Optical fibre cable (OFC) manufacturing in India has picked up pace in the past few years, owing to an uptake in demand. This demand is being driven by various factors such as the adoption of new-age technologies and bandwidth-intensive applications by enterprises, the launch of fibre-intensive programmes and missions by the government and the expected entry of 5G. Moreover, the Covid-19-induced lockdown highlighted the need for the deployment of fibre across networks as there was a sudden, unprecedented surge in demand for high speed connectivity. This increase in fibre demand has created many opportunities for fibre manufacturers, though there are plenty of challenges in their way too.

A look at some of the key drivers of fibre demand in India, the opportunities for manufacturers, the major challenges and the measures taken by the government to give an impetus to fibre manufacturing in India.…

Key drivers

The production of optical fibre and OFC has been growing at a phenomenal rate. Various factors have contributed to this growth including government initiatives such as the Smart Cities Mission, the BharatNet programme, the National Broadband Mission, the Digital India Mission, and several state-level fibre projects. Further, the trend of consuming content on digital platforms has picked up pace in recent years. Growing over-the-top (OTT) consumption and the shift of content from SD to HD and soon to 4k/8k videos have made high speeds and ultra-low latency a prerequisite. This, in turn, is driving OFC deployment across home broadband networks.

In addition, the data centre segment is emerging as a key growth driver of OFC. The ongoing digital revolution in the country, driven by emerging technologies such as augmented reality, virtual reality, IoT, AI and 5G, is leading to the generation of a humongous amount of data. As per a recent market report, data traffic is expected to increase from the current 12 GB per user per month to 23 GB per user per month by 2023. This high data usage needs larger and multiple data centres for data storage and processing. This, in turn, is adding to fibre demand as OFC can support higher data rates and error-free transmission of data over longer distances.

Moreover, as enterprises and businesses continue to extensively adopt bandwidth intensive applications across their networks, the need for deploying fibre has become more pertinent. Covid-19 has further provided an impetus to this trend. According to Sanjay Nayak, managing director and chief executive officer, Tejas Networks, “Covid-19 has brought about a marked change in network usage habits. Work-from-home and learn-from-home became the norm and consumers increasingly relied on the internet for their daily needs, socialising and entertainment. Overall, it is estimated that the average daily data consumption in the country has grown by at least 30 per cent in 2020 and there is a sharp rise in demand for new home broadband connections based on FTTx (fibre-to-the-home/ office) technologies both in cities and small towns across the country.”

Opportunity for OFC players

Since the demand for OFC is expected to increase over the coming years, it brings along a great opportunity for OFC manufacturers in the country.

Further, India is gradually building an indigenous 5G ecosystem for telecom equipment, design, development and manufacturing. 5G requires deep fiberisation in networks, especially on the backhaul side, but at present, less than 30 per cent towers are fiberised, which needs to be scaled up to 80 per cent by 2022. As per industry estimates, there is a need to deploy 100 million fibre km (fkm) OFC per year as against the current deployment rate of 25 million fibre km in order to have a robust 5G connectivity. This is where OFC players can step in.

Government initiatives too present a huge opportunity for OFC manufacturers. For instance, the target under the BharatNet project is to roll out 700,000 km of OFC to connect 250,000 gram panchayats.

Driven by the advent of 5G and associated OFC requirements, the OFC demand in India is likely to grow to 35.28 million fkm by 2024. This figure may be even higher, given that the OFC demand is projected to spike in the post-Covid era, as people get accustomed to using high-bandwidth digital collaboration tools. In terms of value, the Indian OFC market is projected to reach $2.1 billion by 2024, as per industry estimates.

Challenges on the way

While there are plenty of opportunities for OFC players, challenges on the way are not few either. Industry leaders have pointed out that in India each location is different in terms of demand density and infrastructural capabilities and it is even more complicated when it comes to addressing latency challenges and a uniform deployment.

Covid-19 too seems to have caused significant disruption in the OFC manufacturing activity. The worldwide lockdown announced by governments of nations in early 2020 led to the suspension of manufacturing activity. Further, the global disruption of supply chains had an impact on prices of materials, leading to higher production costs.

Apart from this, pricing pressure from global markets is a major challenge for OFC players. China-based optical fibre sells at around $4 per fkm, which is relatively cheaper compared to Indian products, which sell at around $7 per fkm. This pricing pressure posed by cheaper alternatives is a major challenge for OFC manufacturers in the country.  Another challenge for OFC manufacturers emerges from the invention of new technologies, which are either cheaper to manufacture or have superior connectivity properties than existing OFC-based solutions. For instance, companies are working on technologies such as laser-beaming, which could reduce the demand for optical fibre and related products. In addition, there is the challenge posed by changes in currency rates. OFC players rely on revenue from exports, and have exposure to global currencies, such as the US dollar. Any adverse movement of these currencies may hurt companies’ revenue and profitability as their cost structure is mainly based in India and does not have natural hedging.

Government boost through Atmanirbhar Bharat

Challenges notwithstanding, India is expected to emerge as a key OFC market in the coming years with the government pushing the peddle on its Make in India initiative. Under the new Atmanirbhar Bharat theme, the government has increased its focus on “Design and Make in India”. It is demonstrating renewed vigour to nurture a strong and indigenous ecosystem of domestic product companies and manufacturers.

As such, during 2020, the government made several announcements such as the expansion of the scope of performance-linked incentives to include the telecom equipment industry and stricter enforcement of Preference to Make in India in major government procurements. The Atmanirbhar Bharat campaign has given an opportunity to India to relook at its native manufacturing ecosystem and the associated supply chain. Industry analysts have pointed out that this will definitely give a boost to the Indian market, making it a global telecom equipment manufacturing hub.

According to Ankit Agarwal, chief executive officer, Connectivity Solutions Business, STL, the government’s Atmanirbhar Bharat vision, especially in the technology and telecom space, will lead the way for the next decade of network creation. This will place India among the top technology innovation and manufacturing hubs of the world. However, to achieve this, the government should take policy measures to ensure ease of doing business in India, and bring micro, small and medium enterprises (MSMEs) up to date with the latest technologies.

Further, given that the campaign aims to leverage the digital-first approach across multiple sectors, it will place India among the top technology innovation and manufacturing hubs of the world and will lead the way for the next decade of network creation in India. Also, OFC will play a critical role in building the next-generation digital infrastructure. As per STL estimates, the demand for optical products is likely to grow to 20.08 million fkm by 2021 and 24.48 million fkm by 2022. To cater to this demand, OFC manufacturers will have to augment their capacity.

The way forward

Although the government has launched some schemes that will help boost domestic OFC manufacturing capabilities, a slew of measures need to be adopted to realise this goal. Industry leaders note that to fully tap the potential of Atmanirbhar Bharat, the government should ease the complexities of doing business in India, work towards enabling Indian MSMEs to adopt the latest technologies, and incentivise infrastructure providers to enable faster execution of digital infrastructure projects. They also observe that the government should take initiatives to develop a robust component manufacturing ecosystem in the country. The need of the hour is to focus on research and development, and intellectual property rights creation as this will add long-term value.