‘Our core competency is people’
Dr G Ramakrishnan, President, Indian Analytical Instruments Association (IAIA) discusses the evolution of the analytical instrumentation industry, trends and competition from China, in conversation with Arshiya Khan
Could you give a perspective of the evolution of the analytical instrumentation (AI) industry in India?
Indian companies have been using sophisticated AI for more than 40 years. But the serious adoption began since the early nineties. The average growth rate of the AI sector has been between 10-15 percent. There has been a 15 percent growth in the pharma industry-faster than many other industries in India. Correspondingly, the growth of AI sector will also be high.
The demand boost for AI in the early 1990s has been driven by the areas viz., research, quality control and quality assurance. There also has been an increase in awareness of quality of products, both amongst the manufacturers and users. And as users’ demand for stringent quality goes up or the detection limit becomes stringent, the product quality becomes important. Thus, AI comes into play where quality is concerned.
India presents a lot of opportunities for product development and manufacturing, both for the local and overseas manufacturers. Instrumentation can be in the area of healthcare, pharma, biotech, infrastructure development, etc. It also has a scope in the area of safety, including environmental safety, forensic sciences, etc. In the area of environmental science, there is AI available both for organic analysis and metals.
The AI industry has been growing and developing in parallel to the pharma, biotechnology, steel and the cement industries the heavy buyers of the analytical instruments. New educational institutes are being developed and laboratories under CSIR, ICMR, DBT, DST and the agricultural ministry are being expanded, giving a further boost to the AI sector.
What are the major technology trends in the AI market and what are the factors responsible for the development of these technologies?
There has been technology development in every segment of the AI market and the main area of development has been towards better performance, reliability, flexibility, accuracy and automation. The reason for this is simple. Customers want reliable data within a short period of time and at a lesser cost of operation. They are looking for quality instruments, automation and networking capabilities. They want to network all their instruments through LIMS (Laboratory Information Management Systems). They want better productivity and reliability. Mainly, there is a lot of thrust on automation, networking and automation. That’s the latest trend.
Another important aspect is that all these industries are becoming compliance conscious. They want to practice Good Laboratory Practices (GLP), and they want to be compliant with regulatory bodies such as the US FDA. They also want instruments to be compliant with international regulations.
What are the challenges faced by the AI instruments market players globally?
The challenge here is the global availability of spares. It is impossible for any company to stock unlimited number of spares with different models. If an instrument breaks down, there is a delay in getting necessary parts. The cost of spare parts is more as compared to foreign parts as our custom duties are almost 35 percent in most of the cases. And therefore the customer finds it very difficult to justify this cost.
The other area that we need to build up is to get experienced staff to operate advanced instruments. Also the infrastructure at institutes and universities-they lack the facilities required to train students on modern instrumentation. It is also difficult for instrument companies to set up training centers, as custom duties of these instruments are exorbitant. In spite of this there are a few companies that have invested a huge amount in demo and training centers in India.
In most allied industries, global players have distributors in emerging countries like China and India, who supply and service local markets. Is this true of the AI market as well? If not, what is the business model?
The channel for the AI market has been a mixed one. Some of them like to operate directly and some through distributors. This depends more on market size and requirement for service support. And if it is only sales and does not require much of the support infrastructure then the manufacturers (global or local) can adopt a direct sales model. And when support infrastructure requirements are high, then they operate through agents. Recently there has been a steady increase in the investment from foreign countries operating directly in India. And this is mainly due to the reason that they want to have a direct interaction with the customers, to grow the business the way they want. They can then understand the customers better and can give better support, which they believe will lead to better business. That is why more companies are now coming into India.
The Indian AI market used to be mostly dependent on imports from Europe and US, is this still the case?
I would say that analytical instrumentation is not only imported from Europe and US, but also from China, Korea and Japan. Quite a few companies like Shimadzu, Jeol, Hitachi, or Horriba, and a few Japanese players are in this segment. Many American companies have started manufacturing analytical instruments in China. So companies such as Agilent Technologies (earlier Hewlett Packard), Thermo and Shimadzu have manufacturing plants in China.
In the highly competitive AI market, what are the critical success factors for the manufacturers?
Customers are looking for solutions to their problems. They have become conscious of quality and cost. Manufacturers have to take this into consideration while meeting the customers’ expectations as far as possible. This brings in a healthy competitiveness amongst the manufacturers, which will be of great benefit to customers, eventually.
Who are the major global players in this industry that are competing with local players and what has been their strategy?
