. We see that happening in India, too,” he says. Scale is the key to becoming a globally-competitive brand, says Vachani. Last year, the company got into a joint venture with Japan’s Rexxam to make PCBs for air-conditioners. It also has a JV with Bharti Enterprises for making routers, modems, set-top boxes and other telecom equipment.

“We have grown from one million square feet to three million square feet. We should grow to 4.5 million square feet. In last six years, we have grown from 1,500 to 25,000 people. We will be around 35,000 in a year,” says CEO Atul Lall. He adds the company has ramped up manufacturing for BoAt under a JV—from 200-300k to 10 million units.

Dixon is also leveraging government’s push for domestic smartphone manufacturing. According to Counterpoint, government schemes like Phased Manufacturing Program and increased duties on completely built products will push local manufacturing. The Production Linked Incentive (PLI) Scheme also covers mobile phone manufacturing. Dixon was the first mobile phone maker to get funds under the PLI Scheme. According to Counterpoint Research, India exported more than two billion phones during 2014-2022; CAGR was 23%. “India is capacity surplus. There are multiple factories, contract manufacturers and OEMs such as Samsung and Vivo. Plus, local demand for smartphones has not been that great for two years. In 2023 too, we are not seeing much increase in demand, but we are seeing higher exports. That is how the country will utilise this capacity,” says Counterpoint senior analyst Prachir Singh. The company is also expected to benefit from government’s restriction on import of electronic items such as laptops, tablets and PCs.

Vachani is keen to dispel the notion that Indian companies are just assembling electronic products. “People are probably looking at mobile phones. They are a technical product where a large part of the bill of materials is either the display or the semiconductor. Dixon is going to localise almost 60% non-semiconductor bill of of materials,” he says. India imports most of its semiconductors.

Vachani would also prefer to shift Dixon from being a prescriptive manufacturer to an original product designer and manufacturer. This year, the company inked an agreement with Chinese original design manufacturer Tinno Group’s Mega Alliance Holdings for a prospective JV to design and make mobile communication equipment and related solutions. Dixon will conduct the research and design smartphones and IoT-based products. Last year, the Noida-headquartered company entered into an agreement with Google for sub-licensing rights for Android and Google TV—the agreement includes designing and manufacturing smart TVs.

Vachani sees huge opportunity in India as well as global markets. He believes India can be the next stop for electronic and hardware manufacturing and not just for import substitution. He says India exported mobile phones worth $10 billion in FY23 but has the capability to take this to $100 billion.” Even if Dixon gets just 10% share, it will be a large number,” he says. Meanwhile, a low 15% penetration of white goods such as washing machines is also a huge opportunity. “It’s a long way to go as far as the India market is concerned. We see healthy growth in each category,” he says.

The company, often labelled as Foxconn of India, aims to break into the top 10 globally in this decade. “We would like Dixon from India with its unique identity and business model… What got us here will not get us to where we want to be. While we will retain our core values, there will be a major transformation. We want to be at a place where whenever people think of outsourcing, they think of Dixon... like they talk about Foxconn of Taiwan,” he says.