Samsung may shift part of 4G and 5G equipment manufacturing to India

Samsung telecom equipment
Image by TK Kurikawa | Bigstockphoto

South Korean electronics major Samsung is reportedly planning to make 4G and 5G telecom equipment in India for its only Indian telco partner, Reliance Jio, and other telco customers globally.

The company, which already makes smartphones and consumer durables in India through various factories, is expected to soon apply for the Indian government’s recently introduced production-linked incentive (PLI) scheme for the telecom industry. The scheme was recently introduced to boost the local telecom manufacturing ecosystem, especially for 5G, and to cut imports from China.

According to a report by the Economic Times, the South Korean company wants to diversify its telecom manufacturing and leverage cheap labour costs and incentives offered by the Indian government.

Once approved under the scheme, Samsung will start production at its larger factory in Uttar Pradesh which also houses its handset manufacturing unit in Noida, which Prime Minister Narendra Modi inaugurated in 2018. Samsung had then committed Rs 4,915 crore ($673.29 million) investment for the factory.

It is already in the process of relocating its mobile and IT display production unit from China to Uttar Pradesh and is investing Rs 4,825 crore ($660.96 million) for the same.

“Samsung is looking to have diversified manufacturing given that it lately won 5G business globally. However, Jio is the most critical and largest client for it globally,” a company source was quoted as saying by the publication.

Notably, Samsung was looking to secure new network business from legacy Indian telcos like Bharti Airtel, Vodafone Idea and BSNL after it ended exclusive tie-up with Reliance Jio on 4G. However, the vendor’s talks didn’t yield any results, and it laid off several hundred employees last year that were involved in Jio’s pan-India network in the absence of any new business from the telco.

European vendors Nokia and Ericsson, which already have telecom equipment manufacturing units in India, are also expected to apply for the scheme. Cisco, Jabil and contract manufacturers like Foxconn and Flex may also apply along with home-bred vendors like Tejas Networks, HFCL, Sterlite, among others.

India had recently revealed that the scheme would have an outlay of Rs 12,195 crore ($1.67 billion), and over five years, will lead to production of Rs  2.4 lakh crores ($32.88 billion) and exports of about Rs 2 lakh crore ($27.4 billion). In February, the country’s telecom minister, Ravi Shankar Prasad, said that the scheme would bring an investment of more than Rs 3,000 crore ($411 million) besides generating substantial direct and indirect employment and taxes both.

The Department of Telecommunications (DoT) is expected to announce the final guidelines for vendors by later this month. The scheme, which will be operational from 1st April 2021, will require approved companies to make a minimum investment of Rs 100 crore ($13.7 million) over the next few years. For MSMEs, the minimum investment threshold has been kept at Rs 10 crore ($1.37 million), and they will get a 1% higher incentive proposed every year for the first three years.

The PLI scheme will cover core and transmission gear, 4G/5G next-generation radio access network and wireless equipment, access and customer premises equipment (CPE), Internet of things (IoT) access devices, other wireless equipment and enterprise equipment like switches, routers etc.

The report also revealed that Jio would continue to work with Samsung for its pan-India telecom network besides deploying its own 5G stack to offer high-speed internet services after the 5G spectrum auctions.

“Samsung may manufacture here in India and also export outside for all we know. They want to leverage the scheme and PLI benefits if approved. They want to support Jio’s network from a local manufacturing unit since there is a push for Make in India,” a senior Jio executive was quoted as saying by the financial daily.

Jio is building 5G core and radio hardware and software internally and is expected to deploy this for its pan-India network, the person said, adding that the telco is discussing manufacturing partnerships for its own 5G equipment with various companies.

“Jio’s own design will be given to mass manufacturers. The talks are at an advanced level since the deployment will be done quickly after the 5G spectrum auction later this year. Jio will not procure anything from outside. Everything will be made in India,” the Jio executive added.

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