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According to a recent report by Goldman Sachs, the Indian economy will grow at about 8% until 2020. With this prediction, India may well become the second biggest economy after China by 2050. Looking at the current growth dynamics across sectors, a segment that is attracting both attention and investments is telecom. The Indian telecom industry has made rapid strides in the last couple of years and India continues to be one of the fastest growing telecom markets in the world.

Industry observers say that in the last two-and-a-half years alone, India has seen commitments of over $17 bn in IT and telecom sectors. In telecom manufacturing alone, there has been a commitment of more than $1.5 bn. As per estimates by the Communication and IT ministry, India can expect fresh commitment of about $2 bn in the next year. This is a serious affirmation of India's manufacturing prowess.

WHY INDIA?
As we look at the last two years, the investments that came into India on the telecom side were based on the cost advantages India provided. Reflecting on that, A Gururaj, GM and director, Flextronics India says, "The decision to set up an industrial park in Chennai was to reap the advantages of manufacturing in India, which include access to skilled talent as well as cost advantages. In addition to that, the industrial park also gave us an opportunity to begin manufacturing for customers, both domestic and international, whose markets are in India."

Flextronics has ten design, manufacturing, logistics and global shared services facilities in India, including Flextronics Sriperumbudur Industrial Park, which was inaugurated in November 2006. The Industrial Park is modeled after Flextronics' fully integrated, high-volume facilities in other countries, including Brazil, China, Hungary, Malaysia, Mexico, and Poland. These industrial parks provide total supply chain management by co-locating its manufacturing and logistics operations with its suppliers at a single low-cost location.

Yet another major investment in telecom manufacturing was from Nokia. In January 2006, Nokia announced plans to set up a manufacturing base in India with a commitment to invest $150 mn over a four-year period. This was Nokia's 15th manufacturing facility, and one that would manufacture both handsets and network equipment. Says Sachin Saxena, director-operations, Nokia India, "Over the last year, the India manufacturing facility has grown from strength to strength. It has already produced in excess of 25 million handsets as of December 2006. In addition, the factory supports the manufacturing of handsets with 13 language interfaces, ten of which are Indian languages. To cater to the burgeoning needs of the Indian market, we have recently expanded the floor space of the factory from 30,000 sq meters to 53,000 sq meters. Currently around 20% of the handsets are being exported to ten South East Asian countries, along with countries in the Middle East and Africa."

NEW INVESTMENTS
Nokia and Flextronics were great success stories that are acting as the pivot in attracting larger investments from other players. For instance, early movers like Nokia have created successful proof-points that manufacturing indeed works in this part of the world. There was a perception earlier that electronics manufacturing was not viable in India due to different reasons. However, recent developments put India firmly on the map as a low cost manufacturing destination as well as consumer of locally manufactured MNC offerings, custom built to Indian consumers' requirements. Nokia's success has been instrumental in securing some recent manufacturing initiatives like Salcomp and Perlos to India.

Various suppliers are also setting up their facilities. Laird Technologies, a global leader in the design and manufacture of antennas, electromagnetic interference (EMI) shielding, telematics and thermal management solutions, established its first Indian manufacturing facility in the Nokia SEZ in Sriperumbudur, near Chennai, in November 2006. A local technical sales team to support the Indian market is also being established. Spread over an area of 15,000 sq m, the facility will employ between 1,200-1,500 people when all product lines are launched. It is expected to become operational by mid 2007.

With the setting up of a manufacturing facility in Chennai, the company will be able to support its growing Indian customer base more effectively. Meanwhile, Jabil Circuit is also establishing its factory in the Nokia SEZ. Once all the eight suppliers have established their facilities by 2008, it is expected to provide employment opportunities to 20,000 people.

Another major supplier who has come the India way is Aspocomp. This Finland-based company manufactures high-density interconnection printed circuit boards (HDI-PCB), and plans to set up a printed circuit board plant. The company has allocated an estimated investment of $200 million, which would be done in phases. The Aspocomp facility is expected to go live by 2008 and would create employment for 2,800 people. Foxconn is another supplier that is pumping in close to $110 million into PCBs and network components manufacturing. Meanwhile, in June 2006, Motorola announced plans to build a $100-million manufacturing facility in India in phases.

Gururaj says, "The growth of the electronics industry will spur the development of the supply chain. For instance, when we announced our plans to set up an industrial park in Chennai, we received a lot of positive queries from suppliers who expressed interest in setting up their facilities within our premises."

Moreover, existing players are also expanding their manufacturing operations. For instance, Nokia has recently increased the floor space at its factory and this expansion is currently underway. In terms of products, Nokia aims to bring handsets that suit the lifestyle and budget needs of consumers. Recently, India was chosen for the global launch of seven new handsets, which have been created to meet the needs of emerging markets. Says Sachin: "Quite a few of these handsets will be made at our factory in Chennai. As we ramp up production volumes, our aim is to grow our export component significantly over the next year."

On the expansion front, the Chinese telecom equipment manufacturing major ZTE Corporation has announced its intention to up its investments in India. ZTE already has manufacturing setups in Haryana, and has invested to the tune of Rs 5 crore. The company is said to be aggressively scouting for locations for a second manufacturing facility in India.