Will the dragon make it in India?

NEW DELHI: While addressing the Chinese CEOs during his day visit to the country, Prime Minister Narendra Modi stressed on his 'Make in India’ campaign and invited the companies from that nation to manufacture in India.

While addressing the CEOs, he said: "You are the factory of the world and we are the backoffice.”

No doubt, Chinese handset brands such as Gionee, Xiaomi, Huawei, Lenovo are already making their presence felt in India with a host of budget smartphones launches and the flash sales. The latest to join the bandwagon being Coolpad.
But at the same time, a manufacturing scenario with respect to handset making is not giving quite a rosy picture.

Even though, a plethora of Chinese handset makers have charted out plans to make it big in India, but analysts believe that manufacturing in India by Chinese players is over two years away from now.

Tarun Pathak, Senior Analyst at Counterpoint Research, opines that “Unless the brands grow in large scale it would be difficult to start off the manufacturing. It’s pretty faster to set up an R&D center than a full-fledged manufacturing plant here.”

Chinese brands are doing well in India but for manufacturing they can start off with some contract manufacturing. It’s quite early for Chinese players to go for full-fledged manufacturing, he adds.

Analysts are also pointing towards the absence of the right ecosystem for telecom manufacturing. “Other industry segments will have to prove the existence of skill sets, infrastructure, ecosystem, along with government and institutional support before telecom equipment manufacturing takes off, as telecom is not a vertically integrated industry. It needs an ecosystem where several partners and suppliers own specific subsystems and supply these to a central organization,” says S Ramachandran, Research Manager, IDC.

“In China while we are designing a phone we have several options to choose from for each of the components but in India there is no easy access for handset components which makes the notion of manufacturing in the country a little difficult,” says Arvind Vohra, India Head, Gionee Smartphones.

However, Gionee is planning to invest Rs 300 crore in the next two to three years to set up a plant in India, which will cater to the demand in African and Pakistan, Bangladesh, Sri Lanka and Nepal. It has also appointed professional services firm E&Y to advise it on setting up a manufacturing facility and is looking at both contract manufacturing and acquiring an existing unit in the country.

At the some time, some Chinese brands are gung ho about manufacturing in India. “Cai Liqun, CEO, Huawei Telecommunications India, says that the company will invest in India to realize the full potential of ‘Make in India’ campaign.

Lin Bin, President of Xiaomi, says, "We have some big plans for India, we fully support Make in India."

Xiaomi is planning to set up a manufacturing base in India. The world's fifth-largest smartphone maker is also keen to set up an R&D center, to become the top handset maker in India within five years.

Coolpad, which has recently entered the India market, is also planning to set up an R&D center and a manufacturing unit in India. Though plans are there on the cards, but the interesting thing to watch out for would be how these Chinese brands go about manufacturing in India, where Nokia, Foxconn's shutting down of their manufacturing plants didn't go well with the foreign investors.

Secondly, another point to ponder is even today 95 percent of telecom equipment is imported and a handful of Indian companies manufacturing telecom gear add up to only less than five percent of the total India market requirement.