India's challenge in telecom manufacturing and exports

The Digital Users' Group, a public policy think tank for digital users in India, held a discussion around Aatmanirbhar Bharat: India's challenge in telecom manufacturing and exports.

The chief guest was Ramesh Abhishek, IAS, Former Secretary, DIPIT, Ministry of Commerce & Trade. There were other participants as well, such as Ms. Smita Purusottam, Ambassador Retired, Founder and Chairperson, SITARA, Rajendra Singh, Senior Regulatory Specialist, Digital Development, World Bank, Vipin Tyagi, Former Executive Director-CDOT, Arun Kumar, EDM, R&D, ITI Ltd, Dr. Ms. Archana Gulati, Joint Secretary, Digital Communications, NITI Aayog, NK Goyal, President CMAI and Chairman Emeritus TEMA, Sanjay Naik, CEO and MD, Tejas Networks, Subrata Kumar Mitra, VP and Head Government & Industry Relation, Ericsson, Parag Naik, Founder and CEO, Saankhya Labs, and PVG Menon, President and CEO, Vann Consulting.

Anil Prakash, President, DUG, welcomed the chief guest and all of the participants.

Opening the discussion, Ramesh Abhishek, said that there were concerns that around 90% of the telecom equipment was being imported. As part of the Digital Telecommunications Commission, there was help for the domestic telecom manufacturers. Many of the soft technology regulations can be done in the industry.

He said: “R&D is very crucial for telecom. Major overseas vendors are doing lot of R&D. We also need to catch up. The Indian Income Tax department had an argument that there was not much increase in the R&D locally. We have to address and provide some safeguards. The government and the PM have been very open to ideas. The government has to proactively promote exports.”

Need for spectrum management
Rajendra Singh added: “This is the first time the mobile industry is focusing on connectivity. In Israel, students are picked up early, and they are familiar with what's happening in the industry. In Samsung, similar collaborative approach is being taken. We need to have the industry and the government work together. In policy and regulation, spectrum management is key. You allocate spectrum to the different operators. This approach is not going to work. All the various aspects of 5G also need to come together.

“Spectrum management is the major barrier today. Small innovators can make significant contribution. The way things are emerging globally, data is very important for every industry. Data world will be dominated by the mega players. India has an important role to play. The developing world is looking at India to play a balancing role. The Indian experience will be very relevant for these developing countries.”

R&D of advanced components key
Presenting his thoughts, Vipin Tyagi said that unless there is a demand for the products that we are producing actually, there will be possibility for R&D. This is a very interesting time. It is a big challenge for all of us, but not unsurmountable. TIFR designed a system. TFIR and ECIL built the TDC-316 and TDC-322. We had an AMSS (automatic message system) for the army.

“Aatmanirbhar Bharat provides the biggest opportunity. Employment also needs to be generated. That results in the overall development. Broadband is very important. We need to design and build in India. R&D expenditure is the key. There is low spend, but high expenditure. There is rising cost of innovation, as per UNESCO. Covid-19 effected the telecom equipment market growth. There are expectations that the market conditions and supply chain risks will be more favourable in H2-2020. This will propel the overall telecom equipment market to expand. India also has very good design capabilities.”

The current level of investment in the R&D of advanced components needs to increase. There are photonics chips, silicon photonics, fifth-generation coherent DSPs, etc. We need to do more of packaging and product design. We need to study the product concept/usability and human factor study. The die making should have finish, accuracy and longevity. There should be packing and dispatch material design. We must have the IPR for all of the above.

Dr. Ms. Archana Gulati, Niti Aayog, added that distances are converging today. There are technologies such as IoT, robotics, cloud, etc. We are going to add new broadband connections shortly. Transformation is being recognized. There is need to develop domestic telecom manufacturing capabilities. The NDCP has a clear roadmap. The Indian telecom industry has the capability to manufacture domestic telecom equipment.

The TRAI recommendations need to be followed. India has a large start-up ecosystem. We are the second-largest telecom market in the world. Many international companies are thinking of shifting their manufacturing base to India. India must also progress in setting up an assembly unit. Such an effort also requires public-private partnership.

Role of state
In her speech, Ms. Smita Purusottam, SITARA, said that the role of the state is very important. There are very pro-domestic industry policies. There is a sea change in the attitude of the Indian government. We are very optimistic about the prospects. Telecom reforms have happened in China. Next, there are distinguishing features of American innovation such as transformational, trust, military, government procurement, etc.

The transformative American industrial policy has led to transformation of aircraft, nuclear, space, computers, semiconductors, GPS, Internet, etc. Even though the technologies were developed in America, the production moved to China.

India should have pro-active developmental states practicing new measures. China is aware of the strategic nature of ICT. It branched off to create their own companies and to their credit, invested massively in R&D. India's domestic computer electronics and telecom sectors nearly vanished in the early 2000s.

