Rapid telecom growth in India, with he addition of over 6 million mobile ubscribers in the last couple of months, is attracting equipment makers worldwide. Their interest is fuelled further by the mega expansion plans of telecom operators and low manufacturing costs. For companies like Nokia, Alcatel, Ericsson and Motorola, the market offers business opportunities next only to China.
Over the last one year, Nokia, Huawei and several other companies have hurried to set up infrastructure equipment and handset-manufacturing plants in India. Recently, Motorola CEO Ed Zander inaugurated the company’s new production facility at a special economic zone (SEZ) at Sriperumbudur near Chennai.
Absorbing an investment of $100 million, the facility will produce 1 million handsets each month. The first quarter of 2007 is the target for beginning operations. Motorola is also stressing on R&D in Wi-Max technology as is evident from the inauguration of its Rs 600 million R&D centre at Hyderabad. In fact, India is acting as a test-bed for technology R&D for developing countries.
The Telecom Equipment Manufacturers Association (TEMA) expects the telecom equipment manufacturing market in India to touch $100 billion over the next three years. It currently stands at $25 billion per annum. Based on the present scenario, P.S. Ramesh, president, TEMA, says: “We are targeting $35 billion in manufacturing each year. This will facilitate $100 billion in telecom equipment manufacturing over the next three years to meet local and export requirements.” Industry analysts, in fact, expect India to eventually become a manufacturing hub, exporting equipment and handsets.
“Manufacturing will definitely see an upswing over the next few years,” claims Dayanidhi Maran, communications and IT minister. Not only has he been actively involved in attracting global vendors but has also explored the possibilities of indigenous manufacturing. He believes in reducing the dependence on imports and says that in order to reach the target of 250 million lines in the next three years, India will have to manufacture wireless handsets and equipment locally.
Experts have claimed that in three years, 30 per cent of the new mobile subscribers worldwide would be from India. Also, by 2011, 10 per cent of the 3G subscribers will be from India. However, the growth of telecom manufacturing in the country has not been at par with the increase in subscribers and market potential.
In light of this, TEMA has stepped in with ambitious plans. “The main focus of our plan will be the rural areas, where telecom density is just 2 per cent as against 35-40 per cent in the urban sector,” says Ramesh.
Under a two-pronged strategy, TEMA plans to facilitate cost-cutting and will correspond with the government for extension of tax incentives to companies that want to set up manufacturing units in the rural areas. As a first step, it has recommended to the Department of Telecommunications that excise duty on telecom equipment be lowered from 60 per cent to 8-16 per cent. TEMA also plans to include promotion of manufacturing of telecom equipment in SEZs, some of which have already been ventured into by Nokia, Flextronics and Motorola.
There will also be a thrust on setting up a telecom export promotion council with support from the Ministry of Communications and IT. TEMA is also working with the ministry on the New Telecom Policy and on the Eleventh Five Year Plan. It envisages a telecom equipment requirement of $73 billion for the entire five-year period and exports of about Rs 120 billion.
If all these plans bear fruit and new ventures by Indian companies come up, such as Bharat Sanchar Nigam Limited’s plan to partner with a multinational for setting up a joint venture to manufacture mobile phones, India could well be on its way to becoming a global manufacturing hub.
