Soaring High

The growth story of the Indian structured cabling industry continues to soar

northward. The overall structured cabling market has grown from Rs 827 crore in

FY 2006-07 to Rs 1,172.7 crore in FY 2007-08, registering a 41.8% y-o-y growth.

The market in India is growing at an exponential rate both vertically and

horizontally. It is registering one of the highest growth rates in the world.

Undoubtedly, all this augurs well for the structured cabling market in India.

The continuous growth year after year in the Indian market can be attributed to

newer avenues opening for structured cabling players, explosive growth of the

Indian economy, and the increased demand for bigger bandwidth for

bandwidth-hungry business requirements.

In the last five years, the Indian structured cabling market has experienced

a steady growth and has had an average growth of about 20% y-o-y. It is,

however, important to note that since the US economy is witnessing recession at

present, the growth of US-based multinational companies in India might get

affected, indirectly affecting the Indian market.

Though a 41.8% growth has been registered this year, there has been a hiccup

in the path of this growth story in terms of rising copper prices, as the

country is still a market for UTP solutions that require a lot of copper.

Raising plastic prices was another concern for the industry, thanks to the

increasing petroleum prices.

The growth in the structured cabling market has been phenomenal. From a 41%

y-o-y growth in FY 2005-2006 the industry recorded a 41.8% growth in FY 2007-08.

STP is the dominant technology abroad, especially in Europe. However, in India,

unshielded copper cabling still rules the roost, especially when it comes to

regular office networks. This has reflected on the overall market performance.

The international scenario has also been quite encouraging for the industry.

By 2013, the worldwide structured cabling systems market is expected to grow

from Rs 61.2 crore in 2008, at a compound annual growth rate of 13.7%, to Rs

116.4 crore by 2013. The largest market is expected to be the US. The growth in

the US market is expected to be fostered by the addition of new IP subnets to

the enterprise's existing core networks.

On a global basis, growth in fiber cabling is expected to surpass growth in

copper cabling in the next five years.

The Magic



In the Indian scenario, every structured cabling company has contributed to

the journey. Tyco Electronics' AMP NetConnect (referred here as Tyco) topped the

slot by achieving an estimated growth of Rs 299.52 crore in FY 2007-08, a 28%

growth from Rs 234 crore in FY 2006-07. Though this growth is less than that of

the last fiscal, the company's contribution is the single largest to the Rs

1,172.74 crore mark.

Much in sync with the overall market growth, which has witnessed a decline

this year, Tyco has seen a decline in its growth rate this year. It has

registered a 28% y-o-y growth in FY 2007-08 compared to a 42.7% y-o-y growth in

FY 2006-07. Systimax CommScope clocked revenues of Rs 221 crore in FY 2007-08,

registering an 18.2% growth rate.

D-Link, on the other hand, has clocked Rs 180 crore revenue in FY 2007-08

from Rs 146 crore in FY 2006-07, a 23.3% y-o-y growth. Molex has clocked Rs 98

crore in FY 2007-08, registering a 40% growth. ADC Krone has clocked Rs 52.4

crore in FY 2007-08 as compared to Rs 36 crore in FY 2006-07, a 45.6% y-o-y

growth.

A noticeable and interesting trend is that the companies in the middle order

continue to register higher growth rates than that of the top order ones. R&M (Reichle

& De-Massari) India has registered an impressive growth of 120% in FY 2007-08

over the previous fiscal. It clocked revenues of Rs 55 crore in FY 2007-08 as

against Rs 25 crore in FY 2006-07.

Nexans Cabling was not more than a single-digit company in terms of revenues

in crore. On similar lines, CDT Belden has grown tremendously, from revenues of

Rs 15 crore in FY 2006-07 to revenues of Rs 41 crore in FY 2007-08.

Interestingly, enterprises have realized that structured cabling solutions

maintain consistency and simplify troubleshooting. This realization explains why

the market has been on a growth trajectory in the last few years.

