Mobile phone manufacturing comes to India

Date:   Wednesday , February 16, 2005


India, one of the worlds’ fastest growing telecom markets, will soon have the first homemade mobile handsets as mobile phone manufacturing finally reaches India. Elcoteq, a Finland based Original Equipment Manufacturer (OEM), has commissioned a plant in Bangalore to make mobile phones and telecom equipments.

India joins the select list of countries where mobile phones are being manufactured and Elcoteq is the first company to do this. Elcoteq’s initiative is regarded as India’s manufacturing capability endorsement , hitherto better known as a software powerhouse.

Elcoteq says entering India was based on the country’s burgeoning mobile phone users and sizeable growth potential. Besides this, other factors include a highly skilled and educated workforce, a growing customer base and comparable costs. “There is considerable opportunity to develop a world class, competitive telecom hardware manufacturing industry in India,” the company says.

Though mobile phone manufacturing is innovative in India, there will be creation of new supply chain activities to provide raw materials for the industry and also direct and indirect employment opportunities. This sector could replicate the success of automobile ancillary units.

Telecom manufacturing has made little progress when compared to the growth of telecommunication services. This is where Elcoteq fits, because it will create a whole new manufacturing wave.

The company believes India’s proven capabilities in software and hardware design base can be maximized and leveraged to create handsets and telecom equipments to support the telecom industry.

Elcoteq’s Bangalore centre has been established at an estimated cost of US $100 million and will employ about 1,000 people to manufacture approximately 40-60 lakh handsets a year. The company intends to localize at least 50 percent of the handsets components within three years due to the presently inadequate local supply chain, which doesn’t support immediate localization.

While Elcoteq believes their initiative will lower handset costs, it will also work in India’s favour regarding increasing direct foreign investments, higher local manufacturing and industrialisation, increased earnings via exports and savings of U.S. $2.18 billion due to import substitution.

Once handsets manufacturing commences in India, it is estimated the sector will generate business worth U.S. $ 6 billion in 5-6 years. Like other manufacturers, both domestic and foreign handsets will be manufactured in India, for export and local markets.

Though the handset market registered a stupendous growth of US $ 3.6 billion in India, handset makers overlooked India manufacturing wise. Imports complete most of India’s requirements.

In the mid 1990s, Motorola and Flextronics wanted to start a mobile hardware plant but later located to China.
With Elcoteq’s announcement of building a manufacturing facility, several other companies like Nokia, LG and Hyundai have announced plans to set up a mobile phone R&D and manufacturing base in India.

Late last year, Nokia announced plans to invest approximately U.S. $ 100-150 million for a new manufacturing plant in India. Likewise, Korean rivals LG and Hyundai have also announced plans for manufacturing facilities in India. While LG’s mobile device manufacturing unit in Pune will commence operations by the end of this month or beginning of February, Hyundai has plans to set up an R&D and manufacturing unit in the next five years.

The question now is whether or not Elcoteq can succeed in spawning a new sector and cause India to be accepted as the choice for international manufacturing, comparable to how previously China did.