Indian Telcos are standing at a cliff of new opportunities and struggles alike as they gaze deep into the real translation of these words Make-in-India. It’s not a cliff-hanger but it’s not some Internet superhighway either.
The year 2020 would stay book-marked in the annals of many industries. For the telecom sector, in particular, it has been a page-turner in a good way. Digitization exploded since March 2020, work-from-home models became a staple diet for many enterprises and people kept slurping Netflix and Dalgona Coffee recipes at never-before frenzy. All this meant more data, more customers and more revenues.
Then comes a special para that connotes even bigger markets and money if the telecom players can read it right; as the thrust on swadeshi got more and more serious, the Make-in-India question dashed from the back-burner to the front-burner for many players. While the industry tries to read into the sub-text of this big turning point, here are some ingredients worth considering as we stir the pot.
Are we ready for factories?
India has traditionally been known as a leader in the IT services sector, not for product design and development. According to Samsung Semiconductor India R&D (SSIR) Managing Director Balajee Sowrirajan, “This makes the Make-in-India initiative relevant and critical to boost innovation and advancement. There are several initiatives that can augment the Make-in-India shift, beginning with bolstering our R&D.”
When we think of growing an in-country technology capability to serve the country initially and then expand to reach other markets, this seems like a good and perfectly-timed idea for India. Explains Omdia Chief Analyst for IT and Enterprise Roy Illsley: “India has a large population and, as such, represents a significant market opportunity in the telecom space, with potentially one billion people with smart phones.”
Omdia Data Center Compute Senior Analyst Manoj Sukumaran feels that on the positive side, in IT and telecom, the country is witnessing a lot of initiatives to democratize technologies like the Open Compute Project, telecom infrastructure project, O-RAN, and OSM, etc. “Indian companies could leverage these open-source hardware technologies to gain more traction for further innovation,” he adds.
Others believe that India needs to think about the Make-in-India shift more seriously. As Electronic Industries Association of India (ELCINA) Secretary General Rajoo Goel rightly highlights, “Due to our continued import dependence, which increased sharply after 1997 when ITA-1 Agreement was signed, the dependence on western countries increased and this shifted rapidly to Asian countries and China in particular over the last two decades.”
“As a consequence, electronics manufacturers are highly dependent on Chinese imports. MSME’s are bearing the brunt of the disruption in supplies caused due to the COVID-19, which has resulted in nation-wide lock-down. MSME’s have limited resources and generally do not keep many suppliers or alternative sources. The electronic manufacturing service (EMS) players source components whereas the component manufacturers source their parts and raw materials from China. Even if they can find alternatives, it would be tough to source at the same prices and cause cost escalation.”
The no China clause
With the rising backlash across the globe against major Chinese players like Huawei and ZTE; a lot of market is up for grabs for Indian players- provided they know how to nail it.
The US has been at the forefront of blocking Huawei and is giving sanctions as well as pressure-moves to countries and companies all around the world. BT and Ericsson have signed a 5G deal, for instance. BT also picked Nokia for phasing out Huawei’s dominance in UK networks. Sweden, Australia, Vietnam and UK have started treading the US’s approach towards Huawei. Networking equipment market, hence, has suddenly taken new contours, especially for upcoming 5G network projects.
Illsley dissects the backlash from another angle. “This level of mistrust of China is because they are a very secretive country, while the Western countries are based on democratic principles; there is a natural mistrust of cultures that operate in a different way. India has a very well-established democracy and has good relationships with many Western countries, so I would not see India facing the same degree of backlash as China.”
He also points out that China’s tech sector still sells and operates in the Western economies and it is its involvement in sensitive government-backed programs where the difference in ‘openness’ is linked to national security concerns.
But Sukumaran cautions that there are hardly any alternatives that India can offer as there are no Indian companies having the capabilities and maturity of Huawei and ZTE at present. “The only upside could be that other OEMs who have the R&D and manufacturing capacities in India could take advantage of the situation and provide Made-in-India products to the US. But from what we have seen so far, these OEMs are fulfilling the demand from other south Asian manufacturing locations and not much from India.”
Also, do not forget that Huawei is trying its best to circumvent all the barricades that have come up recently. It has, reportedly, started working on a chip plant in Shanghai. ZTE, too, and has upped R&D expenses for the first nine months of 2020, where they topped USD 1.6 billion marking a year-on-year increase of 15.3% and showing 14.6% of turnover over the period.
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