Structured cabling solutions installed with appropriate expertise and trained

personnel can have a warranty of 20-25 years. That's a very long life span

compared to some other backbone infrastructures. Some important verticals that

heavily rely on structured cabling for horizontal and LAN requirements include

IT/ITeS, BFSI, manufacturing, retail, government, and defense.

Industry Stalwarts



Tyco has been insurmountable in the last few years, and it seems the

company's growth story is not going to die down. The company's key deployments

are for major enterprises like Vodafone, Symantec (Veritas), Cognizant

Technology Solutions, and Siemens PLM Software (UGS-Pune). Tyco has also

deployed 1,200 servers for Vodafone, 1,000 for Symantec, and 900 for Cognizant

Technology, and 10 G data center solutions for Siemens PLM Software.

The Vodafone order included Cat 6 cabling, MRJ21, and MPO modular plug and

play solution, AMPTRAC intelligent infrastructure management, 10G shielded

systems, MPO fan-out cable assemblies, and consolidation point.

The second biggest key installation for Symantec included Cat 6 cabling

solution, MPO fan-out cable assemblies, and consolidation point. In the server

order, the third biggest was from Cognizant Technology for which Cat 6 cabling

systems, MPO solution on OM3 fiber, angled panel with colored jacks, AMPTRAC

intelligent infrastructure management, and open racks with new vertical cable

managers were deployed.

For Siemon PLM Software, Tyco installed 10G structured cabling solution for

data center using XG copper cabling, MPO fiber backbones with redundancy, and

Cat 6 structured cabling solution for data and voice.

To continue its growth in the coming years, and retain the leadership

position, Tyco intends to have more focus on its partner programs, and is

working toward enhancing the current ones. An important factor in this is to

increase its reach in smaller cities through new alliances with system

integrators, resellers, etc. In a bid to aggressively market itself in smaller

cities, the company has enhanced its geographical reach by adding offices in

Ahmadabad and Pune, and has forged newer alliances with system integrators in

other B&C class cities.

Systimax has retained its position in the top order this year as well,

clocking revenues of Rs 221 crore in FY 2007-08, an 18% increase over the last

fiscal that stood at Rs 187 crore, a 19.9% y-o-y growth.

The company has launched new solutions in 2008 including CommScope Enterprise

Solutions with 6A and Class EA standards. Its Systimax GigaSPEED X10D Solution

exceeds the latest channel performance requirements for Cat 6A cabling. Early

this year, CommScope completed the acquisition of Andrew Corporation, which, it

claims, further enhances CommScope's 'last mile' offering with its end-to-end

wireless solutions.

As CommScope aspires to be a global leader in structured cabling systems for

business enterprise applications, it continues to be backed by strong R&D and is

committed to developing its technical expertise and proprietary technology as

well as its global manufacturing capability.

D-Link has scaled up its operations with an impressive growth of 23.3% with

revenues for FY 2007-08 at Rs 180 crore. In the last fiscal, the growth rate was

32.7% at Rs 146 crore. Its key installations in FY 2007-08 have been for

Wockhardt, ICICI-Lombard, and Durgapur Steel Plant that required 1,000-5,000

nodes.

D-Link has been able to maintain its leadership position, thanks to its

unique strength-local manufacturing, providing complete solution for networking

from high-end routers, layer 3 switches, DLS routers, VoIP Solutions to the

entire range of information transportation systems, be it fiber medium, copper

for data, video and voice, or the wireless medium. These strengths also

facilitated this player to be an affordable brand for customers.

Molex has clocked revenues of Rs 98 in FY 2007-08, registering a growth of

40% over the last fiscal. In 2007, it clocked revenues of Rs 70 crore, which was

up 84.2% from the previous year. The first key order it bagged was from Tata

Motors, Uttarakhand for which a 1,200 outlet Cat 6 with over 40 km of fiber was

installed. A 20,000 outlet Cat 6 was deployed for HCL.

Another key order involving intelligent infrastructure management (IIM)

solution incorporating Cat 6 over 70 km of fiber and over 40,000 software ports

was bagged from Bhilai Steel Plant. It aspires to improve its market share in

India by securing and retaining its major clients in key vertical markets.

