The Indian government has made the latest in a long series of moves to build a homegrown telecoms equipment market. Attempts to force operators to buy Indian-designed kit have largely failed, as a large-scale vendor has not emerged in the country, but there has been more success in enticing external suppliers to manufacture in India so that telcos can buy locally. Now, the government says it will “encourage” major equipment makers to manufacture all the telecoms infrastructure they make for Indian MNOs on the country’s own soil.
The government’s ability to make such requests is bolstered by the growing importance of its market – the second largest after China, though this is of more immediate relevance to handset makers than network vendors. Many smartphone suppliers do manufacture heavily in India, and there is also a growing homegrown industry. However, on the networks side, the huge scale of the opportunity in 4G expansion and 5G is offset by the notoriously low prices that the MNOs are prepared to pay for equipment or services, and by the recent consolidation which has left only three customers (Vodafone Idea, Reliance Jio and Bharti Airtel).
In Jio’s case, it has worked mainly with Samsung and Airspan, and has said it wants to design some of its 5G platform itself (possibly, we might surmise, in a Rakuten-style cooperation with a key partner, possibly even by adopting the Rakuten platform). That leaves two debt-laden operators, and the state-owned BSNL and MTNL, for Nokia, Ericsson and (subject to potential 5G restrictions) Huawei and ZTE.
It is not clear whether that is a worthwhile reason for large OEMs to rearrange their manufacturing and distribution chains. Nokia and Ericsson do assemble equipment in India, but the proportion of locally made equipment going into mobile networks is currently estimated at about 40%.
Of course, the USA-China row over 5G supply chains, and particularly the status of Huawei, is a factor behind the latest revival of the ‘Made in India’ idea. Successive Indian governments, long before President Trump’s time, have blown hot and cold on letting Chinese equipment into critical networks. The operators have furiously opposed any restrictions on their access to Chinese equipment, but at various times there have been restrictions, and the final policy on the 5G networks is not yet clear.
If the current government succeeded in getting all its 5G equipment made on Indian soil, it says it would guarantee security of supply while also making it easier to guard against cybersecurity breaches and spying by foreign intelligence agencies.
This may be partly an attempt by India to assert its own control rather than being forced to choose sides between the USA and China. It could also push the country another small step towards its long-held ‘Buy Indian’ goals, though so far, only state-run BSNL has an actual mandate to buy only equipment made locally.
India is launching new schemes to boost electronics manufacturing, though these are weighted towards smartphone components, a more realistic goal than driving local networks to 100% homegrown. This year has seen three new programs approved, according to LightReading: the Production Linked Incentive Scheme (PLI) for large scale electronics manufacturing; the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS); and the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. They offer various incentives including cash, capex subsidies and, for EMC 2.0, support for building of “common facilities and amenities”, such as prefabricated factory sheds to reduce costs for manufacturers.
The target for achieving Indian self-sufficiency in telecoms networks is a moving one. The most recent deadline set by telco regulator TRAI was in 2018, when it envisaged zero imports of network equipment by 2022.
That built on policies initially set out in 2011, when TRAI set a target for local vendors to receive 15% of telecoms equipment purchase orders by financial year 2012, rising to 50% in 2019/2020. In the latter year, a further 30% would be made in India by foreign firms, and 20% imported.
These goals have not come close to being met, largely because of the shortage of local Indian suppliers. By contrast, telecoms equipment from abroad increased in value from $14.7bn in 2014/15 to about $21.8bn in 2017/18.
Ericsson has said manufacturing in India may be non-viable because of high taxation and lack of certain infrastructure and skills. India is a major hi-tech player in software and services through giants like Tech Mahindra, but has never succeeded in creating a significant hi-tech manufacturing base despite grand pronouncements about building a base like that of Taiwan.