What must India learn from China: Telecom Equipment Manufacturing?

What must India learn from China Telecom Equipment ManufacturingIndia with more than 672 Million telecom subscribers has seen tremendous growth in the telecom sector.

Entrepreneurship and Innovation have been two important pillars of development in this sector,but it has remained confined to services and business models and to an extend handset manufacturing.

Most of the telecom operators import virtually all the equipment for setting up a network.Moreover setting the 3G network will fuel demand for telecom equipment worth $70-$100 billion.

Most of telecom equipment would be import from Nokia Siemens Network, Ericsson, Motorola, Huawei and ZTR Corp and would greatly contribute to our export deficit.China was in a similar position a decade ago.

Today despite high entry barriers in the industry Huawei and ZTE from China are amongst some top telecom equipment manufacturers globally.China used market size and political will to get vendors to produce locally, create a supporting ecosystem and leverage its strength by taking following initiative:

• The Chinese government started like “China 863” program or state high-tech development plan to develop and test new technologies.

• Vendors like NSN and Ericsson were forced to manufacture locally with 95% local staff and content.

• Support was given to indigenous R&D by providing public funding, research grants and cheap loan from state owned bank.

• Huge amount of money was spent on research and patenting. As a result they defined their own 3G standards (TD-SCDMA) and thus developed their own system for manufacturing of network infrastructure and devices.

The Chinese government was also benefitted from the political environment, given that China government has share in most of the Chinese companies, they could force operators to use equipment manufactured by Chinese companies only. Also like India, Large subscriber base also helped. But it was the Government determination that ensured that even if the technology is not in the portfolio, it was developed in-house and produced. For ex China delayed the rollout of 3G until the domestic manufacturing competencies were developed inside the country.

Given the Indian context, telecom equipment manufacturers also need to overcome (other than the mentioned above) the following Barriers:

• The ability of large equipment manufacturers to give credit to operators.

• Currently most of the equipment manufacturer’s offer equipment on end to end services models. Given the scale of operations credibility and the project management skills of the small players remains a major Issue for an operator.

Given that the key to success in this industry are talent and software skills (which are abundant in India) wherein lies the intellectual property right, some of the merits in producing locally are:

• The market potential for the industry in next five years is $100 billion, given we produce locally we can create atleast 75000 skilled jobs and 2,50,00 unskilled jobs

• Local Production will reduce the cost of operations (also the equipment can be customized as per our needs) for telecom operators, which would help reduce rural-urban divide as cost of operations will reduce drastically.

• Given that India has to embark on its journey in creating telecom manufacturing ecosystem, we can control radiation and energy consumed by our products.

• local and indigenous development will promote innovation and development of innovated products in the domain of security, healthcare and education which are crucial for socio-economic development.

So moving forward I would suggest the following steps:

• Create a dedicated ‘R&D fund’ from auction of spectrum income and the balance from underutilized USO fund. The fund should be chaired by some reputed industry person on lines of UID and should include people from academia (like IIT’s, IIMs, etc.) and senior members of DoT, DIT, TRAI, etc.

• Like the diamond industry is allowed to import raw stones for polishing and cutting, imports of all base components (PCB, board, Chips) and machinery should be allowed duty free subject to reasonable value addition norms.

• Wireless equipment’s developed in India should be supported by allocating special research spectrum free on cost in a pre-determined geography. This are called as test labs

• Provide access to test labs with various government agencies like CDOT and other tie up with other private labs inside or outside the country to provide low cost access to testing facilities.

• Create a certification and testing lab on the lines of China Certification and Accreditation Administration (CNCA) in China. All operators should be forced to use equipment with the necessary certifications as this would help regulatory body monitor radiation and energy consumption. The same facility can also be used to test mobile Apps which required stringent security processes (like m-payment portals)

• Encourage operators to use optical fibers for connecting towers, this will help operators in reducing the need of long Steel Towers (because currently RF waves are used which require line of sight and increase use of device causing radiations).

• Compel MNC to produce locally, If required create joint venture with the foreign companies to produce locally.

• Incomes should not be subjected to MAT

• CST and VAT on sale of equipment on Local products should be kept at minimum (=2%)

• Encourage use of local products by enforcing BSNL/MTNL (government owned operators) to use 5% equipment’s from local manufacturing.

• Create collaboration between various academic institute and R&D labs to promote standardization and creating of intellectual property right globally. This would also require our R&D labs access to the membership of various standard setting bodies globally.

About The Author :-

Varun is a CEO and Cofounder of InCights Mobile Solution, He is also working professional at IIMA Idea Telecom Centre of Excellence.

In the past he has worked with TATA Consultancy services as strategic account manager- VAS, SDP and Mobility and Co-Founded Rentimental.com.

He regularly writes articles for Hitvada- the People Newspaper.

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16 Comments on "What must India learn from China: Telecom Equipment Manufacturing?"


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Swapnil Naik
November 13, 2010 8:19 pm 8:19 PM

Really agreed with your this comment, most of the branded companies are awaited for indian market entry but our politicians asked for money, so they go away from indian market otherwise our youngster will be employee in MNC company. Sab politicians are chor currupted.

November 13, 2010 7:46 pm 7:46 PM

True fact.
Thanks for the article 🙂

November 12, 2010 2:59 pm 2:59 PM

Hamare Desh mein aane ke liye foreign Companies katar lagakar khade the, they are ready to open here their factories offices but hamare jo Politicians hai woh unse paiso ki maang kar rahe the, you know party fund rishvat chaahiye ander entry ke liye, agar inka aisa swagat karenge toh koi foreign big branded company nahi aayegi. Yehi toh hamara dukh hai ke hamare politicians sirf apne aur party kaa development karna chahte hai naa ke Public ka aur naahi desh ka.