The middle order companies and new entrants seem to be quite exuberant and

excited about the growth prospects as they have registered phenomenal growth

rates. Switzerland-based Reichle & De-Massari (R&M) India following its strong

growth in the Indian market, the Swiss company opened an Indian liaison office

in Bangalore. It also opened a training center for partners and end users. R&M

India bagged plum orders from IBM, Standard Chartered Bank, and Tech Mahindra in

the fiscal.

TVS has been doing major projects including work on four major international

airports across India for the company. For the kind of phenomenal growth it

registered in the fiscal, no wonder the company aspires to occupy a comfortable

position in the top order in the Indian cabling industry. The company claims

that quality in structured cabling products and forty-six years of industry

experience in the field has facilitated the company in its smooth sailing in the

Indian market. On the research and development front, the company invests 10% of

its net sales to achieve its target of reaching the top slot.

ADC Krone has registered revenues of Rs 52.4 crore in FY 2007-08, a 45.6%

increase from its revenues in the last fiscal. In FY 2006-07, it clocked

revenues of Rs 36 crore from Rs 26 crore in FY 2005-06, registering a 38.5%

y-o-y growth rate. Due to rising copper prices, especially when UTP solutions

require a lot of copper, it has been a challenge for the company to maintain

prices in long-running projects.

In this fiscal, ADC Krone bagged some of its key orders from TCS, CTS

Kolkatta, and Intellinet Global. It deployed Cat 6 copper and fiber

connectivity, 10G over Ethernet, and TrueNet PLM to TCS, Siruseri, Kolkatta. For

CTS Kolkatta, it deployed copper and fiber connectivity solutions and

intelligent cabling. The other major order was from Intellinet Global for which

it installed copper and fiber connectivity solutions.

Panduit registered revenues of Rs 46 crore in FY 2007-08. Though the increase

in the copper price has been an issue, Panduit has grown 100% from the last

fiscal by closely working with its customers and partners to manage price

corrections. To achieve a robust growth in the next fiscal too, it plans to

invest in headcount expansion, infrastructure creation including customer

briefing centers, channel partners, key vertical segments like IT/ITES, BFSI,

telecom segments, data center solutions, and intelligent and building network

automation. It invests 10% of its global sales revenues in R&D for innovative

solutions and almost 40% of its global sales come from new solutions and

products.

Among the new entrants, a company that registered a stupendous growth rate is

Nexans Cabling. Within a short span of time, Nexans has been able to add many

reputed clients to its kitty in India. The long list includes Carrefour, Gurgaon;

Delhi Metro Rail Corporation, New Delhi; Allahabad Bank, Mumbai; Cambridge

Technologies, Chennai; Carevoyant Technologies, Chennai; Nutrine Confectionary,

Chennai; Spanish Embassy, New Delhi; Australian Broadcasting Corporation, New

Delhi; Bharat Petroleum, Mumbai; Municipal Corporation of Greater Mumbai (BMC);

Barco Electronics, Mumbai; BLB Publishers, Mumbai; Marvel Systems, Pune; Saint

Water Communications, Bangalore; Kotak Mahindra, Mumbai; Titan Industries,

Bangalore; and Airports Authority of India, Chennai.

The company is focused on offering complete solutions for any passive

networking requirements of enterprises. It not only offers products and

solutions but also supplementary support services like upgrading the knowledge

of integrators/installers, creating awareness on specific products/technologies

(passive networking) among end users, and offering design and consultancy

services. Nexans believes in offering the right product mix with a required

combination of Cat 6A, Cat 6, Cat 5e, fiber, etc, and the company also ensures

delivery at the right time.

Sterlite India has registered a growth of about 45.2% in FY 2007-08 over the

previous fiscal. It clocked revenues of Rs 45 crore in FY 2007-08 as against Rs

31 crore in FY 2006-07.

In 2008, Sterlite India claims to have expanded its capacity from

approximately 160,000 boxes (of Cat 5e and Cat 6 cables) per annum to about

300,000 boxes per annum in manufacturing, making it the largest manufacturing

capacity for LAN cables in India. The 45% growth was achieved by its strategic

focus last year on increasing OEM sales and leveraging on the strong presence in

the telecom segments. In India, Sterlite has a market share of about 18% through

direct and OEM sales. In FY 2008-09, it aims to achieve Rs 90 crore, a 100%

growth.

