India’s telecommunications sector has flourished into the world’s second largest, contributing approximately 6.5 per cent to the nation’s GDP and serving as a key driver of economic growth. Amid this impressive expansion, a significant development is the evolving telecom component ecosystem. The telecom component ecosystem in India encompasses a wide range of players engaged in the manufacturing and supply of critical telecom equipment and components, such as mobile network infrastructure, fibre optic cable, antennas and other essential parts.
At the heart of this evolution lies the central government’s Make in India initiative. With other initiatives such as the production linked incentive (PLI) scheme, the focus has shifted towards bolstering domestic production and fostering innovation. Additionally, the government has introduced a range of measures to reinforce the ecosystem, from designing and producing telecom chips to imparting training to develop a skilled workforce and consolidating manufacturing demand across various government departments.
A look at the evolving telecom component ecosystem in the country…
Industry landscape
India’s telecom manufacturing capabilities have grown significantly, achieving near self-reliance in key segments such as antennas, gigabit passive optical network (GPON) equipment, and customer premises equipment (CPE). As of September 30, 2024, telecom equipment sales under the PLI scheme had reached Rs 653.2 billion, including exports worth Rs 123.84 billion. Overall, telecom product exports surged to Rs 1,495.63 billion in financial year (FY) 2023-24, compared to Rs 99.78 billion in FY 2014-15, registering a staggering 15-fold increase in under a decade.
In the mobile phone segment, the country has emerged as the world’s second-largest producer, with 300 million units manufactured in FY 2023-24, leading to exports worth Rs 1.28 trillion. While certain advanced components are still imported, the gap between imports and exports has narrowed substantially. This progress not only enhances self-reliance but also addresses national security concerns associated with dependence on imported telecom equipment. Meanwhile, the production of mobile phones, including electronic components and semiconductor packaging, under the PLI scheme for large-scale electronics manufacturing reached Rs 5.14 trillion as of June 2024.
Telecom manufacturing has become a critical pillar of India’s economy, significantly contributing to GDP and generating employment across the value chain. From manufacturing to research and development (R&D), the sector has directly created over 17,800 jobs, with many more generated indirectly.
Telecom equipment – public procurement preference
In September 2024, the Department of Telecommunications (DoT) introduced draft norms revising the list of telecom equipment eligible for public procurement. The updated list features 36 products that require a minimum of 50 per cent local content to qualify for preferential treatment. These include routers, Ethernet switches, media gateways, CPE, GPON systems, IP-based soft switches, IMS, unified communication systems, wireline PABXs, VSAT hub subsystems, satellite phones, telecom batteries, IP audio/video phones, and IP/internet set-top boxes.
To streamline procurement, the Department for Promotion of Industry and Internal Trade (DPIIT) has categorised suppliers. Class I suppliers are defined as those with over 50 per cent local content, while Class II suppliers have 20-50 per cent local value addition. Non-local suppliers offering imported products fall outside these categories and cannot count services such as transportation, installation and after-sales support as part of their local value addition.
According to DoT, the listed products have sufficient domestic manufacturing capacity and competition. Class I suppliers, with at least 50 per cent local content, will be prioritised in procurement. If Class I suppliers cannot meet demand, Class II suppliers with a minimum of 20 per cent local content may be considered. Manufacturers under the PLI scheme for telecom and networking products are classified as Class II suppliers for specific items.
To encourage indigenous innovation, DoT is introducing proof-of-concept requirements in tenders, offering an alternative to the traditional qualifying experience. The draft guidelines further extend public procurement preferences to satellite communication equipment, emphasising local value addition. The proposed rules also apply to projects funded by the central government at the state and local levels.
The government has further strengthened the Make in India framework by refining the criteria for local content calculations. Imported goods sourced locally through resellers, royalties, and technical charges paid outside India are now excluded from these calculations. Additionally, repackaged or refurbished items are no longer considered as part of local content.
Expanding the scope
In another significant development, DoT has amended the public procurement policy to prioritise domestic companies in 5G technology product manufacturing. While earlier drafts excluded 5G products, the updated policy, announced in October 2024, ensures local firms receive a competitive edge in public sector contracts for 5G products. This move is aimed at fostering indigenous 5G technology development and scaling its production in India.
