CNC machine opertor

Overview

· Industry recognised as a ‘strategic industry’

· High capital output ratio - investments support an output of over 60 times, by user segments

· Thriving domestic industry, dating back to the 1890s; ranks 18th in the world (but with 1% share)

· Industry provides machining solutions, making manufacturing more cost competitive

* Source : Indian Machine Tools Manufacturers Association (IMTMA)

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Market

Raw Materials, Technology

Raw materials

· Available locally; certain components imported (for CNC machines); totally account for over 50% of cost.
Technology

· Industry requires constant upgrading to meet customer requirements.

· Dependence on imported parts/ components owing to low levels of indigenisation.

· Increase in automation levels leading to consistency, better design trends and sophistication of end machine (esp. CNC machines)

· Robots being increasingly used along-with adoption of flexible manufacturing systems, transfer lines, laser cutting and measuring machines.

Industry Structure

· Industry growth uneven - average growth rate : 9.2 % per annum over the last four years · In all, around 200 medium and large units and 300 in small sector · Small and medium units together account for just 10% of output · 10 large units account for 60% of output and are ISO 9000 certified (HMT, Batliboi, Chicago Pneumatic, Mysore Kirloskar, Mico etc.) · Concentration of units in the south (Bangalore, Chennai & Coimbatore), and west (Mumbai & Pune). Other centres - New Delhi, Ludhiana, Ahmedabad, Rajkot etc. · HMT is the largest unit in the industry with around 40% market share · Large units have machine tools capacities for in-house consumption (Telco, Voltas, M&M, L&T etc.)

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Metal Cutting

(Rs. cr.)

Category	No. of Players	Production	Imports	Exports	Key Players
EDMS	5	23.2	5.1	4.8	Ace Manufacturing (Bangalore); Telco (Pune); Mysore Kirloskar(Mysore); PAL (Pune)
Machining Centres	5	52.3	165.7	0.20	HMT, Tool Craft (Bangalore) Modern Machine Tools (Mumbai) Sparkonix (Pune); Electronica Machine Tools (Pune)
Lathes & Automats	5	147.4	63.3	22.8	Ace Designer (Bangalore); Kirloskar Electric; Mysore Kirloskar; LMW; Praga Tools.
Boring Machine	5	34.3	55.3	16.2	BFW (Bangalore); HMT, Kirloskar Electric; Heavy Engineering (Ranchi); Telco (Pune); XLO Machines(Mumbai)
Milling Machines	5	44.9	54.4	3.0	Batliboi (Surat); BFW (Bangalore); PAL( Pune); HMT (Cochin).
Drilling Machines	5	30.9	16.9	1.3	Batliboi; HMT, Widia (Bangalore); Telco(Pune); Lokesh Machines.
Grinding Machines	5	83.2	125.0	3.8	HMT, Mico, Ashok Manufacturing ( New Delhi); Guindy Machine Tools,(Chennai)
Honing, polishing and other super- finishing machines	5	34.6	26.8	0.1	Centre for Design & Development,(B’lre) EMA India; Preswell; Telco; Guindy Machine Tools; Arihant Industrial; Mico;
Planing, shaping, slotting & bracking machines	5	4.5	3.8	0.1	HMT; Telco; PAL; Centre for Design & Development (Bangalore)
Gear cutting machines	5	19.9	59.4	0.3	HMT; Telco; Bharat Machine Tools; ETA Technology; PAL
SPMS	5	96.7	-	-	Widia; Mico; XLO Machines; Batliboi; HMT
Others	5	7.8	151	0.2	HMT; Telco; PAL; etc.
Total (N.C Machines)	5	580 (23)	726 (96)	53 (24)

• Production declined by 10% since 1996-97; Exports have increased twofold since 1996-97
• Imports have declined by 10% since 1996-97
• NC lathes, machining centres, NC SPMs and grinding machines have 25% share in machine tools output
• Conventional lathes and NC boring milling machine accounted for 60% of total export
• Grinding machines formed bulk of imports.

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Metal Forming

(Rs. cr.)