Dax Networks clocked revenues of Rs 11 crore in FY 2007-08 from Rs 10 crore

in the last fiscal, registering a 10% growth rate, a notch lower than the 11%

growth rate achieved in FY 2006-07. It is maintaining a moderate growth year

after year. Its key deployments in 2008 have been for ELCOT, Suzlon, Knswan,

Utharanjal SWAN, and GB Pant University. For Suzlon/Enarkonn, Dax designed fiber

cable as per the end-user application requirement to withstand high wind

velocity of 120 Kmph.

Another company that has made an impressive growth is CDT Belden, which has

registered a 173.3% growth over the last fiscal. It clocked revenues of Rs 41

crore in FY 2007-08 from Rs 15 crore in the last fiscal. It expects to achieve

an even higher growth rate in the ongoing fiscal, to clock Rs 115 crore in

revenues.

Looking Back



The increasing price of copper has been a major cause of concern this year.

It forced players to adjust their pricing. It was a tough task to keep up with

this volatile state of the copper market. To beat the pricing pressure and

secure profits, innovative manufacturing processes and investments in R&D are

the need of the hour. Customers as well as partners understand the issues

pertaining to this. Planned forecasting and close working with partners are

required to manage the price corrections.

The paucity of well-trained and qualified engineers who can do quality

installation is another major concern for the industry. This is especially

important since quality of installation has direct impact on bandwidth delivery.

Another challenge faced by the industry is that unscrupulous local

manufacturers are manufacturing poor quality copies, which cause losses for the

end-user in terms of safety of equipment and personnel.

High attrition rate, high labor costs, and gray markets are also plaguing the

industry. Profitability has indeed taken a beating due to the pricing pressure,

which was further worsened by the upward revision of copper pricing several

times during the year.

Yet another challenge has been short delivery times expected by most

customers. Customers are looking at Cat 6A for data centers, Cat 6 in horizontal

cabling and optical fiber backbones. While the Indian market is quite price

conscious, new protocols require stringent BER (bit error ratio) and the market

is looking at good quality products and value-added services, as people are

looking for quality. This adds to the pressure on the players to deliver in the

given environment.

Trends of the Day



We see two major trends in the international scenario that are slowly

becoming obvious in the Indian context as well. These include transmitting

higher data rate through copper infrastructure and using fiber. India is

witnessing deployment of latest technologies like Cat 6A, Cat 7, and fiber

optics along with intelligent infrastructure management (IIM) being the order of

the day for data centers. There is a lot of initiative with regard to green data

centers. The market potential for India is one of the best in the world and the

business is growing at a good pace.

Cat 6 Rules the Roost: India is still predominantly a market for UTP

solutions with about 95% of the market going for UTP at present, especially in

the horizontal cabling segment. No doubt, Cat 6 continues to dominate the

deployments across the verticals. While Cat 5E occupies 25% deployment and Cat

6A 2-3%, Cat 6 has dominated with a solid 70% deployment. So, undoubtedly, the

dominant cabling solution across all industry verticals is Cat 6, which is

almost ready to edge out the enhanced Cat 5 technology.

Cat 6A: 10 Gigabit Ethernet standard, Cat 6A market is picking up because of

high bandwidth requirements. Its niche market areas are data centers and places

where high-data transmission is required with mission-critical needs.

While its predecessor, Cat 6, is capable of carrying 1-250 MHz for high-end

applications, Cat 6A is capable of carrying bandwidth ranging from 1-500 Mhz. So

it is the cabling solution of choice in data centers and in backbone cabling.

Currently, its market share is about 2-5%.

Cat 6A systems seem to have delivered their promise. Apart from supporting

bandwidth-intensive application, these systems have been successfully deployed

for 10G applications where distance is not a constraint. Though there has been a

widespread adaptation of 10 Gigabit over UTP following its ratification by the

IEEE; according to industry sources, the STP version of Cat 6A is also finding

better market since it is better equipped to handle ANEXT, RFI, and EMI noise.