As far as the pharma market is concerned, analytical instrument requirements are more in the area of chromatography, mass spectrometry, elementary spectroscopy and molecular spectroscopy. And there are several companies that serve in all or several of these segments. There are companies like Thermofisher Scientific, Perkin Elmer, Varian, Shimadzu, Agilent, Waters, Dionex, etc. Local players would include manufacturers such as Chemito, Netel, Nucon which is into local GC and Lab India, Elico and Electronic Corporation of India. They are looking to make instruments at a good price for the lower end of the market.
There are different segments where these instruments are used. So when a company is repositioning itself it has to consider many things. There are lower medium and high-end segments in any industry. And the requirements are higher in the lower end segment that is the lower end medium size companies. These companies may not necessarily focus in the area of automation and advanced software but that means that they have to have instruments at a reasonable and affordable price for these lower segments and medium segment companies. And that will address your requirement and that too at an affordable price.
Tell us about the top three players in this segment and what brings them to this position?
Considering revenues, Thermofisher Scientific is the world’s largest analytical instrumentation company at $10 billion, closely followed by ACG Worldwide with revenues of $9 billion. There are around 20 top companies with Thermo Fisher being at number one. Waters, Agilent and Shimadzu are a few that address biopharmaceuticals. The analytical industry as a whole is a huge industry in India. So in general if you see, that would be the top three or four companies that would serve more requirements of the analytical instruments industry. Thermofisher Scientific, Perkin Elmer, Shimadzu, etc cater to more number of deals in India.
What is the core competency of the Indian players?
Our core competency is people. It is the availability of good technical manpower for sales support applications, etc. These companies have also built up a good infrastructure and have robust management to ensure that their products are well marketed. That also includes after-sales service.
How is the Indian AI market different from that of China’s?
The Chinese AI market could be around five times of the Indian market in size. The main reason for this is the outsourced manufacturing in China which is several folds as compared to India. The foreign investments in China are also greater than those flowing into India. So basically some of the specialised things such as clinical studies are coming into India but the bulk production goes to China.
Basically the investments are dependent upon the market. Also the fact that China’s AI industry is pretty young as they have started investing in this market only from the mid- 1990s but in India it has been continuing since many years.
Because of the facilities available for perfection in China, my feeling is that China will become more of a manufacturing country and India will be on the higher value side of R&D, clinical chemistry, and software development for instrumentation. This is because China has an advantage where the cost of manufacturing is concerned as the Chinese government provides many infrastructure facilities at lower rates. But considering high technical manpower or the software related to the AI industry and the R&D manpower, India scores higher. Another advantage that India has is the proficiency in English language.
Will India overtake China?
Right now, I will not be able to comment on whether we will overtake China in terms of the growth in the AI business. But I think our growth is quite impressive and if it continues then definitely it will become a key market for the AI companies worldwide. Foreign companies are investing more because they know that India is a developing country and they will definitely get more business here. Therefore leading worldwide AI companies are looking at India as an opportunity destination.
LACK OF TRAINED PERSONNEL
What are the key issues pertaining to the domestic AI industry?
The biggest need of the hour in this industry is to get trained manpower. As the industry grows, companies are buying multiple sorts of analytical instruments, but there is a dearth of qualified and experienced analytical chemists in India. And therefore the talent available to operate AIs in laboratories has become a major concern. This can be resolved only if we have special institutes to train and develop analytical chemists in India. Some universities and colleges do have analytical chemistry departments but they cover more of the theory, practical knowledge is very low. It is important to build up these institutes with complete analytical instrumentation software.
What is the role of organisations like IAIA?
Our major objective is to bring high quality international analytical instrumentation trade shows, like Analytica Anacon to India. Through these trade shows, that focus on AI in India, we can help Indian customers, students, upcoming scientists and chemists by giving them an opportunity to get familiar with the latest in the AI market. These trade shows started in 1998. Our main objective behind conducting trade shows at different cities in the country is to make people, students aware of what is happening in the industry. Our first Analytica Anacon India was in Mumbai, then we moved to Bangalore last year and this year it was in Hyderabad. So this gives a complete understanding and exposure of the latest trends in the AI industry.
Basically IAIA is a non-profit making body, with many analytical instruments companies and their distributors as corporate members. The association brings together companies and promotes fellowship. This helps address problems that the industry faces in terms of regulations, duty rates, and other issues and to represent the same to the government in a combined way as an industry body.
Another important aspect of conducting trade shows is to share information on new customs duty rules and regulations amongst the members. We also have group discussions where we bring in experts, who are veterans and know the analytical industry regulations to share and discuss what will be the repercussions of the same.
It is our commitment to customers to have trade shows and also to bring high quality conferences and exhibitions for is intended for covering the latest talk in technologies in the analytical instrumentation.
Where do you envision AI market in 2020?
With a growth rate of 10 to 15 percent year on year, I think that the AI industry will grow into a $ 2 billion industry.