Industry Consortiums to Invigorate Manufacturing

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Industry Consortiums to Invigorate Manufacturing

Prof. Bhagwati Prakash

Need of ‘Made’ by India Products

and Brands India has less then 3 percent share in the world’s nominal GDP, based upon exchange rate and mere 2.1%share in the world manufacturing, inspite of a 17.8 percent share in the world population. China too hadonly 2.4% share in world manufacturing in 1981. But, today it has a 23 percent share in the worldmanufacturing and has thereby pushed the US to second position with 17.2% share in worldmanufacturing. Moreover, of late, in the post reforms period India has even been experiencingdeindustrialization, on account of liberal imports and growing foreign direct investments (FDI). Most ofthe foreign MNCs, which have brought FDI into India have mostly been bringing their components orcompletely knocked down (CKD) kits from outside and are merely assembling their products into thecountry. So, the real manufacturing, including manufacturing of the original equipments has been goingdown, ever since the onset of the economic reforms in 1990s. Besides, the Indian brands and indigenouslymanufactured products are also fast losing their market share, and many of these are turning to be extinct.They are being replaced by the Chinese or other foreign brands. More than two-thirds of themanufacturing in most of the sectors in India has gone under foreign ownership and control in last 24years of economic reforms which was largely under Indian ownership and control, before the reforms.Even, many of the Indian brands too have Chinese or other imported components or even sometimes theIndian brands too are assembled outside India, mostly in China, and merely bear the tags of Indianbrands. Besides, on account of dumping of cheap products by China, Industry and industrial cluster aftercluster are turning sick and facing closures at a large scale. The worse target of cheap dumping are thetiny and small scale industries, ranging from toys, cycle and cycle parts glass products, leather productsfurniture to electricals and so on. Therefore, there is an urgent need of pursuing the strategy to ourmanufacturing technology and promote ‘Made by India’ products and brands. In several major sectors ofeconomy. India has only a miniscule share in manufacturing. For example, in world ship-building, shareof India is just 0.01%. While South Korea, which has 5% of our area and 5% population has 26% share inworld ship-building, inspite of the fact that India is 4th largest steel producer in the world with a largepool of skilled manpower. To the contrary, wherever the industry is provided an enabling environment bythe government, it had done well. For instance, in case of pharma sector, by virtue of an enabling patentsregime provided since 1970 onwards till 2005, the Indian pharmaceuticals sector has become capable tocontribute almost 10% by volume, in the world pharma manufacturing and now provides affordable

medicines world over. Thereby, India is also called the pharmacy of the world. But, now this sector is alsoon rapid decline on account of changes made in the patent laws of India, since 2005 to comply with theagreement on TRIPS of the World Trade Organization (WTO). So, today, India can grow only ifindigenous industry flourishes. This requires to promote domestically owned enterprises. For this thedomestically owned enterprises have to enhance their technology, quality and bring economy in theiroperations. For launching more aand more by India Product And Brands in pace of for foreigencompanies.

Relevence of Industry Consortia

For this India needs to adopt consortium approach to move fast on the path to upgrade and developtechnologies across the manufacturing value chains in different sectors, needed to make Indianmanufacturing and services economical and competitive world over and attain an edge over the foreignproducts and services. The industry consortiums approach, already having firm footing in Euro-Americanand other industrialized countries can only place Indian manufacturing in the front rank, worldwide byvirtue of their time tested capability to develop affordable technologies at the least cost. The majorindustry clusters if transformed into consortiums and consortium development in stepped up across thecountry, horizontally as well as vertically for most of the sectors this can only help the country to overtakeother the industrialized countries including China.

Industrial Research is a high cost prerogative and most of the industrialized countries have promotedindustry-level pre-competitive cooperative researches by sharing the cost of developing latest state of theart technologies for a host of industries with liberal financial support from government via 3 cooperativeroutes. The 3 common cooperatives routes have been: (i) Initiating formation of industry specificconsortia for technical and market research and liberal state funding of these consortia. (ii) Facilitatingformation of Technology Development Cooperative Association and state funding of these. (iii)Facilitating, recognizing and supporting Technology Development Cooperation Agreements among 2 ormore companies as well as by industry level agreements. The United States has enacted the CooperativeResearch Act, as early as in 1984 to develop Industry Consortiums for collective industry level efforts inR&D and market researches with government support. Even the Airbus corporation was initiallydeveloped as an industry consortium of aerospace component manufacturers of Europe to launch a high-end civilian aircraft in competition with the Boeing of the U.S. This Airbus Consortium i.e. “associationof Aerospace component manufacturers” from across the Europe, then developed and launched high-endcivilian aircrafts under the brand of Airbus Industries consortium. The same Airbus consortium has been

converted into Airbus Corporation much later. All the consortium members, who were aerospacecomponent makers became shareholder into the corporation made from consortium.In US, Europe, Japan, South Korea, Taiwan etc. there are several hundred industry consortia, both verticalas well as horizontal, which are liberally supported by their respective governments for pre-competitiveresearch, technology development, market research and brand promotion. In US, there are more than1200 consortia for the industries ranging from Photonics, Automobiles, Telecom, IT, Pharma, Energy,Agrochemicals, Biotechnology and so on. Most of which are funded by the government from 70% to90%. The rest is contributed by the individual corporate units, member of the industry consortiumconcerned. Most of the advanced Researches on each industry segment are being conducted by theindustry consortium concerned. Through such researches being conducted by the Industry consortia, theU.S. and other countries are powering the development of advanced technology for having an edge overother countries. India can take an edge over the whole world in technology development throughconsortium approach.