PLM: In the coming years, it is possible that new standards in data center

cabling will include PLM. Knowledge centers, BPOs with a high number of MACs,

and software development centers with data centric environments require

technologies that allow IT managers to track MACs in real time while offering

security, better asset management, and RoI. It helps in reducing the cost of

network ownership as it is capable of solving many issues including unexpected

downtime, redundant ports, inaccurate records, etc. PLM is slowly getting wider

acceptance though its market share might not be huge.

With the number of large networks increasing along with the increased demand

for very high bandwidth for advanced applications like videoconferencing,

high-definition graphics, IP telephony, IPTV, multimedia networks, and

e-commerce with both voice and data, the Indian structured cabling market is

witnessing a huge demand for intelligent cabling.

Fiber Optics: The fiber optics medium has been in use for a long time and it

has certain abilities that are not there in the copper medium. The limitation

with the copper medium is that it does not provide high bandwidth over long

distances. In campuses, between buildings and across floors of buildings, and in

data centers, the better EMI properties of fiber are preferred. Fiber optics has

done well in 2007 and will continue to exist as a complementary technology to

copper cables.

Increased use of fiber connectivity-particularly factory terminated plug and

play fiber solutions-can be attributed primarily to data center applications

where density is a critical requirement. It is interesting to note that while

fiber cabling is only a little more expensive than the copper cabling system,

the cost of active components for fiber networks makes the entire network

extremely expensive. The fiber optics market share is an estimated 5% at

present.

UTP Vs STP



Undoubtedly, UTP was more in demand and will be the preferred choice in

India. But with new technologies like industrial Ethernet making its way into

the Indian market, the shielded share is bound to increase. STP solutions are

used in shipbuilding, airports, railways, defense establishments, etc. With the

advent of 10 Gigabit, clients are considering shielded solutions much more

seriously as they offer a number of advantages over UTP.

The market share of UTP solutions is about 80% of the total copper needs.

Thankfully, India is not facing as much interference as a few European countries

are due to availability of spacious commercial spaces.

Vertical Growth



As the Indian structured cabling market continues to grow, SOHO, class B and

C cities, Internet-ready housing complexes, and residential cabling are few new

growth point of the market. There has been the implementation of video walls

with Hi-Fi music integrated with security systems. The connectivity for this

could run on a 4-pair cable. The cabling market in data centers is already

seeing a rapid growth, which is currently 40% annually.

One of the key areas of business will be in data centers with the number of

data centers used by enterprises on a rise. The other area is intelligent

cabling. With the number of large networks increasing, there is a need for

intelligent cabling for the proper management of networks.

While the IT industry is experiencing a steady growth, business verticals

such as retail, education, government, and public sector undertakings are the

new areas where structured cabling will see new opportunities. There are scores

of new multinational entrants in retail that hold huge potential for the

structured cabling business. All these new opportunities will mean increased

growth rate compared to last year.

What Lies Ahead



It is expected that India and China will be the two markets in the world to

experience exponential growth rates in the global structured cabling market.

With increased investment in infrastructure, and being a leader in software

development, India would be a strong growth market.

With booming businesses, particularly in BPOs, financial institutions, IT and

ICT firms, the structured cabling market is enjoying a good time. On the other

hand, SMEs and smaller corporates are also adapting to the trend and

implementing structured cables in their offices for the benefits they offer to

enhance business performance.

The structured cabling market will witness a sustained growth in the coming

years too as in the past year. According to industry sources, the Indian

structured cabling market is expected to be worth Rs 1,380 crore by 2010.

The industry feels that though India is still an attractive market, suppliers

need to provide the technology and support in a proactive manner to have

continued growth in the future.

The industry has to carefully look and monitor the huge unorganized sector

that exists in this market. It should be able to deliver consistently with

performance and provide the end-user with technologically advanced inputs. This

would help monitor the growth and help leading players to address the issues

faced by the end-user.

Kannan K



kannan@cybermedia.co.in