India aims to become a 5G export hub, urges vendors to source locally

India 5G export hub vendors
Photo by Leonid Eremeychuk

India has urged multinational telecom equipment makers Nokia, Ericsson, Huawei, and Samsung to deepen their manufacturing capabilities and to prepare for 100% local sourcing of components that are required for telecom products. India also wants these players to make the country an export hub for 5G equipment.

To discuss 100% local sourcing and to expand manufacturing, all four international equipment providers along with Indian telecom operators Wednesday met the country’s Department of Telecommunications (DoT). 

The government wants all these equipment vendors to leverage schemes like a production-linked incentive (PLI). 

India on Tuesday rolled out the guidelines for three different electronics manufacturing schemes that have a total outlay of Rs 50,000 crore ($6.6 billion) to bolster domestic manufacturing ecosystem and to attract companies from China and other countries.

The Indian government also wants these players to ramp up their capabilities for export purpose and position the country as the export hub for telecom products.

During the Wednesday meeting, these vendors urged the telecom department (DoT) not to fix any local value addition thresholds claiming that the local components ecosystem isn’t strong enough. However, local equipment makers like Tejas Networks, Sterlite Tech and Vihaan Network asked the DoT to fix local value addition clause under eligibility criteria for the PLI scheme to avoid almost 100% import of components.

The government is yet to take a call on local value addition or local sourcing of components. The potential move by the Indian government could be seen as being aimed at addressing security-related concerns and to control any probability of snooping by foreign countries. 

The development comes amid a global debate about 5G and network security especially around Chinese telecom equipment makers – Huawei and ZTE.

During the meeting, Nokia, Ericsson, and Huawei requested senior DoT officials to launch a new production-linked incentive (PLI) scheme that is different from the existing one for electronics manufacturers, mainly smartphones. They said that the component ecosystem is very different for networking products compared to mobile handsets.

These telecom equipment makers said that the new scheme should factor in R&D costs that they incur besides offsetting the 8-10% local manufacturing cost disadvantage that vendors currently face as compared to markets like Vietnam, Thailand, and China.

Some of these vendors also requested the telecom department to extend the proposed scheme to their contract manufacture ring partners.

The new scheme could focus on specified telecom products like 5G radio access network equipment, 5G base station, core equipment, switches, routers, and other related products.

European companies Nokia and Ericsson have manufacturing facilities in India that take care of local demand and export needs of some countries in the SouthEast Asia region. Both companies already export 5G-ready wireless products from India.

Chinese equipment provider Huawei used to manufacture in India but stopped production in 2018 due to low demand and other challenges, and currently caters to its customers in India through imports.

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