Opportunities in ESDM

Telecom Sector

Sanjay NayakCo-founder, MD & CEO

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• How big is the opportunity

• Building Indian telecom equipment industry

• Role of government policy support

Outline

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• A $290 Bn industry- one of the top high-tech industry– Driven by innovation, system-design expertise and manufacturing

• Infrastructure equipment (40%)– Wireless (driving growth)

– Wireline (enabling broadband infrastructure)

• Handsets/CPE (60%)– 2G, Smartphones, CPE

Global Telecom Equipment Scenario

– 2G, Smartphones, CPE

• Dominated by few large players– Top-5 players contribute to 70% of the revenues

• Emerging markets are driving growth– APAC (37%), EMEA (28%), North America (30%), Others (5%)

– Indian demand is around 6-7% of the global

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India Equipment Potential

-

50,000

1,00,000

1,50,000

2,00,000

India Telecom Spending

& Domestic Production

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

1,80,000

2,00,000

Imports vs Exports

Source: TRAI report

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Domestic Production Through Imports

Exports Imports

• India consumed nearly Rs 54,000 cr of equipment last FY

• Majority of network infrastructure equipment is imported– Telecom equipment import is 2nd largest item of trade deficit

• Handset production has ramped up in the last few years– Production of >Rs 15,000 Cr; a majority of components are still imported

• TRAI has set a target to have 80% of demand met by local production by 2020

• India can become a large exported of telecom products by 2020

India Telecom Equipment demand

54,000 Crores in 2011

96,000 Crores by 2015

Wireless

2%

Packet

Switching

11%Broadband

Access

2%

Transmission

13%

Other

4%

Mobile

Handsets

68%

India Equipment Breakup (2011)Source: TRAI report

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2G

50%3G

45%

4G/LTE

5%

Mobile Equipment Breakup (2015)

Transmission

35%

Packet

Switching

40%

Broadband

25%

Wireline Breakup (2015)

Total 30,000 crores by 2015

150% growth from 2011 to 2015

Total 18,000 crores by 2015

60% growth from 2011 to 2015

Telecom Product Value Chain

THE BIG IDEA

• Betting on the right technology and standards

• Understanding customer needs: features, price points

• Creation of Intellectual Property

R&D & Components

• R&D : product architecture , design, verification

• System design: Hardware, Software, Silicon, Mechanicals

• Optimization for costs, usability

80-90%

Value

• Optimization for costs, usability

SALES & SUPPORT

• Developing sales and support infrastructure

• Building global partnerships and alliances

• Long-term customer relationships

SUPPLY CHAIN & MANUFACTURING

• Use of contract manufacturers or in-house manufacturing

• Building and managing a scalable, flexible supply chain

• Ensuring quality

10-

20%

Value

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• Focus on building “Indian Products”- we can be global leaders

– R&D led innovation to design/develop & manufacture complete “systems”

– Adequate talent in hardware, software, standards already exists in India

– Knowledge-driven: requires much less capital/investments

– Software and IPR will create differentiators in the long run

– Will be the driver to make local assembly/manufacturing attractive

• Build global economies of scale in manufacturing

– Attract global players to start manufacturing in India

How to build a Rs 250,000 Cr industry by 2020?

– Attract global players to start manufacturing in India

– A common global scale EMS back-end for all electronics manufacturing

– Need to build a strong component industry

• Semiconductor components, PCBs, Mechanicals, Cables/accessories, Crystals etc.

• Create strong sales push in India as well as internationally– Leverage our domestic market to get economies of scale

– Promote brand India, for telecom products internationally

– Use of bi-lateral trade to promote exports

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• Leverage domestic market demand to create initial “market pull”– Need volume-based and provenness in India, to become globally competitive

– TRAI has recommended 30-80% use of domestic products from 2012-2020

– Use of Indian products in projects of national importance will also address national security concerns, in addition to self-reliance

• Encourage R&D/Innovation to create “Indian Products”– Provide R&D grants and risk-capital to entrepreneurs

– Influence global standards bodies- push standards that are relevant for India

• Provide long-term working capital for growth

Key Policy support initiatives needed

• Provide long-term working capital for growth– Provide upto 7 year financing at international rates

• Tax/fiscal concessions to reduce the handicap faced by Indian cos.– Indian companies face upto 22% cost disadvantage against other countries

• Attract global-scale EMS and component industry in India – This will benefit the entire ESDM industry

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Thank You

India Manufacturing Potential

Indian

Production

(Foreign

Companies),

54,500

Indian

Production

by Indian

Companies,

1,600

Imports,

53,222

Indian Telecom Industry (2011)

(By Manufacturing Source)

India Local

Demand

82%

Exports

18%

Indian Telecom Industry (2011)

Total: 80,000 Crores

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India Local

Demand

68%

Exports

32%

Indian Telecom Industry (2015)

Total: 198000 Crores

Indian

Production

(Foreign

Companies),

1,05,657

Production by

Indian

Companies,

45,281

Imports,

47,145

Indian Telecom Market (2015)

(By Manufacturing Source)