According to the government, as Indian companies expand their capacity to manufacture 5G products at scale, they will gain preference in government procurement, further encouraging the Make in India initiative. By emphasising local value addition and expanding the scope of public procurement preferences, these measures reflect the government’s commitment to bolstering domestic manufacturing and accelerating India’s transition to a self-reliant telecom ecosystem.
Equipment zones
To establish India as a global telecom manufacturing hub, the government is developing dedicated telecommunication equipment manufacturing zones. These zones aim to attract substantial foreign direct investment (FDI) and foster an environment conducive to large-scale production. With the telecom sector already receiving $39 billion in FDI, Jyotiraditya Scindia, Union Minister of Communications and Development of North Eastern Region, has stressed the need for a manufacturing revolution. A key initiative is Bharat Sanchar Nigam Limited’s (BSNL) mandate to deploy 4G services using an indigenous 4G stack.
Industry leaders have also called for the establishment of ready-to-use facilities equipped with essential utilities such as power and water, creating a “plug-and-play” model that streamlines operations and accelerates production of telecom equipment and products.
Indigenous chips in the making
India has taken significant strides towards establishing a robust semiconductor ecosystem under the India Semiconductor Mission (ISM). The country’s ambition to become a major chip manufacturing hub is gaining momentum, with key players such as Micron Technology spearheading efforts to produce the first “Made in India” chips. Micron’s packaging facility in Sanand, Gujarat is expected to roll out the first batch of India-made semiconductor chips in the first half of 2025. These chips are expected to power critical applications such as data centres, smartphones, notebooks, and internet of things (IoT) devices.
In addition, Tata Electronics Limited has made headway by exporting a limited batch of semiconductor chips packaged at its pilot line located in a research and development facility in Bengaluru. Further, foreign collaborations are strengthening the semiconductor industry. For instance, a multi-material semiconductor fabrication unit, to be established under the joint partnership of India and the US, will produce chips catering to the national security needs of both nations.
To support this transformative vision, the government has introduced a semiconductor PLI scheme and shifted its focus towards infrastructure development, with an outlay of Rs 760 billion.
India, a rising manufacturing hub for handsets
India has emerged as one of the largest manufacturing hubs for mobile devices, second only to China. This transformation is fuelled by a combination of skilled labour availability, robust government support, and rapidly expanding infrastructure. Notably, initiatives such as the PLI scheme by the Ministry of Electronics and Information Technology (MeitY) have significantly boosted the country’s mobile phone production capabilities.
Under the Make in India initiative, India witnessed remarkable progress, with “Made in India” mobile phone shipments crossing the 2 billion cumulative unit mark between 2014 and 2022. Factors such as high domestic demand, increasing digital literacy, and strong government initiatives have positioned the country as the second-largest mobile phone producer globally.
India’s Phased Manufacturing Programme (PMP), launched in 2015, has been pivotal in this growth. By making component imports expensive, PMP incentivises manufacturers to source parts locally, thereby fostering a domestic component ecosystem. Complementing this, the PLI scheme, introduced in 2020, offers financial incentives of up to 6 per cent on incremental sales for foreign and domestic manufacturers meeting investment targets. This move has attracted global giants such as Samsung and Apple, bolstering India’s manufacturing landscape.
Over the years, the sector has seen a remarkable shift from being 78 per cent import-dependent in 2014 to achieving 97 per cent self-sufficiency.
Further, the 2024 Union Budget reduced the basic customs duty on smartphone components to 15 per cent, making devices more affordable, boosting local assembly and attracting global investments. These measures have strengthened India’s position as a global smartphone manufacturing hub, showcasing its potential to lead the telecom component ecosystem.
Path to global leadership
India’s evolving telecom component ecosystem is pivotal in shaping its digital future, driven by robust government policies, a focus on innovation, and increasing investments. The sector is set to propel economic growth, create employment opportunities, and position the country as a global telecom manufacturing leader. Major global players such as Cisco and Nokia have established manufacturing units in India, underscoring the country’s engineering excellence and entrepreneurial strength.
That said, by fostering self-reliance, embracing innovation, and leveraging global opportunities, India’s telecom sector is on a transformative path towards sustainability and global leadership.
