Hrishikesh S Deshpande
Executive Summary
Indian manufacturing stands at a critical inflection point where intellectual property (IP) creation, not cost arbitrage, will determine competitive advantage in the global economy. While India has achieved remarkable growth in patent applications—increasing 180% from 24,326 in 2020 to 68,176 in 2024—
The manufacturing sector remains trapped in low-margin, technology-dependent business models that prioritize service delivery over innovation. This fundamental gap between IP creation and manufacturing execution represents both the greatest challenge and opportunity for Indian assembly lines in the next decade.
India’s IP Creation Gap: A comprehensive analysis showing the contrast between growing patent applications, stagnant manufacturing GDP share, and the revenue disparity between high-margin IP royalties versus low-margin contract manufacturing
Diagnosis: The Service Provider Trap
The Stagnation Paradox
Despite India’s emergence as a global manufacturing destination, the sector’s contribution to GDP remains persistently stagnant at 14-15%, while services dominate at 56-57% of the economy. This disparity reveals a deeper structural issue: Indian companies excel as service providers but systematically underinvest in intellectual property creation that drives brand value and premium pricing.
Manufacturing vs. Innovation Disconnect
The numbers paint a stark picture of missed opportunities. India’s IP royalty revenue reaches only $5.2 billion annually, while IT services exports generate $199.4 billion—a 38-fold difference. More critically, IP royalty margins average 75%, compared to manufacturing exports at 18% and contract manufacturing at merely 8%. This data underscores how Indian manufacturers remain locked in cost-plus pricing models that prioritize volume over value creation.
The White-Label Reality
Indian manufacturing companies predominantly operate as white-label producers for global brands, essentially functioning as sophisticated job shops rather than innovation centers. These arrangements trap companies in predictable revenue streams with minimal differentiation, where pricing power remains with IP owners rather than manufacturers. Contract manufacturing margins of 8% reflect this commodity positioning, where companies compete primarily on labor costs rather than technological capabilities.
Patent Filing vs. Patent Commercialization Gap
While India ranks seventh globally in robot installations and achieved 15.7% growth in patent applications in 2023, the majority of these patents remain commercialized by foreign entities rather than domestic manufacturers. This suggests that Indian companies are developing technology but failing to capture its economic value through systematic IP commercialization strategies.
Impact: The Competitive Disadvantage Multiplier
Assembly Line Productivity Stagnation
Indian assembly lines face a fundamental competitiveness challenge when compared to China, which accounts for 35% of global manufacturing output versus India’s less than 3%. This gap isn’t merely about scale—it reflects China’s strategic focus on IP ownership and technology commercialization. Chinese companies invest over ten times more in technology licensing than Indian firms, creating sustainable competitive advantages that transcend labor cost arbitrage.
Margin Erosion Under Global Pressure
Manufacturing wages in urban China now exceed $9 per hour compared to India’s $3 per hour, yet Chinese manufacturers maintain pricing power through IP ownership and automation capabilities. Indian manufacturers, lacking proprietary technology platforms, cannot justify similar wage increases without losing cost competitiveness—creating an unsustainable long-term position.
Supply Chain Vulnerability
Contract manufacturing models expose Indian companies to severe supply chain risks, as evidenced during COVID-19 disruptions. Companies without IP ownership cannot pivot production strategies or develop alternative revenue streams, making them vulnerable to global economic shocks and changing customer priorities.
Brand Value Stagnation
The absence of proprietary IP limits Indian manufacturers’ ability to develop global brands. Unlike Apple, which protects its platform through 5,000+ patents for products like Vision Pro, Indian companies remain dependent on clients’ IP, preventing autonomous brand development and premium positioning.
Workforce Development Limitations
Service-oriented business models limit skill development in advanced manufacturing technologies. While India produces 1.5 million engineering graduates annually, the focus remains on executing others’ designs rather than creating proprietary solutions, perpetuating the innovation deficit.
