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The Domestic Push

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VoicenData Bureau
New Update

In the last three years, the telecom boom in India has infused fresh blood

into electronic manufacturing services (EMS). But if we look at 2007-08 in

perspective, EMS did not witness any major investment. Rather, the existing

players focused on improving their manufacturing efficiencies and ramping up

peak production volumes. While some analysts predict that India must sustain its

momentum by further liberalizing the duty structures to retain its competitive

edge, the biggest advantage that India's telecom equipment manufacturers are

tapping is the talented labor pool and better infrastructure as compared to

other developing Asian geographies.

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Vast Potential



As we look at the telecom manufacturing landscape, Nokia's success story is

often seen as proof of how things work in this part of the world. But Nokia

turned out to be a roaring success by virtue of its ecosystem, whereby it was

able to create an integrated manufacturing expertise in India. As per a recent

report by Goldman Sachs, the Indian economy will grow at about 8% until 2020,

becoming the second largest economy in the world by 2050, next only to China.

Similarly, a recent report by Gartner says that electronic equipment production

in India is bound to reach $32 bn by 2011 compared to $14 bn in 2006, signifying

a CAGR of 18%.

Gartner also says that semiconductor consumption in India will more than

double from $2.8 bn as in 2006 to $7.2 bn by 2011. The growing domestic demand

for electronics equipment coupled with other favorable factors like low labor

costs, large talent pool, and various policy moves by the Indian government like

fiscal incentives for local hi-tech manufacturing are making India an attractive

electronics manufacturing investment destination.

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According to industry sources, in the last two and half years alone, India

has seen commitments of over $17 bn investments in the IT and telecom sector. In

telecom manufacturing alone there has been a commitment of more than $1.5 bn. As

per estimates by the Communication and IT Ministry, India can expect fresh

commitments of about $2 bn in the next year. This is a serious affirmation of

India's manufacturing prowess.

According to sources in TEMA, with India achieving the highest telecom growth

in the world, and becoming the third largest telecom market, it has generated

tremendous interest in the large number of players in the telecom manufacturing

space. India now offers a big market with an industry friendly environment. And

will soon become a hub for manufacturing. Also, DoT and DIT are working hard to

announce various policies.

Success Stories



Elcoteq is one of the big-ticket telecom investments that has come the Indian
way. The company launched its Indian manufacturing operation way back in 2005,

being one of the four volume manufacturing plants in the Asia Pacific region.

Elcoteq's manufacturing operations are centered on segments like wireless

communications network equipments, communication terminal products, and after

sales services. The company's plant in Bangalore is equipped with the latest in

manufacturing technologies like surface mount technology (SMT) and testing, and

employs more than 1,000 employees.

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According to Carsten Barth, director, corporate strategy and global

marketing, Elcoteq, “We value our operation in Bangalore. India is an important

market for communication technologies. The available labor is skilled and well

educated, so that we can manufacture with highly motivated staff and deliver

high quality products and services. We are confident of success in India and are

well positioned with upcoming technologies like WiMax.”

US headquartered Laird Technologies, a global leader in the design and

manufacture of customized, performance-critical products for wireless and other

advanced electronics applications, has set up its first offshore manufacturing

facility in India. Laird Technologies, a unit of the UK-based Laird Group,

employs over 14,000 employees across 40 facilities located in 14 countries. The

160,000 sq ft manufacturing facility is located in Nokia's SEZ in Sriperumbudur

near Chennai. Set up at an investment of over $15 mn, Laird Technologies will

employ over 1,200 people at its Chennai facility, when fully operational.

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The manufacturing facility will initially produce antennas, battery packs,

and EMI shielding products for cellular handset applications for Indian

customers. The company also expects to export the products, manufactured at the

Chennai facility to overseas markets. Laird Technologies already supplies

products to large Indian enterprises in the mobile phone, telecom infrastructure

equipment, computer hardware, and automotive electronics sectors, from

manufacturing facilities outside India.

According to Sri Talpallikar, managing director, Laird Technologies, India,

“Availability of skilled workforce, support from the local government, the

presence of good logistics, excellent infrastructure facilities, lower costs,

and our close to the customer strategy were reasons for choosing Chennai as our

first offshore location in India.” Laird's new facility will support its Indian

customers with new products as the company is poised to aggressively expand its

customer base in India over the next 12 to 18 months.

Players like Ericsson have also committed investments in India. Says Mats

Granryd, MD, Ericsson, India; “We believe that there will be tremendous growth

in the next four to five years in India, with the expected addition of over 8 mn

subscribers every month. This makes for a good platform for companies to set up

large capacities, and over time, an entire ecosystem of chip and component

makers, equipment manufacturers, and handset makers to come up. We are happy

that the government has announced a special forum to push exports as well.  We

are sure that over time it will help develop India as a manufacturing hub.”

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What is driving mobile handset vendors to set base in India is the soaring

domestic demand. Instead of importing devices from elsewhere, setting a base in

a booming market makes more sense. If we sample some consumer statistics since

the mid 1990s, the average per annum growth of mobile phone users is in excess

of 85%. With this boom in the backdrop, no wonder players like LG have announced

an investment of Rs 500 crore, in a phase of five years, on manufacturing.

According to Anil Arora, business group head, GSM at LG Electronics, India, “the

GSM potential in India is huge and LG is well poised to address the soaring

demand.” The company had set up its manufacturing arm in 2005 in Pune with

ambitious expansion plans.

Motorola officially inaugurated its manufacturing facility in India near

Chennai recently. With an initial investment of Rs 172.4 crore, the Motorola

owned and operated facility supports an integrated telecom products portfolio.

This includes GSM and CDMA mobile devices and networking equipment such as base

stations and system controllers. The facility, spread over 270,000 sq ft, has a

capacity of producing over 12 mn mobile phones and 6,500 base terminal stations

each year. “The telecom market in India is expanding at a rapid pace and this

facility will help us provide customers with compelling products, competitively

priced with local content, timely delivery, and improved availability,” says

Sammy Sana, country president, Motorola India.

MRO-TEK has invested Rs 12 crore in R&D. The company has developed new

products addressing the perennial issue of last mile broadband connectivity.

These products operate under future proof fiber optics technology that provide

huge bandwidth in the last mile and deliver triple play services

Outlook



At the end what is clear is that India has emerged as one of the

destinations for telecom manufacturing. But to attract more investments the

government must further liberalize, paving the way for more players to enter

into the country. What the industry expects from the government at this point

are tax friendly polices, and easier access to power, water, and better sewage

systems. Notwithstanding the expectations, the players in the fray have

committed huge investments and this itself will act as a driver for further

growth in telecom manufacturing in the country.

Shrikanth G



shrikanthg@cybermedia.co.in

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