Category	No. of Players	Production	Imports	Exports	Key Players
Bending, Folding, straightening, Flattening machines; Incl. Press brakes	20	12.3	29.0	1.3	Bemco Hydraulics, Hind Hydraulics, Press Automation, Preswel Industries
Punching and/ or shearing machines	20	7.5	18.0	1.8	Godrej & Boyce, Nugen Machineries, Glasnost Hydraulics, Ameteep Machine Tools, HMT, Ashok Manufacturing, Crane-Bel
Presses incl. NC	>20	62.2	210.0	3.6	Electropneumatics & Hydraulics, Bemco, Crane-Bel, Glasnost Hydraulics, Godrej & Boyce, Ameteep Machine Tools, Lamba Brothers.
Die casting machine	7	7.7	-	1.1	HMT Praga Tools, Preswel Industries Rapid Flow
Others	6	-	63.7	-	Dee Tee Industries, Brakes India, lmanes
Total		89.7	320.7	7.8

• Production showed an 18% fall over 1997-98
• Exports have grown threefold since 1996-97
• Imports have grown at 30% annually since 1996-97
• Presses formed bulk of imports, among all Machine Tools

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Exports & Imports

Exports	· Exports - Rs. 60.5 crores during 1998 · Affected by disintegration of the former Soviet Bloc which had accounted for 50% of exports · Focus highest on NC machines (almost 50% of exports) and conventional lathes · Export barriers - limited R&D spends resulting in poor quality and performance though cost-wise cheaper · Global market for conventional machines encouraging (HMT a major exporter to UK and other European countries in this category) · Exports to over 64 countries - UK, USA, Germany, Switzerland etc.
Imports	· Imports - Rs. 1050 crores during 1998 · Domestic industry supplies meet around 60% of demand only · Rise in (total) machine tool imports since 1995 · Technology intensive automated and electronic components, form bulk of imports · Second hand machine tools too imported, for ‘faster delivery’, under EPCG scheme. · Customs duty reduction has resulted in dumping and saturation of market.
Customs Duty Tariffs	· Basic : 25%, SAD : 4%, CVD (excise duty) : 16%, Modvat : 20% Surcharge :10%. (surcharge on specified machine tools & spare parts - nil)

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Market Characteristics

Key Success Factors

Manpower : Skilled, qualified and trained, for design, development and operations Technology : Continuous upgrading to reduce costs and meet specification in overseas and domestic markets with strict quality checks Capital : Heavy inflow on account of high raw material and labour costs R&D : To improve technology and remain cost - competitive through better economies of scale. Products : Providing customised solution based on customer specification - reliably and efficiently and with minimum lead time and prompt after-sales service Exports : Meeting global standards on technology and cost factors.

Market Characteristics

Bulk of machine tools in conventional range (lathes, presses, grinding machines etc.) Demand linked to performance of user industries. A small change in user segment leads to a ripple effect in machine tools off take. Organised sector includes units with high captive consumption rates. There are sophisticated in-house divisions (toolrooms) of companies such as Telco, Voltas, M&M, L&T etc. Indigenously developed CNC machines extremely competitive and growing popular; conventional machines currently dominate market however. Concept of ‘just enough machines’ now catching on, along with customised solutions (which require high lead time) Competition between players not very significant - concentration on individual niche segments Well established customer support services - help in swift movement of spares and accessories User profile : Auto, Consumer Durables and Non Durables, Capital goods, Electrical, Electronics &Automated Industries, Defence, Railways and other Infrastructure Depts, Ancillary Units, General Engineering, Job shops & Repair shops.

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Future

Demand Drivers

Overall economy performance User industries performance - In auto components, for every 1% increase in production, there is a 0.3% increase in output in the machine tools industry Fresh / additional investments in user industries Requirement for customised solutions as well as for new higher speed machines, catering to large volumes production.

Business Concerns

Highly capital/ labour intensive : act as barriers to growth of smaller players Lack of government support - harsh tax structures, no fiscal incentives, leading to higher product cost Entry of MNCs - additional pressure on local industry prices, which are already higher due to small batch production processes (productivity 5 times lower than Western countries) Dumping/ saturation of market by overseas suppliers - second hand machines sold at throwaway prices; Financial incentives and liberal payment terms are other aggressive market techniques to attract customers Insufficient export orientation due to lack of superior cost effective technology; over dependence on local demand failing which stock piling occurs Product innovation - lacking requisite technology for better quality machines. Directly impacts exports, where Taiwan, S. Korea etc. are more competitive.

Future

Industry estimated to grow at around 10 % annually