Prescription: Automation as the IP Creation Engine
Automation Investment Trends
India’s industrial automation market is projected to grow from $16.2 billion in 2024 to $37.42 billion by 2030, representing a 14.26% CAGR. More importantly, automation-related investments saw 38% year-over-year growth in 2025, with the government facilitating over ₹3.2 lakh crore in approved industrial projects integrating automation technologies.
IP Generation Through Process Innovation
Manufacturing automation creates multiple IP opportunities that Indian companies must systematically capture:
- Process Patents: Automated assembly processes, quality control algorithms, and production optimization techniques can be patented and licensed globally. Companies like BHEL have demonstrated this approach, filing over 2,228 patents focused on energy-efficient manufacturing solutions.
- Data Analytics IP: Smart factory implementations generate proprietary algorithms for predictive maintenance, quality optimization, and supply chain coordination. These data-driven innovations represent high-value IP assets with global licensing potential.
- Robotics Integration IP: Custom automation solutions for specific manufacturing challenges create patentable technologies. TVS Motor Company’s implementation of AI-backed automated inspection systems demonstrates how operational improvements translate into IP assets.
- Software-Hardware Integration: Industry 4.0 implementations create proprietary control systems and human-machine interfaces that can be commercialized across multiple manufacturing segments.
Cost-Efficiency Through Automation
Strategic automation investments deliver measurable productivity improvements while generating IP assets. Hero MotoCorp’s cylinder kit line automation increased production from 8 to 14 kits per minute while reducing manpower requirements and creating patentable process innovations. Similarly, Indo MIM achieved 30% throughput increases and 45% productivity improvements through automated MIM processes that generated proprietary manufacturing technologies.
Quality Enhancement IP
Automation-driven quality improvements create competitive moats through process standardization and defect reduction technologies. Faiveley Transport’s brake panel automation doubled capacity while creating proprietary testing and assembly processes that differentiate their manufacturing capabilities.
To know more, connect with us at sales@shdesigns.in
Execution: Strategic IP Development Roadmap
Phase 1: Foundation Building (Months 1-6)
IP Audit and Strategy Development
- Conduct comprehensive audits of existing manufacturing processes to identify patentable innovations
- Establish dedicated IP management teams with clear commercialization mandates
- Develop partnerships with research institutions for joint IP creation programs
- Implement systematic documentation processes for all process improvements and innovations
Automation Planning
- Identify high-impact automation opportunities that generate both operational improvements and IP potential
- Prioritize investments in data analytics platforms and smart manufacturing systems
- Establish pilot programs for Industry 4.0 implementations with built-in IP capture protocols
- Create cross-functional teams combining manufacturing, engineering, and legal expertise
Phase 2: Implementation and Capture (Months 6-18)
Smart Manufacturing Deployment
- Implement IoT-enabled production systems with proprietary data collection and analysis capabilities
- Deploy automated quality control systems that generate patentable inspection and correction technologies
- Develop custom robotics integration solutions for specific manufacturing challenges
- Create proprietary software platforms for production planning and optimization
IP Portfolio Development
- File patents for process innovations, automation technologies, and data analytics algorithms
- Develop trade secret protection protocols for proprietary manufacturing techniques
- Establish licensing frameworks for commercializing IP assets across multiple markets
- Create IP valuation methodologies to track asset development and commercialization potential
Phase 3: Commercialization and Scaling (Months 18-36)
Revenue Diversification
- Launch IP licensing programs targeting domestic and international manufacturers
- Develop technology transfer partnerships with emerging market manufacturers
- Create subscription-based software platforms for manufacturing optimization
- Establish joint ventures focused on IP-driven manufacturing solutions
Brand Development
- Transition from contract manufacturing to original brand manufacturing for select product categories
- Develop technology-enabled service offerings that leverage proprietary IP
- Create consulting practices around manufacturing automation and IP commercialization
- Establish thought leadership positions in manufacturing technology innovation
Long-term Sustainability (Years 3-5)
Platform Ecosystem Creation
- Develop comprehensive manufacturing platforms that integrate hardware, software, and services
- Create marketplace models connecting IP owners with manufacturing capabilities
- Establish venture capital arms focused on manufacturing technology startups
- Build global partnerships for IP cross-licensing and technology exchange
Partnership: S&H DESIGNS as Transformation Catalyst
Core Competency Alignment
S&H DESIGNS’ three-decade expertise in material handling solutions and special purpose machines positions the company as an ideal catalyst for India’s IP-driven manufacturing transformation. The company’s philosophy of “Smart & Superior Designs” directly addresses the innovation gap by converting engineering requirements into proprietary system solutions.
