India must continue to nurture its component ecosystem: Sunil Vachani

In a country striving to become a global manufacturing hub, Voice&Data Telecom Person of the Year 2024 and the Founder and Chairman of Dixon Technologies Sunil Vachani, has emerged as a pivotal force. His company, once reliant on LED TVs, is now one of India’s leading homegrown EMS firms, expanding across mobile phones, routers, set-top boxes, and telecom hardware.

Through strategic diversification, partnerships with global majors, and a strong push for localisation, Vachani has helped transform India into a serious player in electronics manufacturing. In this conversation with Voice&Data Editor Shubhendu Parth, he reflects on Dixon’s journey, telecom manufacturing, and the road ahead.

Back in 2021, you had called that year the ‘Golden Moment’ for electronics manufacturing in India. How would you describe 2024 from the perspective of telecom equipment manufacturing?

I recall our last interaction, during which we discussed how both of us were quite optimistic about the times ahead and the potential for India to emerge as a global manufacturing hub. Much of that is now becoming a reality.

We have seen some remarkable numbers. From importing nearly everything to now having ICT and electronics as our third-largest export category, this transformation is remarkable. Around USD 110 billion worth of ICT demand is being met through domestic manufacturing, out of a USD 150 billion market. It is a significant milestone, but we cannot stop here. We must continue to build the component ecosystem, enhance design capabilities, and scale further to remain globally competitive.

So, in terms of defining 2024, should we call it the ‘Yahoo Moment’ of telecom manufacturing or a ‘Y2K moment’—a tipping point like what software saw in the late 90s?

If you recall, in the early days of the software sector, there was a sense that it would become significant for India. However, it had not yet scaled to that level until the Y2K phenomenon occurred. That was when we witnessed a sudden surge in demand and large-scale growth.

Indian champions emerged, and major companies such as Infosys, Wipro and several others went on to become globally recognised names. I believe a similar opportunity and potential exist in our industry right now. We are at a point where we may soon witness that kind of hockey-stick growth.

Just like Y2K led to exponential growth in IT, telecom hardware is poised for a similar trajectory. We have a large domestic market and a strong case for import substitution—especially in IT hardware, where imports touch USD 15 billion. However, we need to build a strong component ecosystem. India must position itself as the next global manufacturing hub. We must also realise that while exports are growing, the overall base remains relatively small. There is still a long way to go.

Dixon had built a strong foundation in consumer electronics manufacturing before entering the telecom space. At what point did you make this shift, and what led you to see telecom as a major growth area?

If I rewind about 20 years, nearly 90% of our group revenues came from a single product—LED televisions. We were very focused on one specific category and working with only a few customers. At some point, we realised that this was a risky strategy and took a conscious decision to diversify. We first entered the CFL lighting space, then expanded into the LED lighting sector, and later ventured into mobile phone manufacturing.

Could you specify the year?

I recall it was around 2008–09 when we brought in a private equity investor, Motilal Oswal. They came on board through a private equity investment, and that was when we started envisioning Dixon as a much larger player, jointly deciding to de-risk the business model.

Nine years later, we provided them with an exit through our initial public offering, which was oversubscribed by almost 125 times—one of the largest oversubscriptions at that time. It was heartening to witness the response from investors who believed in Dixon’s potential. More importantly, they believed in India’s potential to emerge as a major global manufacturer of telecom products.

So, how much has Dixon invested in building its telecom manufacturing capabilities?

Since 2008, Dixon has experienced significant growth and made substantial investments. One of our core beliefs is that scale is key to global competitiveness. I remember a time when factories were designed to cater to around 5% of the domestic market. That mindset no longer applies.

If you look at the scale of infrastructure we are building, the difference is enormous. When our first factory was established, it spanned just 10,000 square feet. Now, we are referring to a single facility located at one site that spans nearly one million square feet.

Dixon can produce 75 million phones annually, accounting for nearly 30% of India’s 250 million-unit mobile market, which includes both smartphones and feature phones.

To give you a sense of the numbers: we estimate the mobile phone market in India—including smartphones and feature phones—to be around 250 million units. Dixon currently has capacity for nearly 30% of that market, with facilities being built to produce approximately 75 million phones across various brands. With the rise of 5G adoption and digital services, this share is expected to grow. Telecom is now a significant contributor to revenue.

What kind of growth do you foresee over the next 3–5 years?

We have grown at a CAGR of 45% in the last five years. We are confident that this growth trajectory can be sustained over the next five years. As you are aware, India is projected to reach USD 30 billion in ICT exports this year, with USD 22 billion expected to come from mobile devices.

We believe mobile exports can touch USD 100 billion in five years. IT hardware and 5G broadband equipment are other strong growth areas. With FTAs in the pipeline, India can cater to high-demand markets. Similarly, the IT hardware segment holds immense promise, as India currently imports approximately USD 15 billion worth of IT hardware.

There is also great potential in broadband infrastructure. The demand for broadband at home is rising rapidly, and 5G Fixed Wireless Access (FWA) will play a crucial role in ensuring that broadband connectivity reaches every household across the country.

What are Dixon’s long-term ambitions and strategies in the broadband equipment segment?