She added: “We need to embrace the ITA-1. We also have a corrupt procurement system. Bank guarantees are demanded from the Indian companies. China controls critical parts of India's information network. We have also written to the PM for creating a DARPA/ISRO-type organization to deploy indigenous 5G capability in mission-mode. This government is receptive, so, we are hopeful. Covid-19 has seen the need for government intervention in many areas. The government is considering indigenous 5G. There are still some huge lobbies at work. There are also some attempts at local content dilution. Lot of work has yet to be done.”

NK Goyal, CMAI and TEMA, said that first, there is a historical aspect. Countries promoted their champions. We opened up the market without asking for any technology. Next, comes scope. There was talk about a national infrastructure pipeline. We have a request that every policy talks about industrial manufacturing.

We do not have a local EMS company. The brand giving them the services may not continue for long. Let us be bold enough to increase the import duty. The industrial policy should be applicable to everyone, including the telecom operators. We have lots of unconnected areas. They are still unconnected. We need to connect them fast. TRAI has also recommended the setting up of a Telecom Finance Corp.

Looking at supply chain
The second part of the discussion was anchored by PVG Menon, VANN Consulting.

He said: “Telecom is very critical for India. There was a report from the ICEA that the telecom sector was responsible for 30-35% of the GDP during the lockdown. Telecom and IT sectors have ensured that the shift has been smooth. Infrastructure enables the telecom network. Smartphones have become the gateway to the world. We need to focus on exports. As you sell into the foreign markets, we need to look at the supply chain. ITA-1 ensured that access to the components were made available, where needed. Exports will help us achieve a balance.”

According to Vipin Tyagi: “We are making things happen and analysing which information is going where. If you design things here, we decide the components and functions, etc. We are the second largest importer of electronics, after oil. There is not enough supply chain within the country.”

Sanjay Nayak, Tejas Networks, added that the telecom network is the bedrock of any future economy. Why do we always have to take a risk or threat as an opportunity? Take an economic view of the problem. India is in the best position to bridge two shores. The amount of business opportunities opening up are great. We also have a unique combination. There is atmanirbhar bharat, there is Covid-19, people are currently shunning China, and we have talent. We should not miss out on these aspects. The cost of not doing something is extremely high!

Arun Kumar, ITI, said that as a large manufacturer, ITI has a very good R&D. We need to specifically have Indian-designed products. With 3G/4G, we could neither transfer technology, nor could we manufacture it. We have the capability.

Manufacturing components
Subrata Kumar Mitra, Ericsson added that from a manufacturing perspective, we have been doing this for a long time. We need to focus on areas, to improve the manufacturing focus. We need to create a level-playing field for companies who are manufacturing in India. There are certain policies where there is some distortion. Lot of business rules are also hampering. We are expected to abide by all that. Let's see when DoT comes out with a policy. We also need to see how India starts manufacturing components.

According to Parag Naik, Saankhya Labs, we need to do R&D in India. An R&D business takes a lot of time. Transformative ideas also come in. You are looking at what can be, not, what is! If you look at the IPR, there is another problem. Every chip designed in India, has a Bangalore effect. You have to look at R&D as to building a process. Maybe, one or two projects will succeed. But, we need to encourage all that, instead of worrying about the financial side. You have to be able to answer the right questions.

Nayak of Tejas noted that you need to sell a product and plough the profit back to R&D. You have to stop being a one-trick pony. All the problems we solve, we can create an ecosystem in India. With all the good vibes, the policy of the last 90 days has brought India to the limelight. If India goes to invest in a 5G ecosystem, it will be great. Give business guarantee to companies that are best-in-class. Use the money for the industry. Give business to qualified people.

Value-addition necessary
Commenting on the R&D angle, Vipin Tyagi said that when there is an R&D house, people working there are questioned all the time. There are few grants. We actually do not have the culture of understanding R&D in India. R&D is mostly forgotten. The blending of hardware and software will create magic. You need to have the order assurance.

Arun Kumar said there are products developed that can go for manufacturing. We had a project with C-DoT. We have also done the G-PON. This was able to provide connectivity for rural areas. All IPRs are held by foreign companies. We need to also develop our own IPRs. Most of the educational institutes do not have such a study. At least, we should be able to fine tune the IPR.

On his earlier remark, Nayak added that without value-addition, any incentive should not be given. TRAI has a policy for incentivising the private operators. PLI is the production incentive. There is need for incentives to buyers, as well. We have a demand-driven spectrum that should be tied up soon. If the government gives the operators some incentives, they would buy.

Mitra noted that you need to increase the local value addition. Components have to be sourced from outside. We are discussing with the government. If component makers can come to India, there can be local value addition. Even non-semiconductor components will provide some strength. Even the IoT device manufacturers will benefit.

Anil Prakash said that the DUG is setting up a high-level Telecom Manufacturing and Export Interest Group to carry forward the discussion and implementation of the recommendations.