Automation Expertise Portfolio
S&H DESIGNS’ comprehensive offerings across material handling solutions, special purpose machines, and product design create multiple IP development opportunities:
- Handling Solutions: With proprietary gripper designs and three decades of automotive component handling data, S&H DESIGNS possesses unique IP assets that can be systematically commercialized across global manufacturing operations.
- Manufacturing Process IP: The company’s experience with complex calculations, mechanisms, and PLM systems creates proprietary technologies suitable for licensing to manufacturers seeking advanced automation capabilities.
- Custom Engineering Solutions: S&H DESIGNS’ ability to understand customer requirements and deliver holistic solutions with value addition represents a proven methodology for converting operational challenges into IP assets.
Strategic Partnership Framework
IP Development Services
- Conduct manufacturing process audits to identify patentable innovations within client operations
- Provide systematic documentation and patent filing services for process improvements
- Develop proprietary automation solutions that create licensable IP assets for clients
- Establish joint development programs combining S&H DESIGNS’ engineering expertise with client manufacturing knowledge
Technology Transfer Programs
- Create licensing frameworks for S&H DESIGNS’ proprietary material handling and automation technologies
- Develop training programs that transfer IP creation methodologies to client engineering teams
- Establish innovation labs focused on developing next-generation manufacturing technologies
- Provide consulting services for transitioning from service-based to IP-based business models
Revenue Optimization Solutions
- Help manufacturers transition from cost-plus to value-based pricing through IP ownership
- Develop royalty revenue models that complement traditional manufacturing income streams
- Create joint ventures focused on commercializing manufacturing innovations across global markets
- Establish technology platforms that generate recurring revenue through IP licensing
Collaborative Innovation Model
S&H DESIGNS can establish innovation partnerships where manufacturing process improvements generate shared IP assets. This approach transforms traditional vendor-client relationships into strategic partnerships focused on creating and commercializing proprietary technologies. The company’s experience with over 360 unique systems and global OEM relationships provides the foundation for systematic IP development and commercialization.
Global Expansion Through IP
S&H DESIGNS’ aggressive expansion plans align perfectly with IP-driven growth strategies. Rather than competing solely on cost, the company can leverage proprietary technologies to establish premium positioning in global markets. This approach supports the company’s goal of 3X growth through collaborations by creating sustainable competitive advantages that transcend traditional cost arbitrage.
Conclusion
The transformation from service provider to IP creator represents Indian manufacturing’s most critical strategic imperative.
Companies that successfully navigate this transition will establish sustainable competitive moats that transcend cost arbitrage, while those that remain trapped in contract manufacturing models will face continued margin pressure and competitive vulnerability.
S&H DESIGNS’ engineering expertise and systematic approach to converting customer requirements into proprietary solutions exemplifies the pathway forward—where every manufacturing challenge becomes an opportunity for IP creation and long-term value generation.
The data is unambiguous: IP ownership generates 75% margins compared to contract manufacturing’s 8%. The question for Indian manufacturers is not whether to pursue IP creation, but how quickly they can transform their operational excellence into proprietary competitive advantages that command premium pricing in global markets.
