Global telecom gear vendors like Ericsson, Nokia and Samsung are not ready to commit fresh investments to expand their manufacturing facilities under the proposed production-linked incentive (PLI) scheme due to limited local demand for products.
Under the scheme, these companies are reluctant to commit fresh investments of up to Rs 700 crore ($94.59 million) to set up new plants especially at a time when their Indian businesses haven’t grown due to low capital expenditure on networks by telecom operators.
India’s Department of Telecommunications (DoT) may launch the PLI scheme worth Rs 15,000 crore ($2.03 billion) for telecom products in next 3 to 4 weeks. The DoT is currently in a process to create a draft cabinet note to provide financial incentives to companies that produce 5G telecom equipment.
Similar to the PLI scheme for mobile handset makers, the PLI scheme for telecom gear vendors is aiming to boost the domestic production of telecom products locally and reduce the dependence of China’s supply chain.
Ericsson and Nokia already make 4G and 5G telecom gear in India. Ericsson manufactures telecom gear through a factory in Chakan, Pune, which caters to the domestic demand and exports to countries in the southeast Asia region.’
Nokia, on the other hand, exports telecom products to mature markets like the US, Europe and the Asia Pacific region besides service the local demand. The factory is situated in Southern city Chennai.
Chinese telecom vendors Huawei and ZTE could have been potential candidates under the PLI scheme but due to uncertainty over their future in India, they haven’t committed any fresh investment to the Indian government on the manufacturing front.
“The government is very keen on starting the incentive scheme for telecom equipment makers but will have to coax them more. They (vendors) already have their plants in India, and now to set up more requires capital of Rs 500-700 crore, including land,” a senior industry executive was quoted as saying by the Economic Times.
Not just telecom gear vendors, India is aiming to attract global IT and networking companies like Cisco to deepen their manufacturing capabilities not just for the local demand but also for global exports.
Local telecom gear vendors like Tejas Network and Himachal Futuristic Communications Ltd. (HFCL) alone with state-run vendor Indian Telephone Industries Limited (ITI) are also looking to leverage the PLI scheme to expand their local manufacturing capabilities in India.
The multinational gear vendors are also at loggerheads with the DoT over the need to provide source codes of telecom products to the local authorities. The DoT wants them to declare source codes as part of the Indian government’s focus on network security in the backdrop of advisories from the US and its allies.