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