We have a joint venture with the Bharti Group and Airtel. Many of the products that were earlier imported in the telecom sector are now being manufactured in India. We now want to focus on backward integration. We are increasingly sourcing a significant portion of the bill of materials locally. The aim is 50% value addition through localisation. We are engaging global partners to scale exports. India is now a highly competitive market, and telecom gear can be a significant export story.

Rising home broadband demand and the promise of 5G FWA will drive last-mile connectivity, unlocking the full potential of India’s broadband infrastructure.

Does the partnership with Bharti include enterprise infrastructure?

This partnership primarily focuses on Customer Premises Equipment (CPE), including ONTs and 5G FWA devices. The collaboration resulted from a call with Sunil Mittal, a close family friend. He wanted to concentrate on services and was looking for a partner to manage Bharti’s unit in Ludhiana that manufactured push-button telephones—one of their earliest facilities that Sunil was very attached to. We felt privileged to take it forward. The partnership has been successful, and we expect substantial revenue growth this year. We are confident about the potential of this product segment.

Are there plans to enter enterprise-grade telecom gear?

Yes. While CPE has been our initial focus, we also plan to enter the network equipment segment. We are evaluating investment opportunities to determine how we can strategically enter this space.

Dixon has also been working on component manufacturing, including display and camera modules. Could you elaborate on this and share what additional modules you plan to include?

We have experienced significant success in mobile phone manufacturing—both at the company and industry levels—supported by employment growth and increased sales following the implementation of the Production Linked Incentive (PLI) scheme. However, we recognise that this momentum must be sustainable. For that, India must invest in building a robust component ecosystem.

At Dixon, we recognise this need and are proactively investing in it. We are establishing our factory for display modules in Noida, in collaboration with HKC, a global leader in display technology. This facility is expected to be operational by October or November this year. We will start with mobile phone displays and eventually expand into displays for televisions and IT hardware such as laptops. This step alone could increase domestic value addition from the current 18% to around 25–26%. We are also planning to enter camera module production through a partnership that we hope to announce soon. This would further raise the value addition to around 37–40%.

The PLI scheme for components is a game-changer, and it will help build a strong and vibrant component ecosystem in India.

We consider this a substantial leap for both the company and the sector. Other countries, such as Vietnam, have also followed a similar trajectory—starting with assembly and eventually achieving significant value addition. We are also investing in mechanical components and encouraging our vendor partners to establish a local presence. We aim to reach 45% value addition soon.

You have previously used the Maruti analogy. Can you explain why you see it as relevant to electronics manufacturing?

I refer to Maruti as an example because it carries important lessons. Some still believe that India’s success in mobile manufacturing is superficial—that we are just assembling imported parts. But these things take time. When Maruti was first launched, people may have viewed it as a simple sub-assembly. However, over time, India’s auto component sector matured and now supplies to global brands, including Tesla in the United States, one of the most demanding markets.

That is the direction we see for the electronics component sector as well, where Indian companies will not only serve domestic demand but also export to the world’s most respected brands. The PLI scheme for components is a game-changer, and it will help build a strong and vibrant component ecosystem in India.

India has implemented strong policies under Atmanirbhar Bharat and the PLI scheme, with Dixon among the early beneficiaries. What more should the government do to help India truly emerge as a China-plus-one alternative?

The most important thing the government can do is instil confidence in investors. Investors need to hear that the government is committed to the Make in India programme, that it will honour the commitments already made, and that the momentum seen over the last ten years will only grow stronger.

If that assurance is clear and consistent, then entrepreneurs and industrialists will do their part—investing in scale, backward integration, design, and digital transformation.

In many ways, the government has already done its part. Now it is about reinforcing that confidence and continuity. The rest is up to us—to rise to the occasion and build global-scale capabilities.

What about the changing geopolitical situation, especially the strategic shift in the United States’ stand on sourcing from India? Do you have any concerns about the evolving trade and geopolitical dynamics?

No. We see this as a significant opportunity. Many countries are now moving towards bilateral trade agreements, rather than multilateral free trade frameworks. This opens up a vast set of possibilities. To put it in perspective, the US imports around USD 80 billion worth of IT hardware and approximately USD 60 billion worth of mobile phones annually.

If India can capture even a small share of that market—and I am confident we can once a Free Trade Agreement is in place—we may find ourselves with more demand than capacity. We may not have enough factories to fulfil the potential scale of opportunity that could come our way.

As someone instrumental in shaping the telecom equipment and hardware story, what would you highlight as Dixon’s key milestones and achievements in 2024?

Our most significant achievement is the scale of infrastructure and ecosystem we have been able to build. But more than that, what I find deeply satisfying is the belief that has taken root within our team—the belief that India can truly emerge as a global manufacturing hub. That mindset shift within Dixon, across all our people, is invaluable.

Another milestone I am proud of is that a homegrown Indian company has managed to build products that meet or exceed the expectations of the most demanding global customers. For a long time, many doubted whether Indian companies could achieve this.

Finally, what is your message for young entrepreneurs entering the telecom manufacturing sector?

Never give up. If you continue to give your best and remain determined, things eventually fall into place. I hope our story inspires a new generation of entrepreneurs to explore this sector. We need more MSMEs and start-ups to invest in the component ecosystem, even for basic components like PCBs. Entrepreneurs must believe in the India story—it is real and happening now.