A consortium is an association of two or more individuals,firms companies, associations, universities,organizations or governments (or any combination of these entities) with the objective of participating ina common activity or pooling their resources for achieving a common goal, especially for group ofindustrial enterprises either for developing a new technology or cultivate a market or similar otherobjective. Generally an industry consortium engages in pre-competitive research at industry level. Butthere may be other types of consortia also. Mostly, in a majority of countries consortium is a co-operativeresearch effort among business firms, governments and universities to help the participating companies orfirms to attain and maintain leadership or gain a competitive edge over their international competitors in aparticular industry



:Mostly, the industrialised countries also emphasize over various advantages of consortia such asminimizing the cost of developing new technologies by reducing unnecessary duplication of researchefforts, sharing the risks of undertaking R&D, getting immediate access to new technologies, newmarkets and cheap production sources, and making otherwise big and complex research projects possible.

Consortia in US :

In the United States, technology consortia, mostly horizontal, have rapidly grown after 1984, when theCongress implemented the National Cooperative Research Act (NCRA). This law allows American firmsin the same industry to establish consortia that conduct precompetitive R&D. In the United States,however, the formation of industry specific R&D consortia was earlier hindered by antitrust laws thatpenalized cooperation among competitors until the US Congress passed the National CooperativeResearch Act of 1984 (NCRA). In 1993 the NCRA was amended to include cooperative production andredesignated the National Cooperative Research and Production Act of 1993 (NCRPA). These legislativeacts reflected a new technology policy to facilitate cooperative research with sharing costs aimed atreducing risk for individual companies. Governments often liberally extend financial grants for thecommercialization of new technologies crucial for any industry to grow and compete globally.

Research and development consortia in the US are required by the NCRPA to register with the U.S.Department of Justice, which recorded more than 600 new consortia from 1985 to 1996. While theNCRPA does not provide exemption from antitrust laws, it limits the damages that may be assessed if anantitrust violation occurs. Where antitrust laws provide for triple damages to be assessed, the NCRPAlimits liability to single damages. In addition, any alleged antitrust violations would be judged under arule of reason standard, rather than assuming they were illegal per se. In the years since NCRA waspassed, no antitrust proceedings have been brought against registered consortia

.Under the NCRA, firms within an industry may form consortia to conduct “precompetitive” research.Precompetitive research is research that is considered generic to the development of multiple products ofbasic and primary value to all participants. By forming R&D consortia, manufacturing firms can avoidduplicating basic research tasks and share the results more cost effectively. As a result they are able tocompete more effectively in the global marketplace.

After the implementation of the NCRA, technology consortia have increased substantially in the UnitedStates. There are now about 350 technology consortia involving about 1500 American and 50 foreignfirms. As indicated above, they predominate in high-tech industries. The Microelectronics and ComputerTechnology Corporation (MCC), the Semiconductor Research Corporation (SRC) and the SoftwareProductivity Consortium (SPC) are examples of co-operative research ventures that involve companies insimilar markets.

Common Features of Industry or Technology Consortia in the US

:• The Primary goal of most consortia precompetitive research is to conduct on an ongoing basis,and the secondary goal is product development. The government gives liberal grant to most of theconsortia.

• The funding for technology development consortia is mostly provided by government-industryshared programs. Less than 25% consortia are funded solely by the private sector i.e. memberunits of the industry.

Technology Development Cooperative Association

An alternative:

Such associations can be created for a variety of sectors with pre-defined contribution and pattern of sharing the benefits. Or the benefits ofco developed technology can be accessed, availed and commercially exploited by all equitably.

Cooperative Research and Development Agreements (CRADAs)

Another Alternative:

Suchagreements can be worked out between two or more companies, research laboratories, universities,technology institutes or any combination of these.A CRADA is an agreement inter se one or morecompanies, institutes, laboratories and or any of the one or more parties under which the can sharetechnocrats, other personnel, services, facilities, equipment, or other resources toward the conduct ofspecified research or development efforts. Such research must be consistent with the mission of the one ormore parties. The CRADA partners contribute any one variable or all of the above and funding to theproject to share the benefits in predefined ratios.CRADAs involve collaborative research which mayresult in the sustained growth and development of inventions. Mostly a CARDA is signed with either agovernment or a governmental agency

.Examples :

Some examples out of several hundred consortia actively engaged in research in industrialized countriesare being briefly described hereunder:

1 The Airbus example :

Airbus Industries was formed in 1970 as a consortium of aerospacecomponent manufacturers to manufacture the Airbus range of aircraft, with the retention of productionand engineering assets by the partner companies and initially making the Airbus Industries consortium asa sales and marketing outfit. This arrangement some initial inefficiencies and inherent conflicts of interestto among the four partner companies as; they were both shareholders of, and subcontractors to, theconsortium to make aircrafts jointly. The companies collaborated on development of the Airbus range of
aircrafts, but also had intent to guard the financial details of their own production activities to maximizethe transfer prices of their sub-assemblies. But all these initial problems were overcome with sharedvision and ambitions of participating companies and governments. After successfully running thisconsortium, it was consolidated as European Aerospace and Defence Space company. As consortium theAirbus Industries launched its first 300 seater A300 in 1972. It was converted into a joint stock companyin 2001. It has facilities at 16 places across four countries viz France, Germany, Spain and UK. It now has63,000 employees across these 4 countries and a turnover of $ 70 billion (Rs. 5 lac crores)

.2. The European Photonics Industry Consortium (EPIC)

: The EPIC is a good example of not-for-profit association with headquarters in Paris, France. EPIC serves the photonics industry communitythrough a regular series of workshops, market studies and partnering. EPIC focuses its actions on LEDsand OLEDs for lighting, optical fiber telecommunications,laser manufacturing, sensors, photovoltaics andphotonics for life sciences. EPIC coordinates its activities internationally through its membership in theInternational Optoelectronics Association.

EPIC was originally founded in 2003 by five companies: Aixtron, CDT, Osram, Philips, and Sagem.Today, more than 180 companies, research organizations, universities, and other industry stakeholders aremembers of the consortium. The membership works together to execute the mission by proposing andimplementing influential initiatives of significant impact on the industrial landscape. The strength ofEPIC comes from its capacity to represent the European photonics industry with a clear and articulatevoice. Industry associations such as EPIC have a key role to play in identifying market opportunities andin helping their members to work together to capture the opportunity. The European photonics industry ismade up of a broad community of highly innovative small companies. When economic pressures createturbulent markets and make planning difficult, an association can help companies to create partnershipsand find a better way through the crisis by finding new revenue streams. Key initiatives: The EPIC has following breakthroughs to its credit.

(i) Photonics21 i.e. European technology platform: In 2004 EPIC proposed the creation of aEuropean Technology Platform in photonics to the European Commission. EPIC’s membersworked in partnership with other European organizations to develop a vision of photonics as awell defined science leading to disruptive breakthroughs in telecommunications, life sciences,manufacturing, lighting and displays, sensors and education. The European Commission acceptedthis vision and established the Photonics-21 Platform at the end of 2005.

(ii) Merging Optics and Nanotechnologies (The MONA Roadmap)

: During 2005-2007 EPIC andits members developed and participated in the MONA project to create a study to identifysynergies between photonics and nanotechnologies, and to identify opportunities for industry inthese areas. The goal of this project is a roadmap leading from the R&D environment tomastering nano-electronics and nano-photonics technologies at an industrial scale. This roadmaphas been completed and is available to the public.

(iii) Advanced Components Cooperative for Optoelectronics Research and Development(ACCORD):

Beginning in 2007, EPIC and its members initiated the ACCORD project whichpurchases prototype photonics components and systems from SMEs and awards them touniversity R&D groups based on competitive proposals. ACCORD is inspired by PTAP,(Photonics Technology Access Program), a similar exchange initiative developed by the OIDA,also a member of the IOA.

iv) Leadership in Fiber Laser Technologies (LIFT) :

EPIC organised and led a consortium of 20companies, SMEs, and research labs in a proposal to the European Commission for a €17 millionproject to develop new technologies for higher brilliance fiber lasers. The project has beenaccepted and started in 2009. EPIC also initiated and manages the Linked-In site for Fiber Lasers.

(v)Workshops on key photonics opportunities :

EPIC organises workshops and symposia on keytopics and opportunities identified by its membership. Proceedings and synthesis of thesemeetings are available to the public. Some examples are presented for workshops developed incollaboration with the SPIE.

2. CAR Industrial Consortium:

The CAR Industrial Consortium has been in operation since 1999, andhas since then succeeded to see the participation of 25 automotive original equipment manufacturers(OEMs) and suppliers. Over the years, it has grown with an initial membership of 10-12 companies. Thefollowing members in the CAR Industrial Consortium are global giants from across the globe. Some ofthem are”• Bosch • GM • Renault • Chrysler • Honda • Tenneco • Cummins• Lubrizol • Transportation Research Center • FordThus, research and development consortia can provide member companies with many benefits and takethe country to ever newer heights. They are formed to share expenses and resources and to pool talent andexpertise. Consortia that are formed in the United States to compete globally are eligible for government funding. The most common type of consortia is horizontal, consisting of competing firms within anindustry. Vertical consortia include firms ranging from materials suppliers to finished productmanufacturers. India can also undertake this initiative in all the sectors.