Destination R&D

Comment

Digg

Del.icio.us

In the last few years, market place is abuzz about India as an emerging destination for R&D due to availability of quality talent, people with knowledge of product development process moving back to India, cost arbitrage, MNC R&D centers and several other advantages. This holds true for 'offshored R&D functions' and for 'software products' to a great extent but not beyond that.

While there is some amount of work happening on the non-software front, it is limited to a few players and a few areas. For any country to be termed as an R&D hub, it needs to have companies working on 'complete product' development with several homegrown product companies/technologies. India is at par with the world when it comes to emerging technologies and products development in the 'software' field. The ecosystem for Indian software product companies and start-ups have evolved significantly during this decade. However, telecom industry in India, even though with one of the largest and fastest growing subscriber base, is far behind in terms of development of core products (including hardware) around wireless/wireline technologies or other products compared to its peers like China. China has several homegrown technologies (such as TD-SCDMA) and product companies such as ZTE and Huawei, etc. Leave aside emerging technology areas such as 3G, 4G, WCDMA, LTE, HSDPA, IPTV, etc.

Components
Some of the leading companies in the component space across the world include Qualcomm, Intel, Texas Instrument, ARM, AMD, etc, and some of their products include chipsets, micro-controllers, and several others. All of them have their presence in India in terms of development centers and other functions. India lacks the presence of homegrown companies in the component space, and is dominated by the presence of foreign players. However, IT services firms like Wipro, Sasken, and other IT consulting vendors have provided R&D services to telecom product companies in the component space, with work ranging from low-end to high-end services. This includes:

Testing of various components and products
Development, for example, 7K chipset series boards for Qualcomm
Large parts of product development of almost complete routers, switches, and mobile phones for leading telecom companies

Besides, India does not have any large homegrown original design manufacturer (ODM) company that can support telecom companies and OEMs. MNC's who have ODM/EMS operations in India include Flextronics, Jabil Circuit, Celestica, Elcoteq, Solectron, Hon Hai Precision Industry, Sanmina-SCI, D-Link, etc. A contrasting trend can be found in countries like Taiwan and China, which have large domestic companies in the ODM space providing manufacturing/R&D services to telecom companies. Some of these companies have grown into complete product companies and formidable brands such as HTC and BenQ. Taiwan, for instance, has large domestic companies like Quanta, Compal Electronics, Inventec, Wistron, Lite-On Technology, BenQ, and HTC in the telecom ODM space.

Value chain of wireless (mobile) telecom

Infrastructure and Transmission
The infrastructure includes physical and transmission infrastructure. Physical infrastructure (towers, distributed antenna systems, rooftops, etc) is not a hi-tech area, and hence we are not focusing on that. On the transmission equipment (MARR systems, multichannel digital equipment, opto electronics equipment, subscriber carriage system, BTS, MSC, BSC, etc) front not many Indian companies have been able to stamp their authority on the global stage. Very few homegrown Indian companies like Tejas Networks have build world-class products in the telecom infrastructure space. Other companies like VNL (products like BTS, MSC, BSC), Kavveri Telecom (RF components and antennas), Coral Telecom (wireless infrastructure equipment), Svarn Telecom (switching equipment) have developed innovative products in the telecom infrastructure space, but these are still relatively small in size

Some of these companies are growing at a faster pace and acquiring companies around the world. Kaveri Telecom, for instance, has acquired four Canadian telecom companies and the most recent one was Trackcom Systems International (TSI). China, on the other hand, not only has presence of homegrown companies (Huwaei, ZTE), but has also developed its own technology TD-SCDMA, which is an initiative by Chinese Academy of Telecommunications Technology (CATT), Datang and Siemens AG, in an attempt to create its own wireless technology, thereby reducing its dependence on western technology, and also help in developing products that can support emerging technologies.

India has over 120 telecom R&D captive centers of global telecom giants. MNC R&D centers in India are working on varied products and technologies. MNC companies like Nokia, Ericsson, Nokia Siemens, Qualcomm, Samsung, Infineon, etc, are providing high-end R&D services to their parent companies. Some of the R&D work carried out by telecom captives in the telecom infrastructure/ transmission space includes:

ASIC design and hardware design

Software development for next generation packet-switched mobile technologies
Wireless access solutions for mobile voice and messaging
Product engineering development on IN product on various protocols

Nokia Siemens has plans of bringing in 3G specific research and development projects to its facility in Bengaluru. A couple of Indian institutions like C-DOT (Designing Telecommunication Switches) and C-DAC have purely focused on developing products from India, but have not really made a mark in the industry.

Recommendations

Infrastructure and Government Support: Central or state government would have to take various measures for promoting hardware product development. They would have to invest heavily on infrastructure and provide financial assistance to promote entrepreneurship in the hardware product space. Taiwan is a classic example of this, government spent heavily on building infrastructure and ecosystem for developing hardware industry. Taiwan built 'Hsinchu Science Park', a hub for ODM, semiconductor, and IT companies. Japan's international trade agency Ministry of International Trade and Industry (MITI) and the Karnataka government has taken the initiative to boost hardware product development.

VC Funding: This is increasingly happening in the software product development space in India. Similarly, for complete products, VC funds focusing on hardware product development would also be required. It would encourage start-up companies focusing on hardware product space. Government of Taiwan took proactive initiatives to provide low cost bank loans, and started a 'Taiwan Venture Capital Association' to encourage companies in this space in Taiwan.

Build Risk Appetite: Indian companies haven't looked at building product companies in the hardware space purely because the 'cost of failure' is much higher. This is the primary reason why you see more product development happening on the software front because the cost/investment is much lower than hardware. However, it is important for Indian entrepreneurs to understand that taking these risks have more chances of paying higher returns in the long-run. Sloka Telecom is a classic example of Indian start-up taking risks in the niche space. Sloka is a pioneer in designing, developing, and selling compact and cost-effective base stations. It won the Nasscom's innovation awards in 2008 (awarded as the Top 8 Innovators).

Strategic Tie-ups: Indian IT services companies like Wipro, Saksen, HCL, Satyam and many other have years of experience and expertise on high-end outsourced R&D services to global telecom companies across the value chain. They have worked on several global products developed and under development from developing IP stacks, enhancing and maintaining transcoders to working on mobility management layer in 3GSM protocol stacks. Over the years, they have built expertise in working on emerging telecom product lines and technologies. They have some of the best talents which is very competitive globally to build complete products. Indian IT firms can come up and work on building their own products and also look at the opportunity of JVs or tie-ups with companies that have capabilities such as physical infrastructure, funds, product program management experience to build a globally competitive product in the telecom space.

Perhaps, there could be a platform, a combined effort of government and large Indian telecom software and services companies to start building an ecosystem for nurturing product development to compete globally in the telecom space. India has a large talent pool for complete products development that can be leveraged in creative arrangements between different companies to come up with wireless technologies, mobile devices, network elements, and others.

Page(s) 1 2